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Good morning. My name is James, and I will be your conference operator today. At this time, I'd like to welcome everyone to the conference call for Recipe Unlimited Corporation 2020 Third Quarter Results. [Operator Instructions] Today's conference is being recorded. And if you have any objections, you may disconnect at this time.Before turning the meeting over to management, please be advised that this call contains certain forward-looking statements that are based on current expectations and are subject to a number of uncertainties, risks and other factors, which may cause the actual results performance or achievements of Recipe to be materially different.Further information identifying risks, uncertainties and assumptions and additional information on certain non-IFRS measures referred to in this call can be found in the company's management discussion and analysis and annual information form available on SEDAR.I'll now turn the meeting over to Frank Hennessey, Chief Executive Officer of Recipe Unlimited Corporation. Mr. Hennessey, you may begin your conference.
Thank you, James, and good morning, everyone. Thank you for joining today's conference call. On the call with me today is Ken Grondin, our Chief Financial Officer. Normally, I start off thanking all of our frontline teammates and franchise partners who continue to operate their restaurants and serve their guests while taking all necessary safety precautions. But in times like this, thanking never seems sufficient. The effort and the diligence put forth by our teams are allowing our guests to have confidence that they can be social safely in our restaurants.Our continued system sales improvement throughout the majority of the quarter was the product of this effort. The results in the third quarter demonstrate the resilience of our brands and our business model. The investments made pre COVID in e-commerce technology enabled us to meet the seismic change in consumer behavior. Our off-premise system sales increased 40.8% to $105.9 million compared to $75.2 million in 2019.We are not allowing COVID to define us as a company. We are continuing to invest in our restaurants and our technology to improve the overall guest experience. As an example, this week, just-in-time for the festive season at Swiss Chalet, we launched a significant new update to the Swiss Chalet app. The app features an all-new user interface based off of thousands of reviews and feedback received from guests on how we can improve their experience. It has an all-new guest coupon wallet, which, amongst other things, enables us to direct targeted offers to specific individuals, allowing us to reward our most loyal customers. Also, the new app now provides the ability to give the gift of Swiss Chalet. Customers can now easily send their loved ones a Swiss meal easily through the app. The give the gift of Swiss Chalet will be featured in specific campaigns in future months. We anticipate Recipe's e-commerce business to exceed $500 million in 2021.Total system sales in the third quarter was $676.4 million compared to $869.1 million in 2019. While system sales decreased by 22.2% year-over-year, we saw a steady system sales increase from the previous quarter as our corporate and franchise restaurants gradually reopened and we closed the third quarter with a 40.5% increase in system sales from the second quarter, which again reflects the strength and resilience of our brand and that we can recover from the effects of this pandemic when our restaurants are allowed to operate. Our retail and catering division increased their contribution to $12.6 million from $8 million in 2019, an increase of $4.6 million or over 57.5%.And as I mentioned on our last call, the retail team has responded exceptionally well to ramp up production in a safe manner. But again, we are focused on continuing to bring new products to market in retail. We are launching a new lineup of Montana sauces that we expect to be available on grocery shelves and in our restaurants early in the New Year. This is just the next iteration of new product development that is ongoing in the retail channels.Our second Ultimate Kitchen location is on schedule to open by the end of this month in Toronto. A new feature of this particular kitchen is that guests will also be able to call ahead and pick up or walk in and take out or do delivery. We have also cosigned partnership deals with Blondies Pizza, a successful local pizza company here in Toronto and Bento Sushi, a leading national supplier of sushi in Canada, to join our Recipe lineup of brands being offered at Ultimate Kitchens. We are on track for our next 2 locations to open in early Q1 of next year in both Montreal and Hamilton.As I mentioned during our last call, from the onset of this crisis, we immediately focused on Recipe's long-term position as we put measures in place to build and protect the long-term health of our brands and our franchisees. Our first action was to secure sufficient liquidity for the foreseeable future. In March, we drew $300 million on our revolving credit facility, and we have subsequently repaid $276 million in the second and third quarters. In May, we amended our lending covenants with our banking syndicate and private note holders to provide additional liquidity and covenant flexibility. These covenant amendments are effective through the third quarter of 2021.We continue to make prudent decisions around new store development and corporate store renovation plans, but as demonstrated by the ongoing investments in Ultimate Kitchens, retail