Good morning, ladies and gentlemen, and welcome to the Red Robin Gourmet Burgers Third Quarter 2012 Conference Call. [Operator Instructions] As a reminder, part of today's discussion will include forward-looking statements within the meaning of federal security laws. These statements are commonly identified by words such as continue, plan, expect, will and other terms with similar meaning. These statements will include but will not be limited to, statements that reflect the company’s current expectations with respect to the financial condition of the company, results of operations, plans, objectives, future performance and business, including the company’s traffic and revenue-driving initiatives, intentions with respect to expense management, and plans for deployment of capital and other expectations discussed during the course of this call. Although the company believes the assumptions upon which preliminary or initial results, financial information and forward-looking statements are based, are reasonable as of today’s date, these forward-looking statements are not guarantees of future performance, and therefore, investors should not place undue reliance on them. Also these statements are based on facts known and expected as of the date of this conference call, and the company undertakes no obligation to update these statements to reflect events or circumstances that might arise after this call. Participants on the call today should refer to the company’s Form 10-K and other filings with the SEC for a more detailed discussion of the risks, uncertainties and other factors that could impact the company’s future operating results and financial condition. The company has posted its fiscal third quarter 2012 press release and supplemental financial information related to the quarter’s results on its website, www.redrobin.com in the investor section. I will now turn the call over to Mr. Steve Carley, Chief Executive Officer of Red Robin.

Thanks, Janet, and thanks, everyone, for joining us on our call today. With me are Eric Houseman, our President and Chief Operating Officer; Denny Post, our Chief Marketing Officer; and Stuart Brown, our Chief Financial Officer. After Stuart, Denny and I deliver our prepared remarks, we'll all be available for Q&A. I first want to say that we're very pleased with our most recent quarterly results. You may recall that during our second quarter call in August, we said that we were taking action to blunt anticipated challenges to guest traffic in Q3, due to 3 weekends of the Olympic Games, slowing consumer demand generally and other headwinds. The success of our marketing initiatives and the solid operational performance of our restaurant teams contributed to a stronger-than-expected fiscal third quarter 2012 and allowed us to outperform the casual dining category in an intensely competitive market. During the quarter, we again achieved year-over-year improvement in guest counts, gains in restaurant revenues and continued expansion in our operating margins. We were especially pleased with the performance of our Tavern Double platform, with the flavor innovation and everyday value it offers to our guests. And our Red Royalty program, which continues to connect with our guest to drive frequency. As we shared in our earnings release, and as you can see on Slides 3 and 4 of the supplemental information, during Q3, we grew total revenues 3.4% to $213.3 million and increased company-owned comparable net restaurant sales by 1.1%, including an 80 basis point increase in guest traffic. Restaurant-level operating profit margin improved 90 basis points to 19.7% in the third quarter, compared to 18.8% a year ago. In terms of our bottom line, earnings per diluted share grew to $0.24, compared to GAAP diluted earnings per share of $0.14, and adjusted earnings per diluted share of $0.24 a year ago. As you know, our long-term strategy for building the Red Robin brand is a multi-pronged approach that includes enhancing the guest experience and strengthening our value and quality perceptions to drive revenue growth, as well as managing costs and optimizing our use of capital. Denny will update you on the third quarter's marketing successes that drove guest traffic and revenues, but I'll first update you on some very key initiatives in our strategic plan. During Q3, our restaurant teams continued to make progress streamlining our operating costs. There's no rock too small for us to look under to find potential savings defined for potential savings, and here are some examples. We found about $120,000 in annual savings by changing the spec or the appearance with our onions. Now we chop our onions and put them in salsa, so the appearance of the onions isn't important, but we, still, were able to change the spec and save $120,000. In addition, we expect to save about $275,000 annually with our to-go packaging. It uses less material, and therefore, it's cheaper. And more than $0.5 million each year we will save by switching to a washable, reusable kids' beverage cup. Besides the cost-benefit, the packaging in kids' cup initiatives are a win for the environment. All 3 of these examples show, once again, that we can find operational cost savings that don't diminish the guest experience. On Slides 5 and 6, you could see our cost saving ideas having an impact, not just on the continued expansion of our margins, but also on the investments we're making back into the business. Not only are we making big investments like our technology infrastructure improvements and brand transformation effort, that I'll talk about in a moment, we're investing in improvements like enhanced audiovisual packages and flatscreen, high definition TVs in our restaurants, to support our bar initiatives and new kitchen equipment to enhance the quality of our food. We're also reinvesting savings to support the innovative ideas from our culinary team. We're absolutely putting the savings to good use, building our business wherever it makes sense. Regarding our brand transformation initiative, we're on track to open a number of transformed restaurants in the fourth quarter, reflecting varying levels of investment. Now this is not simply a restaurant remodeling effort, it's part of our overall strategy to make Red Robin -- the Red Robin brand more relevant to our current guests and to attract more of them more often and leave them so delighted that they tell all their friends. This continues an evolution of our brand to build profitable sale. Like every other guests-facing initiative we're working on, the changes we're making are informed by comprehensive consumer research, and about everything from the physical space and layout of the restaurants, to the team member uniforms, our service model, our menus and our food presentation. Over the next several months, these restaurants will, in effect, serve as a laboratory for us to test what's really important to our guests and determine the returns from these investments. We expect to have conclusion of findings by Q3 of next year and will determine the next steps based on what we learn. On growth of new full-sized Red Robin restaurants, we opened 4 new units in Q3 and we're on track to open a total of 10 for 2012. Also 3-franchised restaurants in Texas, that closed over the summer, have since reopened under the management of a different franchisee. So far in Q4, we've opened new Red Robin restaurants in Washington State and Florida, and later this month, we expect to open another Florida Red Robin location. In 2013, we're planning on opening up to 15 new full-sized Red Robin restaurants in markets that include Florida, New York, New Jersey and Chicago. All markets where we are very underpenetrated. Finally, on Red Robin's Burger Works, we said that our plan was to have 5 units opened by the end of this year, and we achieved that goal in the third quarter with the opening of a Burger Works at the University of Colorado in Boulder and another on Denver's Metro State College campus. Remember that our objective behind Burger Works was to enhance our long-term growth profile, with a smaller footprint that combines our great burgers and a fast casual service system. Burger Works allows us to penetrate trade areas we haven't been able to serve in the past with full-sized Red Robin restaurants. Our first 5 Burger Works vary in size, in trade area and, quite frankly, in performance and consistency of execution. But as intended, they're generating a lot of learning that we can use to tweak the model to deliver even better guest experience and improve the ROI. We have a lot of runway ahead of us with Burger Works including urban locations, stadiums, airports, college campuses and other opportunities. Moving forward, while we continue to refine the model and test at existing Burger Works units, we plan to open up 5 more Burger Works in 2013. So moving on to Slide 7, I'd like Denny to share some of the highlights of our key marketing initiatives in the last quarter that were big contributors to our outperforming the market and helping us sustain the Red Robin brand. Denny?

