Katie Scherping - Chief Financial Officer Dennis B. Mullen - Chairman and Chief Executive Officer Eric C. Houseman - Chief Operating Officer and President

Jeff Omohundro - Wachovia Destin Tompkins - Morgan Keegan Nicole Miller - Piper Jaffray Steven Rees - J.P. Morgan Joe Fisher - Bear Stearns Conrad Lyon - FTN Midwest Bryan Elliott - Raymond James

Good day, everyone, and welcome to the Red Robin fourth quarter 2007 financial results conference call. At this time all participants have been placed on a listen-only mode, and the floor will open for your questions following the presentation. It is now my pleasure to turn the floor over to your host, Ms. Katie Scherping, Chief Financial Officer of Red Robin.

Thanks, Keith. Before I get started I need to remind everyone that part of today’s discussion, particularly, but not limited to, our outlook and development expectations for 2008 will include forward-looking statements. These statements will include but not be limited to references to our earnings guidance, margins, new restaurant openings or NROs, trends, costs and administrative expenses and other expectations. These statements are not guarantees of future performance and therefore investors should not place undue reliance on them. We refer all of you to our 10-K and our 10-Q filings with the SEC for a more detailed discussion of the risks that could impact our future operating results and financial condition. I also want to inform our listeners that we will make some references to non-GAAP financial measures today during our call. You will find supplemental data in our press release on Schedules 1 and 2 which reconciles our non-GAAP measures to our GAAP results. Now I’d like to turn the call over to Denny Mullen, Chairman and Chief Executive Officer. Dennis B. Mullen: Thanks Katie, and thanks for everyone for joining us today. We also have with us Eric Houseman, our President and Chief Operating Officer. Eric will provide an update on the key initiatives that have and will continue to contribute to the business results, and Katie will review in detail our most recent financial results as well as guidance for 2008. But first let’s start with a quick review of the 2007 results. Total revenues increased 23.4% while company-owned comp revenue restaurant sales increased 2.4% on a 52-week comparable basis. As a reminder, our fiscal 2006 year had 53 operating weeks. The total Red Robin system is now in its second year of more than $1 billion in sales. Restaurant level operating profit increased 19.5% to $153 million. GAAP basis diluted earnings per share was $1.82, which is $0.04 above the high end of our full year EPS guidance that we provided on our update last month, related to a decrease in the effective tax rate and compares to $1.75 last year. Katie will talk you through these comparisons year-over-year in a few minutes. In 2007, we also acquired the assets of 16 existing franchised Red Robin restaurants in California as well as 1 location that was under construction at the time, but has since opened, for a total of 17 restaurants. We also assumed management of another franchised restaurant that was part of the California franchised portfolio, and we acquired significant territory in California which we are currently evaluating for additional restaurant development opportunities. And finally in 2007, we opened a total of 40 new Red Robin restaurants, 26 company-owned and 14 franchised locations, and we ended the year with 249 company-owned and 135 franchised locations, a total of 384 Red Robin locations in North America. Looking at our fourth-quarter results, we earned GAAP diluted earnings per share of $0.60 which compares to $0.53 in the fourth quarter of 2006. We also opened four new restaurants in the fourth quarter of 2007, three company-owned and one franchised restaurant. So far in 2008, we have already opened six new restaurants, 5 company-owned and 1 franchised, and as of today, we have 14 additional restaurants under construction; 10 company and 4 franchised. You may recall that we had three major initiatives going in 2007 which included launching the national media advertising campaign to help build brand awareness; reducing the cost of new restaurant development and implementing new restaurant opening initiatives to improve the performance of NROs in 2007 and beyond. We have certainly made significant progress in all of these areas in 2007, and these contributed to our performance throughout the year. For example, according to third-party research, which measured the effectiveness on our brand-building efforts, we are pleased to report that the national marketing initiatives launched in 2007 had a measurable positive impact on both incremental revenues and traffic at our restaurants. As we previously announced in 2008, we plan to invest even more in brand-building media including network and cable advertising as well as the Internet. Our 2007 investment of $11.5 million will increase to about $18 to $19 million in advertising in 2008, which will buy us about 24 weeks of advertising – more than double the 11 weeks we had in 2007. We launched two new commercials starting February 4, and we will be on and off air for 24 weeks until the middle of November. In addition, our building cost initiatives have been implemented. When we updated you last quarter, we said that our development teams had taken about $300,000 out of the cost of building our new prototype restaurant. In 2007, we opened 5 restaurants with this prototype design. In 2008, about 75% of our restaurants will be built using the new building prototype. In 2007, we implemented a number of programs designed to normalize new restaurant performance, including measures to strengthen our restaurant-level leadership and retention, improve training protocols to boost proficiency and productivity, and generally invested more in resources and dollars to help our new restaurants achieve a more comp-like or normalized sales and margins earlier than they have historically. Based on the progress we’ve made in 2007, we are increasing 2008 development to between 30 and 33 company restaurants. We also said that we will continue evaluating franchise acquisitions on an opportunistic basis after consideration of many factors, including earnings accretion. In this regard, and as we have disclosed in separate announcements on January 17 and January 31, we intend to acquire the assets of 15 Red Robin franchised restaurants for a combined purchase price of $29 million, including 8 existing restaurants in Wisconsin, 3 in Minnesota, 3 in northern Indiana, and 1 in New Jersey. We also plan to acquire an additional restaurant that is currently under construction in Eau Claire, Wisconsin, which will open in May of this year. In addition, these acquisitions allow us access to development rights in territories that were formerly subject to exclusivity provisions. The combined