and e-commerce, we are still continuing to make the necessary investments to grow our company. And as a result of careful working capital management, the company reported positive cash flows of $40.4 million before debt repayments in the third quarter, and we finished the quarter with a $48.6 million cash balance.We have made substantial progress with landlords in having them apply for the Canadian Emergency Commercial Rent Assistance, CECRA, and/or rent abatements. We are continuing to negotiate with landlords for improved rents going forward, and we are awaiting details on the new Canadian emergency rent subsidy program, which is the replacement program for CECRA. One thing to note of the new plan is that the subsidy will be directed towards the tenant without the need to have landlords apply.We are also awaiting more details on the extension program announced for the CEWS program that was announced by the federal government to carry forward into next year, albeit at substantially reduced levels. We are appreciative of the support from the government for our many small business owners. It was a meaningful number in Q3. And among other things, it allowed our franchisees and our corporate teams the financial ability to employ the additional staff required in order to implement the increased sanitation steps and the frequency of those cleanings. While we expect to continue to qualify for the government wage subsidy, we are still awaiting more details.And now I'll turn it over to Ken to review our financial results.
Thank you, Frank, and good morning, everyone. My overview will refer to our third quarter 2020 financial statements and MD&A issued last night, both of which are available on SEDAR. For the first part of the financial highlights, I will focus on Recipe's consolidated results, and we'll finish with a summary of our segmented business performance. Total gross revenue was $243.3 million for the quarter compared to $309 million in 2019, representing a decrease of $65.7 million or 21.3%. Year-to-date gross revenue was $653.6 million compared to $925.5 million in 2019, representing a decrease of $271.9 million or 29.4% year-to-date. The decreases in gross revenue were primarily related to corporate restaurant revenue decreases, particularly in urban centers that were most impacted by the COVID-19 pandemic.Operating income was $28.9 million for the quarter and a loss of $28.3 million for the 39 weeks ended September 27, 2020, compared to profit of $20.4 million and $84 million in 2019, representing an increase of $8.5 million for the quarter and a decrease of $112.3 million year-to-date. The increase in the quarter reflects the success of our recovery efforts in the quarter, the overall strength of our brand and the growth of -- growth in off-premise and retail sales. The decrease for the year was largely the result of the negative sales impact due to COVID-19 in the first half of '20, asset impairment charges of $61.5 million taken year-to-date related to the effects of COVID-19 and the franchise support actions we have taken in response to the pandemic.Net interest expense and other financing charges were $7.9 million and $23.8 million for the 13 and 39 weeks ended September 27, 2020, compared to $4.9 million and $16.9 million in 2019, representing an increase of $3 million for the quarter and $6.9 million year-to-date. The increases are primarily related to the $300 million draw on the company's credit facility at the end of March to provide liquidity during COVID-19 and higher interest charges after the company's debt covenant amendments completed on May 7, 2020. The company subsequently repaid $276 million on its revolving credit facility and expect interest expense to decrease in future quarters.Adjusted earnings was $16.1 million and $29.3 million for the 13 and 39 weeks ended September 27, 2020, compared to $19.5 million and $60.9 million in 2019, representing a decrease of $3.4 million or 17.5% for the quarter, and a decrease of $31.6 million or 51.9% year-to-date. Adjusted diluted earnings per share decreased to $0.29 in the third quarter and $0.52 year-to-date compared to $0.31 and $0.96 in 2019, respectively. The decrease was largely due to negative sales effects of COVID-19, partially offset by sales increases in the retail and catering segment and cost reduction initiatives taken by the company.Now turning to segmented results for the quarter and year-to-date. Total contribution from corporate restaurants was $12.8 million and a loss of $1.1 million for the 39 weeks ended September 27, 2020, compared to a profit of $16.8 million and $55.8 million in the same period of 2019, representing a decrease of $4 million for the quarter and a decrease of $56.9 million for the year. The decreases are due to sales declines due to COVID-19, while incurring full fixed costs, including rent and other fixed cost charges, partially offset by decreases in variable overhead costs and the receipt of federal wage subsidies.Total contribution from franchised restaurants was $17.1 million in Q3 compared to $26.1 million in the same period in 2019, a decrease of $9 million or 34.5%. Total contribution from franchised restaurants for the year was $48.1 million compared to $78.5 million in 2019, a decrease of $30.4 million or 38.7%. The decreases reflect the negative sales impact caused by COVID-19, and the company's direct royalty support provided to its franchise partners, including the introduction of Recipe's royalty subsidy program, which reduced royalty rates by 1%.Turning to the retail and catering segment. Retail sales reported within the