Thanks, Steve, and good morning, everyone. As you know from tracking Black Box and other industry sources, traffic has been hard to come by this year and particularly, in the last quarter. That's why I'm so proud of the way that the menu and marketing teams continue to come together to outperform competitors today, and to set us up for even further and stronger growth in the future. A key focus area continues to be delivering innovative flavor combinations that make us gourmet at an everyday value to our guests. Our Tavern Double platform, which we launched in the second quarter and, more recently, used to create news through new Tavern styles and the big Tavern, continues to meet our expectations. This platform now accounts for significant mix and has emerged as the most successful new platform launch in our history. During the third quarter, we featured the Tavern Double on TV to reinforce everyday $6.99 with bottomless fries value, while also bringing back the popular Oktoberfest Burger, supported with online and social media, as well as strong in-store merchandising. The best part, this 1-2 combination allowed us to sell the Oktoberfest at full price this year, rather than taking the $3 discount we did last fall. This top line-bottom line balance worked well to drive profitable results, as you'll see when Stuart takes you through details. We're also having greater success with menu options that help build average check. Along with the Oktoberfest Burger LTO, we introduced Warm Pretzel Bites, a great new shareable appetizer that generated incremental sales. Other check drivers included our bar business, frequent trade up to Tavern styles and featuring a popular entree, in this case our hand-battered, made to order Arctic Cod Fish & Chips. Another key part of our marketing strategy is becoming even better at engaging guests through our Red Royalty program. During the third quarter, we leveraged Red Royalty to drive repeat profitable traffic. One of our successes was an offer that offset traffic softness during the Olympics. We're using Red Royalty for micromarketing in key geographies to generate awareness of new menu items and to segment our guests with smart rewards. Membership has reached 1.9 million guests, and while it is already an effective and profitable program for us, we continue to refine it and link it with other engagement tools such as eBlast and social media for even greater impact. During the third quarter, we also made further progress against our bar and beverage initiatives. Take back the bar initiatives continue to increase our alcohol beverage mix up to 7.2% as of Q3 this year. Taking back the bar is also about differentiating our brand, being more relevant to adult guests and creating a great dining experience in our bar. The addition of a master mixologist to our culinary team has already generated benefits in the form of improved core beverage items, greater variety of both alcohol and nonalcohol beverages and offerings that set us apart, such as our Sam Adam's Oktoberfest beer shake. The beer shake story was picked up national outlets ranging from The Today Show to CNBC, and in many markets across the countries. This fun new item really captured people's imagination. It generated more PR impressions in a month than we achieved for legacy programs in an entire year. It was unexpected and it spoke to the whimsical nature of our brand. Looking ahead, we still have a lot more opportunity to increase beverage mix and we're confident we have a slew of strong concepts in the pipeline. As Steve is fond of saying, this is a marathon, not a sprint, and while we're pleased by our progress so far, we know we have a long runway ahead to become best-in-class. Last, on the advertising front. We will have a new agency partner in place by year end, with the experience and the media leverage we need to go to the next level. Those are just a few of the headlines from Q3 on the menu and marketing front. With an unprecedented investment and quantitative, qualitative and sensory research, we are developing a robust pipeline of new products, evaluating new kitchen equipment to expand our capabilities and breaking new brand and marketing. We have multiple market test in placed this fall, all supported by operations in other teams across the enterprise, partnership for which I am very grateful. We are just starting to rock 'n roll. And now, I'm going to turn the call over to Stuart, to give you more perspective on our operating results and the outlook for the rest of the year. Stuart?