revenue from the 15 existing restaurants was approximately $41.8 million in 2007. We expect to close on these acquisitions in the second quarter, and we will update our 2008 financial guidance at that time. With that, I’d like to turn the call over to Eric. Eric C. Houseman: Thanks, Denny. In the fourth quarter of 2007, our comp store sales were up 2.7% on a 12-week comparable basis. This is made up of a 4.2 increase from price and mix, partially offset by a 1.5% decline in guest counts. Though our guest counts declined in the fourth quarter, please keep in mind that, as intended or anticipated, we did not run any media during this period, whereas we did have local advertising running in the fourth quarter of ‘06. For comparison purposes, we posted a 0.2% comp gain in the fourth quarter of 2006, which included a 3.2% increase from price and mix almost entirely offset by a 3% decline in guest counts. You’ll recall that a restaurant enters our comparable base five full quarters after it opens. Our fourth quarter had 192 company-owned comparable restaurants out of the 249 total company-owned restaurants. The 17 acquired franchised restaurants in California are not currently included in the comparable base, but they will be included beginning in the third quarter of 2008. Average weekly sales for this group of restaurants was $64,957 in the fourth quarter of ‘07. Average weekly sales for the comparable base was $62,873 during the fourth quarter, compared to $61,421 last year. Average weekly sales for non-comparable restaurants was $54,022 during the fourth quarter of this year compared to $53,557 last year. Approximately 61% of our operating weeks from the non-comparable restaurants in the fourth quarter of 2007 were from units in new markets compared to 63% in the fourth quarter of 2006. The performance of our non-comparable restaurants average unit volume represented about 85.9% of our average comp store sales volumes in the fourth quarter of 2007. This was slightly lower than the 87.2% in the fourth quarter of 2006. But not unexpected, given the fact that we ran no media in Q4 of ‘07 and we had fewer new restaurant openings in the fourth quarter of 2007 compared to the fourth quarter of 2006, thus losing some increased honeymoon period sales benefit during Q4 of ‘07. Our fourth quarter margins of 21.4% were nearly flat to the 21.5% margins in fourth quarter of 2006. However, the 2006 fourth quarter margins included about a 50 basis point benefit from the additional week in 2006. So taking that benefit into account, we had 40 basis points better margins in 2007. Keep in mind that also Q4 of 2006 didn’t have the incremental media cost as well. Our price increases have helped us combat some cost challenges and offset some of the 50 basis point of incremental costs related to our media campaign year-over-year. We attribute some of our ability to sustain margins to our focus on labor costs and food costs, which we believe are being influenced by the NRO normalization initiatives that we have discussed in recent quarters. Our long term restaurant margin goal is still to achieve 20% to 22% margins, but in the near term we will experience some additional pressure from the increased media expenses that were raised from 1% to 1.5% of restaurant revenue system-wide in 2008, as well as continued headwinds from food and labor costs. We know that 2008 will be a challenging year for all of us, as well as our industry, given the macroeconomic environment and continuing cost pressures. To partially offset some of these headwinds, we will be taking a 0.5% price increase in late March with the roll-out of our new spring menu. Now that we’re six weeks into the New Year, I’d like to spend a few minutes talking about what we have in store for the coming months. On the November call, we mentioned that we were testing a new, easier to navigate and even more visually appealing menu shell to continue our focus on driving guest preference while helping to maintain margin contribution and cost of goods. The test was very successful, and last week, as a warm up to the introduction of the new spring menu, we also introduced some new promotional items. They include our Red Robin Signature Sirloin Steak Sliders and our new Sicilian Burger, both of which are insanely delicious and highlight what Red Robin is all about: high quality food made with fresh, honest-to-goodness ingredients. In the beverage department we’ve added a Sunset Sangria and the So Peachy Sangria and our Mandarin Cream Lemonade to the promotion as well. At the end of March, we will launch our new spring menu featuring four new Gourmet Burgers. In addition to the Sicilian Burger that is available on our current promotional menu, we’ll be adding a Blackened Bayou Burger, a Jamaican Jerk Chicken Burger, and our new Prime Rib Dip. These will further elevate the quality of what Red Robin has to offer our guest while providing crave-able and unique food offerings. In addition to new and innovative menu items, we will continue to generate brand building news around our Gourmet Burgers through consumer and trade media relations focusing on our key attributes, including Red Robin’s quality, unique menu selections, deliciousness, and, of course, our kid and family friendly atmosphere. In fact one of our highly successful programs to return this year will be the next Gourmet Burger Kids Recipe Contest, a proven winner for both Red Robin and our guests – especially our younger guests who love their burgers and have some world class burger recipes of their own to share. During 2007, in only its second year, this contest attracted more than 10,000 entries and generated extensive national media coverage for us. Finally on the paid media front, as Denny mentioned a few minutes ago, we saw a measurable positive impact from our national advertising campaign on cable television and the Internet in 2007, and we will be more than doubling our on-air time in 2008 to build on the momentum that we have achieved so far. We believe that increased investment in national media will boost brand awareness even further in both existing as well as newer Red Robin restaurants. As we saw last year, our media campaign helped drive growth in guest counts and provided ongoing support for our new restaurant openings. Last month we provided our team members with a sneak preview of our new television commercials at our leadership summit, and the reaction was overwhelmingly positive. And just about two weeks ago, beginning on February 4, we began our 2008 media campaign on national cable television, which is already generating great buzz. If you have not seen them, our commercials can be found on our website. We’re eager to see what our 2008 media will do, and we will share those results with you on our first quarter call in May. And now I’ll turn the call over to Katie so she can review our financial results in more detail.