retail and catering segment relate to the manufacture and distribution of fresh, frozen and nonperishable branded and private label food products. Catering sales relate to food and beverage sales from Recipe's catering divisions, operating under the Pickle Barrel, Rose Reisman and Marigolds and Onions banners. Total contribution from the retail and catering division in Q3 was $12.6 million compared to $8 million in 2019, representing an increase of $4.6 million or 57.5%. The year-to-date contribution from the retail and catering was $35.3 million compared to $23.4 million in 2019, representing an increase of $11.9 million or 50.9%. The growth in the contribution from retail and catering has been primarily driven from increased sales to grocery store customers at higher gross margin rates, demonstrating the strong customer demand for Recipe-branded retail offerings even after restaurants reopened.Turning to the central operations segment. The central operations segment sales consists of fees generated by Recipe's off-premise call center business, off-premise delivery call ahead, web and mobile-based meal orders. Central Operations segment EBITDA consists of franchise fees, property and equipment rent and vendor volume rebates reduced by central overhead costs and Keg royalties paid to the Keg Royalty Income Fund.Central segment contribution before the Keg royalty expense was $2 million in the quarter compared to $1.9 million in 2019, representing an increase of $100,000 or 5.3%. Year-to-date central segment contribution before net royalty expense was $1 million compared to a profit of $8.5 million in 2019, representing a decrease of $7.5 million.The net change for the quarter and the year reflects higher revenues generated from off-premise call center fees, the receipt of federal wage subsidies, offset by lower franchise fees and lower vendor rebates on less purchase volumes.This concludes the financial commentary of the call. Now I'll turn the discussion back to Frank.
Thanks, Ken. The restaurant industry has been unfairly targeted throughout this crisis. The public data that is now emerging proves what we have known all along, that our indoor dining room restaurants are a safe environment for both guests and teammates. Since the start of September, I have personally been involved in trying to work with both local and provincial government officials. We have shared our data directly with these individuals, including Premier Ford and Mayor Tory. We demonstrated that indoor dining restaurants were not the issue as it relates to outbreaks of COVID. Ourselves, along with our trade association, begged and then demanded that they show us actual data in how they are making these decisions. It was only a few days ago that they finally released this information.However, even that data categorizes together indoor restaurant dining, with bars, casinos, banquet halls, nightclubs, movie theaters, wineries and breweries. Indoor dining restaurants are not nightclubs. We have pointed out that restaurants are one of the safest and most regulated businesses in Canada. Why? Because the food and the beverages that we produce, people consume. As such, we have always had strict food safety protocols in place, including temperature checks, frequent hand washing, ensuring that there is no cross contamination. This is not just simply a Recipe standard. It is an industry standard. We are the one industry that can operate our businesses successfully while still keeping people safe because we train for it. We measure it. We are inspected for it, and we live it.Despite the efforts of both Restaurants Canada and many others in this industry, we still have significant closures of restaurants in Québec and have had closures of diners in Ottawa, Toronto and Peel and York since mid-October and now Manitoba. This stalled and rolled back some of our momentum on system sales.In order to begin to counter some of the negative and erroneous narrative that has been launched in the industry, this week, Recipe launched our Social Safely campaign. You can visit socialsafely.ca to see all of the things that we do every day as a company to keep guests safe, including our heightened protocols due to COVID. This campaign will be primarily digital this fall with the national TV campaigns slated for January. You will find the Social Safely message on all our brands' social channels, including our websites, and soon on all of our takeout packaging and messaging in-restaurant. We intend for this message to live on post COVID so that we continue to build trust and restore confidence with all Canadians.The unnecessary sacrifice of restaurants, both chain and independents, must come to an end. We are appreciative of government financial support, but we need to be open for business. We are grateful to those provinces and regions who have taken a common sense approach to the management of this pandemic, and especially Dr. Bonnie Henry, BC's Provincial Officer of Health. Dr. Henry has, from the beginning, worked collaboratively with the restaurant industry on how to operate safely. Further, Dr. Henry has actually encouraged people who want to get together in larger groups to do so in a restaurant versus someone's home because it is safer.So thank you again to our guests, for their trust and faith in us, and thank each of all of our suppliers, teammates, franchise partners for your tireless efforts to deliver great food, great service, value for the experience and an ambience that makes people wanting to come back to restaurants.And with that, I'll turn it back to the operator to take some questions.