Thanks, Denny, and I appreciate everyone joining us on the call this morning. As Steve and Denny already covered, we had a great quarter. We exceeded our expectations and demonstrated our ability to nimbly and profitably drive the top line, while effectively managing expenses. Earnings per diluted share were $0.24 in the third quarter, on higher sales and higher restaurant-level operating margins. This is better than we'd anticipated entering the quarter, although flat versus last year's adjusted earnings per share. Looking in the big picture versus a year ago, the improvement in restaurant-level operating results was offset by investments and projects, supported long-term infrastructure and growth, including preopening expenses, as well as a much higher income tax rate. Year-to-date, adjusted EPS has risen 13% to $1.48. As shown on Slide 9 of our supplemental, our revenues in the third quarter totaled $213.3 million, an increase of $7.1 million or 3.4% and that included 1.1% growth in comparable restaurant revenue due mainly to higher traffic. Year-to-date, comp sales were up 0.9%. Revenue from comparable units in Q3 included approximately $1 million from a reduction in liabilities associated with our Red Royalty loyalty program. We defer revenue for the cost of earned rewards, and the cost of rewards is lower than we have set aside. Accumulative impact of this adjustment boosted comparable restaurant revenue by 0.5% for the third quarter, adjusted 0.1% on a year-to-date basis. Now that we have over a year of good data on member behavior, we were able to perform a thorough analysis of our Red Royalty program, and are confident that the structure is working well rewarding our loyal guests in a way that it's profitable for the company. Our average guest check increased 0.3% in the quarter due mainly to last October's price increase, the changes in our royalty program and increased alcoholic beverages -- beverage sales. These increases, however, were offset by lower appetizer sales and the increased mix of the everyday value Tavern Double. When comparing our guest count trends to data from Black Box, we appear to have outperformed by 250 basis points, as we increased counts up 0.8%, while casual dining at a whole was down 1.7% in Q3. As you see on Slide 11, our strong year-over-year restaurant-level performance, continued this quarter with margins up 90 basis points to 19.7%. Specifically, cost of sales were down 70 basis points from last year, as lower prices on dairy, produce and pork more than offset increases for beef and potatoes. Restaurant labor increased 60 basis points to 34.2% due to the higher variable compensation. Although, other operating costs fell 90 basis points due to lower card processing fees, utilities and supply costs. Looking to Slide 12. Over the past 2 years, we've expanded restaurant margins by a full 220 basis points from 17.5%, despite cost of sales being up 40 basis points. Selling, general and administrative costs were $24.5 million in the quarter, an increase of $1.6 million versus a year ago, mainly due to the cost of expanding our gift card program, as well as investments in our IT infrastructure, partially offset by severance cost, which we incurred last year. We expensed $1.2 million this quarter related to the development of our new finance and supply chain systems, an increase of $400,000 over last year, and year-to-date, we have expensed $4.2 million related to these systems. SG&A costs, overall, were less than expected this quarter, as some cost related to the production of gift cards for the holidays shifted into the fourth quarter. Gift card sales this year expected to rise well over 20%. Depreciation increased both sequentially and compared to last year due mainly to $600,000 of write-offs and accelerated depreciation related to our brand transformation initiative and upgrades to some of our kitchen equipment. We expect about $750,000 of additional depreciation in the fourth quarter related to these initiatives. Looking at Slide 13. The continued growth in EBITDA is enabling us to fund investments in our infrastructure, to improve our guest experience and value proposition, and to extend growth, with new full-service restaurants, Burger Works and remodels. Year-to-date, adjusted EBITDA is up 9% or $6.5 million, to $78.5 million. If you look back over the last 2 years, EBITDA through the first 3 quarters has increased $18 million or 30%, in what has been a fairly competitive environment. Year-to-date, we've invested about $43 million, including $22 million in new restaurants, including the one we acquired in Clifton, New Jersey, $10 million in maintenance capital and $9 million in IT systems and corporate initiatives. The cash we've generated also funded $7.9 million of share repurchases in the quarter. Year-to-date, we have purchased approximately 521,000 shares for $15.7 million, which represents 3.7% of our share base at the beginning of the year. Regarding guidance. You can see the update in the third quarter earnings release and on Slide 16 and 17. Steve and Denny have already provided a piece on the number of the initiatives that we have on the pipeline. Our capital investment expectations for this year of $55 million to $60 million includes approximately $7 million in Q4 for our brand transformation initiative and the upgrading of audiovisual in about 100 restaurants that we talked about last quarter. Additionally, we will expense about $700,000 for training, research and other costs related to brand transformation in the fourth quarter, which is included in our updated SG&A guidance. We're still in the early stages of transforming Red Robin to assure continued and sustainable growth. But our track record of margin improvement over the last 2 years has already delivered significant value for shareholders. Looking ahead, the initiatives we're undertaking to drive top line growth, business insight and enhancing the guest experience, require time and resources to design, test and implement. But we are highly confident in the opportunity we see in front of us. Although we will communicate our 2013 outlook on the fourth quarter earnings call, we think it would be helpful if we provide some direction on our call today. First, the impact of our 53rd week this year is meaningful. That holiday week is a very profitable one, as it has sales about 40% higher than an average week, with restaurant-level operating margins of approximately 30% for the week. With low selling and corporate costs, those operating results flow strongly in earnings. We estimate that we could be worth $0.15 to $0.20 to earnings per share, and $4 million to $5 million to EBITDA. For 2013, that week shifts from being in the first quarter to being in the fourth quarter so Q1, 2013 results will be lower than the same period of 2012. The impact of commodities based on current market is expected to raise our cost of goods around 5% next year. Our goal would be to offset the dollar impact of inflation by improving sales mix into some degree by increasing price. Further, as Denny touched on, we'll be evaluating the timing of our marketing and media plans with our new agency partner, to assure that we are optimizing effectiveness. So you should anticipate some noise in comparability, if we change media plans. Our update in February will include estimates on comparable sales growth and margins, as well as the impact of key initiatives in the pipeline. Lastly, on new stores. We will continue expanding our base and plan to open around 50 new Red Robin restaurants and up to 5 additional Burger Works. With that, I'll turn the call back over to Steve. Thank you.