Thanks, Eric. First I’ll talk about our results for the fourth quarter 2007, and as Denny mentioned earlier, you may recall that the fourth quarter of 2007 was a 12-week period while the fourth quarter of 2006 was a 13-week period. The impact of the additional weeks on our results contributed about $14.4 million in additional revenue, about $1.9 million in net income, and $0.11 of diluted earnings per share in the fourth quarter of 2006. As I go through our results, the comparisons I will make will be on a fiscal year to fiscal year GAAP basis, and where material, I’ll highlight the additional contribution from the extra week in 2006. We provided Schedule 2 in our earnings press release to help you reconcile our GAAP reported net income and EPS to non-GAAP net income and EPS on a comparable basis. Total revenue in the fourth quarter of 2007, which consists of restaurant sales and franchise royalties, grew 12.3% to $183.8 million from $163.8 million. The 53rd week contributed about $14.4 million to total revenue in the fourth quarter of 2006, so excluding the extra week, our total sales would have increased 23.1% over the fourth quarter of 2006. Restaurant revenues grew 12.5% to $180.4 million from $160.4 million, or 23.6% without the extra week, and consisted of $142 million in sales from our 192 comp restaurants; $13.1 million in sales from the 17 acquired or managed restaurants in California, and $25.3 million in sales from our 41 non-comparable restaurants. Eric already covered comparable sales metrics, so I won’t discuss those specifically, but please note that the 17 acquired California restaurants will not be included in our comp stores sales metrics until the beginning of the third quarter of 2008. As we have done in the past, these restaurants are reported on separately as our 2007 acquired units. In addition, we measure our comps in the fourth quarter and year-over-year on a comparable 12-week and 52-week basis by realigning similar weeks of 2006 to calculate our same store sales year-over-year. Franchise royalties and fees increased 2% in the fourth quarter to $3.4 million which excludes royalty contributions from the 17 acquired California restaurants from which we recognized $382,000 in royalty revenue in the fourth quarter of 2006. The 92 comp restaurants in the U.S. franchise system reported a 1.3% increase in same store sales, while the 18 comp restaurants in the Canadian franchise system reported a 6% increase in same store sales for the fourth quarter. The restaurant level operating profit margin of 21.4% was slightly below the 21.5% reported last year. Taking into account the impact of the extra week last year, which benefited margins by 50 basis points, our margins improved by 40 basis points, as Eric mentioned earlier, compared to the fourth quarter of 2006. Our cost of sales increased by about 40 basis points to 22.8% this year from 22.4% of restaurant revenue last year. The increase was due primarily to higher raw material costs, particularly hamburger, poultry, steak fries and cheese, as well as higher beverage costs. Our labor costs decreased by 50 basis points to 33.2% from 33.7% of restaurant revenues this year compared to last. A large part of the improvement was due to operations initiatives on controllable labor and leverage from our benefit costs and price increases that helped offset the year-over-year increase in minimum wages. The 30 basis point increase in our other operating costs to 16.3% of restaurant revenue this quarter compared to 16% a year ago was primarily the result of the incremental costs of our national advertising fund contribution of 50 basis points of revenue, which began in March of 2007, offset partially by sales leverage and lower utility costs. Occupancy expense was 6.3% of restaurant revenues in the fourth quarter or flat compared to the same period a year ago. Depreciation and amortization increased by 40 basis points to 5.9% of total revenues from 5.5% a year ago, due primarily to the leverage from the extra week in 2006. General and administrative expenses were 50 basis points lower than the fourth quarter of 2007, at 7.6% versus 8.1% of total revenues in Q4 2006, due in part to the benefit of marketing contributions with no corresponding expense in Q4 2007, which was the opposite of what we saw in the third quarter of 2007, where expenses exceeded contributions in the third quarter. For the full year, G&A leverage was 20 basis points. Our pre-opening expense in the fourth quarter 2007 was $1.3 million compared to $1.8 million last year. Pre-opening costs typically represent costs incurred approximately 6 weeks prior to our restaurant openings, with the majority of the costs incurred in the final 2 weeks. We opened 3 company-owned restaurants in the fourth quarter this year compared to 7 last year. The fourth quarter 2007 pre-opening expense included $682,000 of costs incurred for the 3 restaurants we opened in the fourth quarter and $597,000 of pre-opening costs incurred in the fourth quarter for restaurants we have opened or will open in or after the first quarter of 2008. Our pre-opening cost per restaurant averaged $280,000 in 2007, and we expect that average pre-opening cost per restaurant to carry into 2008 as well. Net interest expense rose to $2.5 million from $1.9 million last year. Our interest expense increase reflects the increased borrowings