[Operator Instructions] Our first question comes from the line of Peter Sklar with BMO Capital Markets.
It's Emily for Peter. Knowing what we've known with the struggles that the restaurant industry has had, we were very surprised by how well the corporate restaurants recovered in Q3. Can you maybe guide us through the thinking of how you came from the dramatic loss in the first half of the year and now you're back to a 10% contribution rate at the corporate restaurants?
Well, I think, first and foremost, our restaurants were getting open and giving people the opportunity to come out. And I think what we kind of saw take place over the summer in our restaurants, as people started to come out a little tentative at first, but then when they kind of walk into the restaurant and they realized they're not walking into a clinic, but they're actually seeing the safety protocols in place, seeing the service in mass, seeing the appropriate separation, and that they can still have a great experience, it just caused, I think, people to have more confidence and faith and were coming out a little bit more frequently.And so as we saw throughout the quarter, our system sales steadily improved, I think, as that confidence was growing. And the unfortunate piece here, Emily, is that it's -- because of the big comments I just made, a lot of that were closed now. We have somewhere in the neighborhood of around 480 restaurants that are closed or partially closed. It's kind of hard to do business when you're mandated to be closed. So we think that when we're allowed to be open, the resilience of the brands, I think the fact that people trust brands in times like this and the research would prove that. And I think it was demonstrated in our business throughout the third quarter.
Great. And I presume you can see the frequency and the repeat customers coming through since the restaurants have reopened?
Yes. I mean we know just our -- normally that our heaviest users that kind of make our engine run. And so yes, they do -- they do come back. Depending on the brand, the frequency of heavy users changes. It could be once a week in some of our brands, it could be once a month and others. So -- but yes, we were seeing that. And again, I think also we're seeing new users in some of our off-premise channels, which we hope to continue to capture and keep. So again, I think people trust brands in this. And when they came out and they saw that the proof was literally in the pudding.
Just switching to the franchised segment. What are your thoughts on how long the royalty substitute program would continue? I know it's slated to end for the end of 2020. But given the uncertainty with things that's going on, like how flexible is this end date? And what are your thoughts on potentially having to extend this?
I mean, obviously, it's something we're looking at very closely, and with the rent subsidy program that we had in place as well. I think what we need to see is we need to see more details around what the new rent subsidy program is going to be and what is actually going to happen with the wage subsidy. So until we can assess -- actually have the government come out with more details, we'll look at that, and we'll make the right thing. I think first principles apply here, and right from the start, our goal was to make sure that our franchisees can survive this time to get to the other side because just to what I was earlier talking about, once we're open and people can come in and see it, we've seen the business -- we saw the business starting steady come back. So I don't think our first principles have changed, but we just need to see more details before we can make that assessment.
And lastly, on the Keg. We noted that the flow out to the Keg income fund is at similar -- or actually a little higher than last year in Q3. Are the Keg restaurants now operating at a point to support this level. And then can you maybe help us guide us through this?