Thanks, Stuart. I'll wrap up our prepared remarks by reiterating that 2012 is a foundational year for Red Robin, as we transform our business and position the company for sustainable long-term growth. Given our progress so far this year, we're on track to meet our objectives for 2012, including continued operational discipline, building our new product pipeline, elevating the guest experience and expanding our restaurant base through new unit development. I want to, once again, thank all my fellow Red Robin team members across the enterprise, for their continued hard work, passion and focus on results. Our success would not be possible without them. Finally, we want to make sure everybody stays safe out there on the East Coast as Hurricane Sandy makes landfall. With that, operator, we'd be happy to take questions.

[Operator Instructions] And we will take our next question from Jeff Omohundro with Davenport & Company.

I have a couple of questions. I guess, my first one just a clarification on Stuart's comment regarding the 2013 commodity outlook. Was that a 5% blended commodity inflation for 2013? And was it correct to say that you're suggesting that you can offset that magnitude of inflation or the expectation to offset it through price and mix?

Yes, Jeff, this is -- yes, you're right. You understood the comment on the 5% right. In terms of offsetting it, yes, we're doing everything we can to provide options for our guests to trade up themselves, so they can add PPA on. We can improve overall profitability per check. And again things like the Pretzel Bites and the other appetizers that we have in the pipeline will help with that. So that's our first priority is to offset it that way. But we obviously will continue to keep in our pocket the ability to take price to offset it as well as things play out.

And then secondly, you've maintained the 0.5% of comp guidance for the year, despite the strong Q3 results. And certainly the prior year is more challenging, but I'm wondering if that would suggest that you're seeing a deceleration in Q4? Perhaps you can address that and the state of the competitive environment you're currently seeing.