to fund our growth and fund the California restaurant acquisition, offset by lower interest rates. Our effective tax rate for the fourth quarter was 25.3% compared to 24.2% in the fourth quarter of 2006. The effective tax rate contributed $0.04 to our diluted EPS compared to our updated guidance, which included a tax rate assumption of 31%. Our full year effective tax rate for 2007 is 29.2%, as we continue to benefit from tax credits from tips and other initiatives we have recently implemented. We are currently forecasting our 2008 effective tax rate to be approximately 30%. Net income for the fourth quarter of 2007 was $10.1 million or $0.60 per diluted share, compared to net income of $8.8 million or $0.53 per diluted share in the fourth quarter of 2006. Net income for the fiscal fourth quarter of 2007 included $1.5 million in pre-tax stock compensation expense or $0.07 per diluted share after tax. Net income for the fiscal fourth quarter of 2006 included $1.2 million in pre-tax stock compensation expense or $0.05 per diluted share after tax. Recall that Q4 2006 includes $1.9 million of net income, an about $0.11 benefit to diluted EPS for the extra week. For the fiscal year 2007, GAAP diluted earnings per share were $1.82 versus GAAP diluted EPS of $1.75 in 2006. Excluding the after-tax impact of acquisition integration costs, reacquired franchise costs, legal settlement expense, and the extra week in 2006, fiscal 2007 diluted EPS would have been $1.98 versus $1.71 in fiscal 2006 or 15.8% growth in EPS year-over-year. Schedule 2 of the press release lays out this reconciliation for you. Excluding the $47.8 million paid for the acquisition of the California franchised restaurants, our capital expenditures were $77.8 million for the year, most of which was for new restaurants. We expect our capital expenditures to be about $85 to $95 million in 2008, excluding any 2008 acquisition consideration, which is currently expected to be about $29 million. The balance outstanding under our line of credit facility at the end of the year was $144.4 million, with about another $144 million of the original $300 million still available, excluding the $100 million of additional credit that may be available in the future at our request. Now let’s talk about our outlook for 2008. Consistent with our practice in 2007, we will not provide quarterly revenue, quarterly comparable restaurant sales, and quarterly earnings per share guidance. We will, however, provide guidance for these metrics on an annual basis, which we may update throughout the year as circumstances and visibility changes. We will continue to provide quarterly unit development expectations for both company-owned units as well as franchised units. For the first quarter of 2008, which is a 16-week quarter, we expect to open 8 to 9 new company-owned and 1 to 2 new franchised restaurants. For fiscal year 2008, we expect to open between 30 and 33 new company-owned units and franchisees are expected to open between 9 and 11 new restaurants. For the 2008 fiscal year, which is a 52-week year, we expect revenues of $880 to $893 million and net income of $2.00 to $2.20 per diluted share. These projected results are also based upon certain assumptions including an expected comparable restaurant sales increase of approximately 2% to 3.5% with a late March price increase that Eric mentioned of approximately 0.5%. This guidance excludes, however, the impact from the previously announced 2008 potential acquisition of 15 Red Robin franchised restaurants, including reacquired franchise costs and acquisition related integration expenses. We will update financial guidance after those acquisitions are closed. Our annual financial guidance also includes expansion of a national advertising campaign that will be funded by company-owned and franchised restaurants. Total 2008 spending is expected to be approximately $18 to $19 million, up from $11.5 million in fiscal 2007. Each restaurant in the system, company-owned and franchised, is contributing approximately 1.5% of their restaurant revenue in fiscal year 2008. With that, I’ll turn the call back over to Denny. Dennis B. Mullen: Thanks, Katie. To summarize, we are pleased with the financial results for Red Robin during the fourth quarter and full year of 2007. In 2008 we plan to expand our efforts to build our brands, drive increased restaurant sales, and support new restaurant growth in both existing and emerging Red Robin markets. While we grow the top line, we will also continue our efforts to improve operating efficiencies to help offset some of the continued industry cost pressures, as well as continue the discipline of reviewing opportunities to take costs out of our building, all of which we believe will contribute to increased profitability and greater returns to our stockholders. As always, we remain focused on our heritage and passion, which is, of course, our fantastic team members serving the highest quality Gourmet Burgers and a variety of other insanely delicious menu items that have made us the premier destination for America’s families. And as we have said in the past, our success in 2007 would not have been possible without the talent and hard work of every one of our Red Robin team members, and I want to personally say thank you for their efforts. Operator, with that we’d like to open the call for questions.