Sorry, Emily, I lost you on the first part of that. Could you repeat your question?
Sure. I was asking about the Keg. And we noted that the royalty flow out to the Keg income fund this quarter was at a slightly higher level year-over-year. So we're wondering if the Keg restaurants are now operating at a point to be able to support this level? And if you can just provide some insights into this?
Yes. I'll turn it to Ken.
Emily, it's Ken here. Yes, the Keg royalties are paid purely based as a percent of sales. So if their restaurants were open and more open in Q3, corporate and franchise, that they were paying a higher royalty rate. So -- royalty dollars, the rate is the same, but just the dollars were higher compared to prior quarters in 2020.
Our next question comes from the line of John Zamparo with CIBC.
I wanted to ask about the wage subsidy. It was much more material than I think most of us were expecting. It was up significantly from Q2, even though you saw sales improve. So can you just help us understand the calculation a bit here? And I know there's little certainty at this point for Q4, but just any commentary you can give on what you expect to see for Q4 would be helpful.
John, it's Ken. The wage subsidy, we apply for the waste subsidy on a, I'll call it, corporate consolidated basis. So our consolidated application includes Recipe, St-Hubert and The Keg and Original Joe's, our large entities. So based on our consolidated sales decline, we were eligible for most of the quarter for a very high rate of wage subsidy, not the maximum, but a high rate of subsidy. So even brands like St-Hubert that we're operating that on their own would not have qualified for as much, because of the consolidated application at the Recipe corporate level, we got a high rate of recovery.Now for Q4, those rates are coming down, and we don't have clarity as to how it's going to continue into 2021. But it was, obviously, very positive for us in Q3.
Okay. And is it fair to say the majority -- the vast majority of that goes through the corporate segment. Is that right?
John, it's a mix. We really apply and allocate the wage subsidy based on where that labor was. So for corporate restaurants, wage subsidy would have been applied to that labor category for corporate. We would have rate subsidy applied to our retail and catering segment for those labor costs, and then the balance would have been central.
Okay. Got it. On the Ultimate Kitchens, is there anything you can say about the economics -- unit economics of these? I'm not sure what you're willing to share, but anything on build-out cost or average volumes or margins, anything at all would be helpful.
Yes. I mean the build-out costs are not substantial, nowhere near restaurants. Really just equipment and basically the spaces that we're going in. We don't need kind of all the fixturing that you normally get in the restaurants. So we're targeting build-out costs in there to be somewhere under $1 million, again, primarily equipment. The sales are very, very good in the first location. I think one of the things that -- to get to the returns that we want to get to, we do feel that we need to blend down the fees to aggregators. So the first kitchen was a delivery only kitchen. And we know from our own experience just in our Swiss Chalets and St-Huberts of the world that the majority of our off-premise business comes from take out, not delivery. And so we wanted to have that kind of feature available in the new locations. So again, we're expecting we like to have sales targets in excess of $2 million a unit on these things. And we have pretty aggressive targets for EBITDA. So I'll just -- I'll leave it at that.
All right. That's helpful. On the retail sales, I mean these are clearly encouraging that these are remaining at such elevated levels. I'm sure you guys have pretty granular data on this. I'm curious what the relationship is between retail sales and restaurant. Is it a pretty clear negative correlation that when you see restaurant sales go down at any given week or month you see retail spiking? Or is there a reason to think that the retail sales lift you've gotten is sustainable for next year and ultimately, whenever consumer behavior normalizes?
Well, I think there's -- it's hard say there's not some correlation. I think there's a combination of 2 things, right? I think there's -- obviously, we had some new product launches in the market. We got sort of lucky on the timing, if you want to say that, on the retail side with some of the launches of some of the St-Hubert products, some of the Swiss Chalet products and Montana's. So there was that helping us.But then, yes, I mean, clearly, when you had a -- in the second quarter, when you had an $80 billion industry shut off, a lot of that translate into the grocery sector. So -- but again, I think what the positive out of that, that we take is that it also gave lots of people gave trials to a lot of our products in grocery, just like we had lots of trial of new users in our off-premise. So kind of the goal is to try to capture as much of that and keep as much of that as possible, maybe grow your base and then get dining rooms open so that we kind of get back to the best of both worlds but ahead of where we were.