No, in Q3 if you look the Black Box numbers on traffic was already pretty competitive. So in terms of looking now where in Q4 is, we're expecting to be a lot of the same. Obviously, we've got a cautious outlook, just as consumers stay skittish around the fiscal cliff, and things like that. So we were remaining fairly cautious, if the things turn around better and people feel better, then it'll be great for us, that's not that what we're counting on.

Have you seen a shift in trend so far?

Looking at the national data from Black Box, I think it's been fairly consistent.

We will take our next question from Will Slabaugh with Stephens.

I wonder if you could address the menu for a second, and talk about where you are now versus maybe where you want to be down the road? What additional opportunities would mean from a mix or a traffic standpoint? And then just kind of -- if you could work into the barbel strategy that you have now and kind of what they may look like going down the road?

Will, this is Denny, great question. I think we've made obviously some progress with extending our barbel with the addition of the Tavern Double. But we see an opportunity to continue to broaden the range of offerings within our burger authority, as the core of our menu. We also have a lot of upside. I think if there's kind of a weakest part of menu, it's generally the appetizers and the desserts. And have a number of things in test that we think will make a big difference there, as well, give guests another reasons to add on either at the front or at the back, or hopefully both ends of the meal. As well as, what we've got going on around beverages and greater variety. And like I said, some of the fun kind of things that we're doing. So I am very fortunate. I think we have a very clear strategy around burger authorities. They give us a lot of room to move. And a lot of things go along with that, right? The right size, the right beverages, et cetera. So lots of room to play here, and just started down the path way, I think you'll be seeing a lot of things coming.

Is it fair to assume it should be something on the higher end of the barbel here fairly soon, at least?

Yes. I mean we're certainly looking at that. And have a good possibility of that, given some of the things we're doing around kitchen equipment, et cetera, for later next year, perhaps.

Great. And then just one more question for me about the Oktoberfest promotion that you mentioned you are able to run at a full price point this year, wondering how that can compared this year versus last year?

Mix was only marginally lower, frankly, year-over-year. So you can do the math. It made a big difference. Guests really love that burger.

Jeff Farmer with Wells Fargo.

You alluded to this, but could you just provide some color on how the Tavern Double mix has trended really, since, I guess, that April introduction all the way through October? Is this continuing to build momentum at this point?

I've been really pleased the way it's settled out. I mean, there's a significant percentage of our guests who are voting with their wallets to choose Tavern Double. And with the addition of the big Tavern this summer, we're also seeing a number of guest opt over into that item, which has the same dollar trade up for Tavern style. So, I think, across the board, we're really pleased with the way it's settled in and how sustained and, I guess, confident as almost it is in its path. Even like things with when the Oktoberfest rolled in this fall, we continued to see Tavern Double maintain its share.

So again it sounds like you don't want to provide too much on the mix, but it's at least fair to say that it's double-digit percentage of your mix at this point?

Yes.

Okay. And then you alluded to this again, but, obviously, in August, you guys were thinking that you're going to see some negative same-store sales, things now have proved to be a lot better than that. And you touched on this, but what were some of the biggest surprises for you on the top line? Where did you guys outperform, relative to your initial expectation?

Well, I think some of the initiatives we were able to institute with our Red Royalty program made a big difference for us in terms of day part traffic and some other things, particularly around the Olympics, and some initiatives that really, really worked for us. I would say Red Royalty was -- I wouldn't say the biggest surprise, but we were certainly very pleased with the outcome.

And Jeff, this is Stuart, the other thing I'll add is that we haven't started to look out in terms of where we thought the -- felt the market was heading later in the summer and into the early fall. Denny and her team had set up some promotions and activity that they had tested earlier in the year, that we were able to pull out and use just in this types of circumstance.

Okay, and then one more, you guys began to discuss 2013 a little bit. Obviously, in April, you pointed to upper teens EPS growth for 2012. It looks like that's probably in play. But as it relates to the mid-teens EPS growth out to '13 with the pieces that you gave us, is that still a reasonable expectation for 2013 sales growth.

And again, if you go back and -- so going back, this is again on a 52 to 52-week basis, so let me clarify that. And I think the biggest change, and again, we'll put full guidance out in February. I think, going back to where we expected the economy to be going into '13, I'd say there's a lot more volatility today than we would have expected. That said, we'll give a lot more color in February.

Conrad Lyon with B.Riley & Co.

Question about Burger Works average weekly sales. Question is two-fold. One is to see where it's tracking. And also for modeling purposes, can you talk about that yet, and where it's going? And especially, as we go into next year as -- I just want to make sure that it's not actually seeing the trend of the big -- bigger box store get muted by it too much.