We’ll go first to Jeff Omohundro - Wachovia. Jeff Omohundro - Wachovia: My question I want to focus on is the advertising spending plan this year, and first if you could just comment a little bit about your thinking around the timing of your spending and how the Presidential election cycle and the Olympic cycle might impact that as we think about it quarterly? Dennis B. Mullen: First of all, we increased it to 24 weeks, and want it to pulse on and off through most of the year. We will be off-air during the opening and closing ceremonies of the Olympics, and the election campaign is not on national cable. It’s usually local, and there will be some noise out there for everybody when the campaign is on, but we don’t expect that to be an issue. Jeff Omohundro - Wachovia: And then my other question is also on the advertising front, but in terms of your alternative efforts there, I think you’ve been in the process of finalizing some Internet advertising efforts, for example, just maybe an update on that effort as well? Dennis B. Mullen: We did Internet last year, so we’re doing similar programs this year where we will be driving customers to our website to get them to hopefully opt into our eClub, et cetera. We have various syndicated television spots where, like Oprah, et cetera, where people can then go to their website and opt directly or click directly through to our Internet website, and we will have a promotion, if you will, like we did last year, a game promotion on the Internet later this year. Jeff Omohundro - Wachovia: And then lastly, I might have missed it, but did you comment on existing markets versus new markets in terms of your development for 2008? Thanks.