Well, first, that there's only 5 opened and the last 2 just opened, literally, weeks ago. So there's a pretty big range in their performance. I think it's safe to say that it's not material to our -- to the big-box numbers at this point. And we've opened in very different trade areas on purpose to try and understand the dynamics and see how the boxes work. And we're getting a lot of great learning and we're not done. But I think, it's safe to say that is not material at this point on our total business.

And Conrad, I'll try to be clear in our disclosures and things like that, as to what's talking about is just the big-box. So if you look at our average weekly sales and things like that, right now, those are just big-box numbers and we'll figure out how to give some color as Burger Works becomes meaningful later on.

Got you. This might be too early too or, but going to next year, is there average weekly sales range that you'd like to see or is there too much variability in terms of sites?

Well, Conrad, there's really no secret on the business model behind a fast casual burger concept. There's a couple of folks out there doing it really well and you need to do $20,000, $20,000-plus a week in sales and a 20% operating margin, and keep your occupancy cost below 10%, and everything then works. And so we're looking at that same model for Burger Works.

Got you, okay. A different question on marketing. I think Stuart you said there might be more noise next year. Directionally, does that mean you'd like to be a little bit lower, perhaps?

Not in terms of that, I think it's more of a timing is what I was referring to. As Denny sits down with the new marketing agency to figure out what's the most effective timing -- weights immediate. Denny, I'll let you jump in, that's what could cause some noise.

Yes, one of our reasons for seeking a new partner is to get to a much more vibrant mix of media for our tools. And so I would expect that we're going to be doing a lot of things differently next year and are already planning for that.

Got you. Is there a set window or kind of a -- like what quarter where we might expect that, just to model accordingly?

We'll give color as we have it, right? The balance is not giving information to competitors, but to keeping obviously, our investors informed to what's going on. So we'll try to do that.

Okay. Just a last question here just in terms of company of same-store sales to franchise same-store sales, not a huge gap, but I'm just wondering if there's anything that was noticeably different, just in terms of -- speaking domestically here, maybe just different in your price increases or different operationally procedures?

We certainly don't -- obviously don't control their pricing, so it could be some pricing differences. Because, obviously, there are some regional differences, and they're not all today on Red Royalty, so they could have an impact as well as to how we're performing versus our intention.

Bryan Elliott with Raymond James.

A couple clarifications. First, just to make sure Stuart, I understand the mechanics of the Red Royalty, I guess, actuarial change. So as I heard it, just want to make sure I heard it accurately, that better history and understanding of how people are using the reward system, therefore you were able to tighten up the actuarial assumptions and the deferred revenue set aside for future benefits, and that added 50 bps to Q3 comp?

Yes, exactly. So if you think about it, really over the past -- basically, the last year, since Red Royalty has been out there. As people earn rewards we set aside the cost of that, and the accounting is we set that aside basically to defer revenue. So for every burger you buy in your buy 9 get the 10 free, we set aside revenue to cover that redemption of the reward. And what we've seen really over the last year, is that we've seen fewer people claim those rewards that's been earned. And so really we have to look at it on what the impact is really over the last 12 months, which is more meaningful to comp sales in the quarter over the last year to even 0.1%, so it's been a pretty solid number.

And just thinking about that going forward, I guess, that would actually be -- if that continues probably a slight net benefit, until we this lap this change in assumption in accrual rate?

What I say is that over the last year, earnings has been a little bit lower than would have been otherwise, just because we've been setting these discounts aside -- these incentives side. So those incentives going forward, it will be a little bit lower as we set that aside on future earned rewards.

Okay. Also appreciate the color and detail on contracting and positioning. The -- my question is about the burger mix up to 13%. I'm wondering, I know a few years ago -- and this may have been simply because of what commodities were like at that moment in time, but this is more of a big picture question than that. But a few years ago, when we got that kind of data from your predecessors, chicken, actually, often was a little higher COG than hamburger, partly because of the female SKU of your customer base. I'm wondering if that mix, both of -- maybe of customer base and/or of beef, ground beef versus chicken preferences is changing meaningfully or is the beef percentage up so much more than poultry simply because of the market price changes in those commodities?

It's a couple of different things. It's price, really, I mean that's probably the biggest thing weighting it up, as you've had, obviously, more inflation in hamburger than poultry over the last few years. So that's probably the biggest driver. I don't have the mix right here in front of me on burger versus -- on hamburger burgers versus chicken burgers, it probably has not changed that much over the last couple of years.

Okay, that was really the question. And then finally, if you could just give us a sense on the big technology upgrade and installation effort. You kind of touched on it from a cost standpoint a little bit. But if memory serves, you were hoping to kind of have it in place, I believe, by the end of the third quarter, more or less, and have kind of the training done and the modules turned on and really begin to use it. And I just, I guess, I'm looking for a confirmation that you actually got there and that's part of why the fourth quarter is going to see significantly more test and initiative that Denny mentioned.

Yes, on the financing -- finance side, we've gotten almost all the testing done. We've got the one module, we're finalizing up. So we'll be -- as opposed to turning it on here, which we were sort of talking about actually doing at the start of November, we're going to push it until the start of January, just to get sort of all the final testing and shake down of the systems, as well as the -- be sure we have all the training in place. So we're pretty in good shape on it, like most of the testing is done. On the supply chain side, which is really would impact the restaurants. We're expanding that this week. We've been in parallel already in 1 restaurant, and we're expanding it, I think, in about 3 restaurants this week. So we'll continue to expand the supply chain running parallel in all of the restaurants.

Right. And the POS and all of that, are we done with that?

Yes, the POS was not changing at all. So we weren't changing out the POS system. That's still there. And so probably in terms of just overall timing and this is running a few months later than we would have anticipated, so in terms of our final rollout on the finance piece will be in January and the supply chain piece on of the restaurants will push more into -- more in the summer next year than we anticipated.

Alex Slagle with Jefferies.

I have a question on the brand transformation restaurants you planned to open in the fourth quarter. If you could talk about the different levels of investment and what different -- differentiates those different units?

Yes, I think, Alex, we're just beginning this process and we're looking at several different ways to approach it, pretty consistently with what a lot of folks in the space do. Everything from the very, very high level of investment, that includes everything on the outside of the building, completely redoing the inside and a bunch of physical space changes to something significantly less than that. To try and understand what resonates with the guest and where we get the best ROI, and it's organic right now. So we're going to get some open at some various levels of investment. We're going to begin, just read them and see. We'll do some consumer research. And we, probably, will make changes from what we learn there.

Andrew Charles [ph] with Bank of America Merrill Lynch.

It's Andrew Charles [ph] on for Joe Buckley today. So we're wondering did the $1 million Red Royalty incentive revenue flow-through to earnings materially or how did that flow-through?

With regard with the flow-through, almost completely right through our RLOP and into EPS. Okay. And then one thing I'll point out is just -- one thing just to remember is that -- so with that you've got the impact to that on a year-to-date basis, again, the impact is much smaller so probably increased our lot margins year-to-date by 10 basis points. The other thing to remember on the bottom line impact though as well, is we did have a higher depreciation related to brand transformation of about $0.5 million.

Okay, and then you said last call you look to modestly increase prices with the October price roll off. I know looking into next year, you talked, how you like to increase the mix and the price slightly. Can you just talk about maybe what you -- how much price you took earlier month when the price rolled off?

Yes, we rolled it back to about 90 basis points of price.

Okay, so now it's being replaced?

Yes, essentially, from what was rolled out.

Nicole Miller with Piper Jaffray.

Can you talk a little bit about the trends -- the comp trends within like the months this quarter? And then also, if there's any variability we should know about looking into the current fourth quarter, if one month is easier or more difficult than another?

Nicole, this is Steve. We don't give sort of color by month. Obviously, we put out some promotions anticipating it to be sort of a soft month and Denny's team was able to do that very effectively. I mean, in terms of what's going on for the fourth quarter, if you compare it to a year ago, traffic in the fourth quarter was down, I think about 80 basis points, and then we had a price flowing through well over 3%. So I think, overall, the economy is going to stay fairly consistent in Q4 to what we saw in Q3. I think it's going to -- consumers going to stay volatile.

Okay. And just thinking about how the product mix is changing and the platform they're evolving and reflecting on what you have done to be at this point. What permission do you feel you now have? Or what opportunity in terms of advertising your brand differently, whether it's tomorrow or next year or 5 years in the future? Do you have -- do you believe, you have now, that you've repositioned the brand?

Well, I'd say, number one, we're not done. As having said, we've repositioned the brand. It's still in progress. I would say the one insight is we do tend to -- when we're able to be on air, kind of punch above our weight class. There's an awareness that we're able to generate, and awareness is our biggest challenge. It's keeping ourselves top of mind for key meal occasions, in particular, the dinner occasion. So I see some opportunity there that isn't tied only to product news, but doesn't, at the same time, eliminate product news. So it's a balance of top of mind awareness for key occasions with the advantage of occasional product news mixed in.