In 2008, Jeff, our operating weeks, will be split fairly evenly between new and existing markets, which is different than the last couple of years where we’ve been heavily weighted in the new markets. Jeff Omohundro - Wachovia: Great. Thank you.

We’ll go next to Destin Tompkins - Morgan Keegan. Destin Tompkins - Morgan Keegan: I just wanted to ask on the same-store sales guidance of 2% to 3.5%, as we look at the comparisons you’re lapping, they get more difficult through the year. Is it logical to think that the sales trends would be better in the early part of the year?

The sales trends are difficult in Q2 and Q3, because we were heavily on advertising during those periods of time. In Q4, as we’ve stated, we were negative 1.5%, so our guest counts in Q4 are actually going to be easier, we hope, in Q4 of ‘08. Dennis B. Mullen: Television matches up in Q2 and Q3 of where we were last year, and will be, not only matches up, but will be heavier. So to the extent we’re comping over Q2, Q3 last year’s improvements, we expect that we’ll be in good shape there. Destin Tompkins - Morgan Keegan: But given that Q1 is a fairly easy comparison where you weren’t on air, wouldn’t it be logical to expect that we’d see a little bit better trend in Q1 than say later in the year?

Our guidance reflects the easier Q1, obviously. Destin Tompkins - Morgan Keegan: Okay, and then on the menu pricing, just to clarify, did you roll over a 0.5% in December, and then you, when you put the 0.5% on, won’t that be lapping a 0.9% from last year, so after we get through that going forward, is that about 3.6% you’ll be running until we get to August?

No, we actually rolled off the 0.5% in December, so we’re carrying about 4% into the beginning of this year. We’ll roll off a 0.9% in April as we bring on the 0.5%. And then late August we’ll roll off 2.9%. Destin Tompkins - Morgan Keegan: So what will you be running from April to August?

About 3.4%. Destin Tompkins - Morgan Keegan: And then just wanted to ask about the impact of TV as you have experienced being off air in the fourth quarter. When you get ready to roll back on air, or you recently just rolled back on, what has been your experience when you’ve gone off-air and the tailwind that you’ve benefited from and what are your expectations as you go through the year? Dennis B. Mullen: We’re frankly not going to get into that, because last year was the first year we went on TV, so we don’t have enough history or background. We’ll talk about how the first quarter is going on TV, in the first quarter. Destin Tompkins - Morgan Keegan: Okay, great, thank you.

We’ll go next to Nicole Miller - Piper Jaffray. Nicole Miller - Piper Jaffray: I missed the beginning of the call. Can you give the stores and the comp base, non-comp and the acquired number of units that match up to the average weekly sales?

The number of comp units is 192; the number of non-comp units is 41; and then we have 17 that are in the 2007 acquired class. Nicole Miller - Piper Jaffray: Thank you. Looking at the 0.5% March price increase, do you have an opportunity to be more aggressive throughout the year? Dennis B. Mullen: At this point we’re comfortable with that 0.5%, and we’ll evaluate it as we go forward. Nicole Miller - Piper Jaffray: Looking back at 2001 and 2003, did you benefit from the last round of tax rebates, and how do you think about the tax rebate benefit, if there is one for later this year? Dennis B. Mullen: I think the company benefited to some extent. We’re not going to quantify what it was. Your guess is as good as mine, but we hear statistics that the consumers are going to spend between 40% and 60% probably of that tax rebate. To the extent they spend it and it’s disposable, we certainly think we’ll get our share. We didn’t build that into projections though. Nicole Miller - Piper Jaffray: Okay. And then just my final question, can you share advertising feedback, both from franchisees and what you’ve heard from consumers so far? Dennis B. Mullen: Feedback in terms of non-quantitative, yes. Nicole Miller - Piper Jaffray: Yes. Dennis B. Mullen: The feedback has been, likeability has been very strong. We’ve gotten lots of emails, et cetera; we’ve talked to our team members in restaurants to see what guests are saying about the television commercials, and they’ve been quite positive, same with franchise partners. Nicole Miller - Piper Jaffray: Thank you.

We’ll go next to Steven Rees - J.P. Morgan. Steven Rees - J.P. Morgan: I wanted to ask about the new unit margin performance. I think in the past you’ve talked about a three-year ramp up process, and with all the NRO initiatives, I wanted to see if you’re seeing any improvement in terms of the new unit margins and how that ramp-up period is progressing?