Steve Anderson with Miller Tabak.

You answered a lot of my question regarding the third quarter menu price for this year. You haven't given any guidance regarding the timing for the next one, and I wanted to ask also about the alcohol. I remember when you said 7.2% -- the 7.1%, if I recall, last quarter. For reference, what was the year-ago quarter?

We're up -- the alcohol mix in Q3 was about 7.2% and we're up about 70 basis points from a year ago.

Year-over-year.

Year-over-year.

David Dorfman, Morgan Stanley.

I wanted to get some more color, if I could, on some of the puts and takes in the fourth quarter with respect to your restaurant-level margin guidance. I think you said 20.5%, and then so sort of where might the extra week sort of flow into those lines at the restaurant-level. And then looking at if cost of sales -- I don't know if you're anticipating it staying sort of lower in the fourth quarter like it was in the third or bouncing back. I was surprised to hear that Gary was a source of benefit. But if it stays low, it implies some sort of less inflation in the -- or more inflation perhaps in labor and operating and sort of where do all the of sort of gives and takes sort of pan out to your guidance?

David, I think you have very quickly analyzed it correctly, in terms of the impact of the extra week is probably 20 to 30 basis points on the operating margin in Q4. So you've got the sort of normalize for that and so if you look at really it comes down to cost of sales and cost of sales is -- you hit dairy, which is really one of the biggest ones. So it was favorable in Q3, but we're already seeing the bounce back, obviously, most of the market has in terms of our pricing and what we have contracted already bouncing back in Q4 as the -- a lot of the dairy herd have quite frankly, gone to slaughter, to help beef prices a little lower than we expected into Q2 and Q3. But now that springs back in terms of dairy prices. So that's one of the big drivers as sort of tickling a little bit of a cap on RLOP growth in the fourth quarter.

And then -- but if you look at RLOP growth, you had I think 90 bps in the third quarter and then I guess, your full year guidance would -- I say would, be flattish in the fourth quarter? Is that sort of the maturation going forward that a lot of sort of initiatives in place to sort of hit their run rate and it's going to -- the new things are just sort of incrementally going to take in, but these sort of 100 or multi-100 basis point improvements are largely behind us, and now it's just finding the right way to sort of tweak the model and get a little more here or there. And get, obviously, a lot of it is sales-dependent as well? And we look forward to fourth quarter?

I'd say well the surface looks fairly flat in terms of gradual increases in RLOP that were, as you look out, underneath the surface, it's probably a little bit bigger, because we are still finding, as Steve touched about in our initiatives, I think, a number of ways to save cost. We are just putting that back to the business right now. So for example, we let Red Robin in for grand transformation, one of us is going to get a G&A, in terms of research and things like that. But the trading costs as we open up restaurants in new markets in Florida and New York and New Jersey, training cost -- replacement cost as we move managers into those markets, we're basically offsetting some of those cost with investments to keep growing the business.

And then those investments costs are mostly at the restaurant-level, not G&A?

There will be some of both, we'll try to call those out, though.

[Operator Instructions] And Peter Saleh at Telsey Advisory Group.

Just wanted to ask on the -- Denny, on the advertising, can you remind us how many weeks on TV you we're on this quarter and how that compares to last quarter -- third quarter of 2012, 2011?

We laid right over last year's weeks and we had 2 weeks in this quarter.

An additional 2 weeks at the beginning of Q4, as well. So there's sort of a 4-week flight overlapping at quarter end.

It was exactly like last year.

As you think to 2013, do you guys anticipate being on TV more or the same as this year?

I anticipate it looking different next year. Again, television is not the only tool in the toolbox, particularly as we demonstrated with our Red Royalty programs and some other things, social media, the emerging of a more and more digital media and activity in targeting. So I'm not certain yet. I think what we'll see is a different kind of mix next year -- different kind of investments.

And then on -- just on the comps. So when you guys gave guidance back in August, you had indicated you thought that this quarter would be negative. So that implies, I guess, July was probably your weakest month. Is it safe to assume that you had improving trends throughout the quarter?

No, I don't think you could draw that conclusion. I mean again, if we were -- if you go back within the conference call remarks, we were -- it is as much looking out from what we expect for the rest of the quarter with the consumer, and we're teeing up some ways to blunt the impact of that. Quite frankly, they were just more effective than we thought they'd be.

And it appears there are no further questions at this time. I'd like it to turn the conference back over to Mr. Steve Carley for any additional or closing remarks.

Thanks, everybody. That wraps up our call for this morning. Thanks, for your attention, and we appreciate it. Thank you.

That does conclude today's conference. We do thank you, for your participation.