In the 2007 class, Steven, we did see an improvement. Historically we did say it took us three years to ramp up to that normalized comp-like level. We’re not far enough into it yet to claim exactly what that shrunk to from three years. We’re fairly confident it’s going to be less than three years, though. Steven Rees - J.P. Morgan: Okay, and then in terms of the new unit sales volumes, I think you’ve seen that bounce around between 85% and 91% of system average this year. What are you expecting for 2008, or what are you modeling? Eric C. Houseman: Steven, internally it’s kind of a trend for us; it’s such a dynamic number, and restaurants are coming into that and going out, so it’s really hard to quantify, and then like I mentioned on the call, if you have a quarter that doesn’t have a lot of honeymoon sales, drastically can move that, because the base is so small. So we are looking at these more in terms of, like Katie mentioned, where are they at when they enter the comp base in terms of average unit volume and margin performance.

This year they ran anywhere between 85% and 91%, 92%, depending on whether or not we were on advertising, and as Eric mentioned about the volume of new unit openings in any particular quarter, certainly influences that AUV as the percentage of the comp AUV, so when you model it, you have to model it actually looking at all those variables. Steven Rees - J.P. Morgan: Okay, great, thank you very much.

We’ll go next to Joe Fisher - Bear Stearns. Joe Fisher - Bear Stearns: I was just curious of an update on the commodity side of things. You gave us a lot of detail in the December analyst meeting, but I was trying to piece together what you’re thinking when it all comes together for the year, and also if you’ve done anything on the hamburger side. I think you were paying spot back then.

Joe, good question. I’m glad you asked the question about the hamburger. Let me address that one first. We’ve just recently decided to go ahead and contract that. We have been buying on spot historically. We’ve never contracted before, but given the opportunity and the threats that we see in the near term this year, we decided that now was the time to contract that, so we did. 90% of our food cost is under contract right now, so we have very good visibility to 2008’s costs. Those costs are included in our forecast and in our guidance that we just gave, so we’re very confident that we have some good visibility to those food costs this year. Joe Fisher - Bear Stearns: And with that hamburger, was that contracted up significantly year-over-year? I’m not exactly sure what the market...

It was up about 6% year-over-year on average. Joe Fisher - Bear Stearns: And then just one other question, I was wondering if your development team has seen any change in the real estate landscape when you’re going into, whether it’s new or existing markets, whether it’s cheaper or it’s just easier to obtain certain locations, if you could talk to that? Dennis B. Mullen: Our development people are in the room, so we’ll have to say it’s never easy. We’re negotiating harder, we’re demanding more, and we expect that to bear some fruition as we go through the year. Joe Fisher - Bear Stearns: Okay, and then one final one, has there been any noticeable change in mix shift as you’re taking these price increases? Dennis B. Mullen: No, not at all. Joe Fisher - Bear Stearns: Okay. Great. Thank you. Dennis B. Mullen: And no change in lunch/dinner mix either.

We’ll go next to Conrad Lyon - FTN Midwest. Conrad Lyon - FTN Midwest: Nice job lapping that extra week. First question has to do with the acquired units, Wisconsin, thereabout. You talked about it in the last press release closing in the second quarter and being accretive. Does that still hold true?

Yes. Conrad Lyon - FTN Midwest: Okay. Can you give us an idea of the condition of these restaurants? Do you think it’s going to require any significant CapEx? Eric C. Houseman: No, not at all. They’re relatively new restaurants, especially the Wisconsin ones. Conrad Lyon - FTN Midwest: Okay. And it looks like you got at least on the surface a pretty good deal in terms of price. Does that imply that there’s some margin opportunity there? I’m assuming that perhaps maybe the restaurant-level margins might be a little bit lower than say your average? Dennis B. Mullen: In terms of the price, if you will, we believe it’s fair and hopefully the franchise partner believes it’s fair. We always hope and aspire to improve average unit sales and margins, but these are good operators. Conrad Lyon - FTN Midwest: Okay. Let me move over to labor. I believe, especially earlier in 2007, I think you added additional labor and perhaps some other costs there to reinforce the message and enhance guest service, especially in newer markets. Do you think that you might see any benefits to labor this year, or might you tail it back a little bit, or will the staffing change this year do you think?

I think early on in the year in 2007, our new unit openings we were experimenting with the right level of staffing, and as we settled into a more consistent methodology of staffing, I think we saw improvements to that later on in the year, and we expect to carry that over into the 2008 openings. Conrad Lyon - FTN Midwest: And bottom line, your outlook for labor, do you see it being maybe just flatter to slightly up?

Yes. There’s going to be minimum wage pressure. Conrad Lyon - FTN Midwest: Okay.

Before price increases, about 30 basis points of minimum wage pressure. Conrad Lyon - FTN Midwest: Okay. Perfect. All right, thank you very much.

We’ll go next to Bryan Elliott - Raymond James. Bryan Elliott - Raymond James: I may have missed this, but in the prepared remarks, did you reconfirm what you said in December that new units in new markets, the gap between that and new units in old markets had fully closed? Is that still the case?

I would say the gap is narrowing. When we’re off advertising, we notice a bigger delta between new and existing markets. We know that advertising has a very heavy influence in our new markets, so when we’re off advertising, and we were dark all of Q4, we saw a bigger impact of that delta, but we expect to close the gap as we’re on more consistently in 2008 for advertising. Bryan Elliott - Raymond James: All right. And I believe I also heard you say that some percentage of your ‘08 stores would open with a new prototype, 75%-ish I think it was.

Yes, 75%, that’s right, Bryan. Bryan Elliott - Raymond James: Just wondered why they all couldn’t benefit? Dennis B. Mullen: Because we have many of them that were in process in ‘07 that already have opened the first part of this year.

That were the old prototype that we pushed out. Dennis B. Mullen: Once these deals are in process, they take 12 to 18 months, so if they were in process last year, we couldn’t go back and start over again, or it would have cost more than the cost savings. Bryan Elliott - Raymond James: Okay. Fair enough. Thank you.

We’ll go next to Howard Penney - FBR. Howard Penney - FBR: Thanks very much. I have a series of questions, if you don’t mind. The first two, what do you expect the all-in inflation cost of the new units in 2008 to be, and then can you elaborate a little bit more on labor in this quarter and how you were able to manage the labor costs, given the decline in traffic?

Let me address the construction costs. We’re not expecting to see significant increase in construction costs. We think with the reduction in costs that we have taken out of the building that we can control that inflation. It will be minor if any. Eric C. Houseman: Howard, I can answer the labor savings questions. We’ve done a lot of things this year, obviously with the NRO initiatives focused on tools, processes, and different things in our heart-of-the-house as well as front-of-house operation. We have been behind the scenes taking “labor” out of the business model by going to some pre-cut and pre-prepared prep items in the kitchen, so it’s an ongoing focus for us. We have a lot of proprietary tools that we use in-house, and I think the NRO initiative is actually bleeding off and best practices are being developed that are being implemented in our comp restaurants. Howard Penney - FBR: That’s helpful, thank you. Big picture advertising question, if you don’t mind. Your decision to go advertise on a national basis is really going to change the complexion of this company in the sense that there is a level of volatility associated with advertising, given that we have seen other companies who do this have relative degrees of success in different promotions, whether they resonate with consumers or not. And then also for 2009 to have an impact over 2008, that 1.5% is going to have to go to 2% or 2.5% or whatever that inflation rate that you’re going to see in order to see the impact. Can you just talk about how you’re going to manage this advertising program and maybe limit some of the volatility, when success, working and not working, and what you see you’re going to have incrementally over the next few years to continue this positive impact? Dennis B. Mullen: First of all, that’s a leap on your part not ours that we would naturally increase advertising as a percentage of sales going forward in future years, so to back up, we went into the national campaign to build the brand. So we’re not building it for spikes on promotion. We’re not doing price promotions. We’re not doing specific product promotions. That’s the way we rolled it out last year for the 11 weeks, and that’s the plan that is already in place and bought for this year. That’s the 1.5% level. We have made no decisions about what we will do in ‘09 or beyond. Naturally to the extent that sales increase in ‘08, and naturally by the fact that we have 30 plus restaurants more coming on plus the franchised acquisitions we will have, pot will be a little bit bigger if we say at the 1.5% level, but we’re making no commitment on the promotions. This is a branding campaign that we committed last year and are fully committed to in ‘08.

We’ll go next to Joe Fisher - Bear Stearns. Joe Fisher - Bear Stearns: I was wondering if you can comment on any regional strength or weakness out there? Dennis B. Mullen: Joe, we really haven’t seen material weakness in any particular region as we said in the past. If we had, if we do, we will certainly discuss it specifically.

We have no further questions at this time. I would like to turn it back to the speakers for any additional or closing remarks. Dennis B. Mullen: We just want to thank everybody for joining us on the call today, and we look forward to talking to you all soon.

Ladies and gentlemen, this concludes today’s conference. You may disconnect at this time.