Okay. And just one last one. What's it going to take to get back to either capital returns or M&A? I'm assuming there's not one particular metric. But do you think about it more as a recovery of system sales? Or is it something on the balance sheet you want to see? Or is it some measure of franchisee health? Just would like to get a sense of what both management and the Board are looking to see in order to return to capital returns or M&A?
Well, I think we're certainly keeping our eyes open. I think the best return on our investment right now is to get our restaurants open, right? So that's sort of why you see the attention, the focus and the commentary and the efforts is to get our current restaurants open. Outside of that, obviously, we want to make sure that our balance sheet is in the right place. But we are certainly open. We're certainly looking at things, and we continue to do so. We do definitely have some white spaces in our portfolio that we would like to fill. So I wouldn't say that we've -- are talking about not looking at doing further acquisitions based on this. We're just still looking for the right opportunities. Now, I'll let Ken...
Yes. And John, it's Ken. With respect to dividends and capital returns, it's an active discussion at the Board, but our priority is to obviously, first, take care of the Recipe financial health and our liquidity. And when we know what we -- know when -- when we know we're on a clear path of recovery, ideally without further shutdowns and disruptions, then we'll be in a position to assess returning our dividend program because we don't want to start and have to turn it off again.
[Operator Instructions] Our next question comes from the line of Sabahat Khan with RBC Capital Markets.
In the MD&A in the release, you alluded to the future state of the restaurant industry being somewhat different from what it used to be. I guess to prepare for that, is it really just Recipe investing more in your takeout and off-premise business? Or do you think maybe the restaurant network might need to be rightsized as well at some point? I guess, at this point, how are you feeling about that?
Yes. I mean there was -- since -- I think since 2013, we've seen on the full-service side, we've seen 10% growth of new restaurants through 2019. That was getting to a pretty healthy level. So I think there was probably going to be some correction at some point anyway in the industry. We think -- again, we think we're pretty well positioned. We think that because of the actions that we have taken that our franchisees, for the most part, will be in a good place on the other side.But there's clearly lots of restaurants out there that aren't as fortunate. And we believe that those businesses will just go away. We know we've seen it already with closures. Certainly, seeing lots of medium-sized chains in the U.S. actually go away. But -- so we feel like we're going to be in a decent place, in a good place, but there will be some corrections in the industry, no doubt.There is some shifting. There would definitely be some shifting on the channels. Again, I think a lot of people got a taste for the off-premise business and so that may benefit certain brands. Certainly, some of our brands will benefit from that. But our business is primarily full service restaurants, and we need to get people back into dining rooms. We need those dining rooms open.
Okay. And then, I guess, on the off-premise side, your commentary around including third-party brands in your Ultimate Kitchen, I guess, is that a test run you're doing with the likes of Bento? I guess, what's your thought longer-term on bringing other brands into that offering?
It was always part of the plan. That's why we called it Ultimate Kitchens, not Recipe Kitchens. We just think that what's different about our model versus the traditional kind of those kitchen thing is that to operate brands, it has to be integrated in the technology and in our kitchen equipment so that it's not a separate kitchen for each of these businesses. And so with brands like Bento and Blondies. Again, those are white spaces for us. We don't have that in our offerings. We feel that, that's going to be complementary to the Recipe brands that we do have in there. And we'll just see how that works and how that plays. It will be a royalty model. And again, we'll just see how it turns out.And that's kind of the -- there's lots of benefits to this Ultimate Kitchens. And one of the things, it just allows us to test lots of different concepts, lets us test a lot of different equipment to be more efficient, to get labor costs down, things that we can learn through Ultimate Kitchens that we can translate to our to our other restaurants and our franchisees to, hopefully, make them more efficient going forward.
Okay. And then on the store network side, I think positive surprise for us was the 1 net opening during the quarter amidst this pandemic. Can you maybe talk about what you're seeing? In the early days of pandemic, there was some concern around the health of the franchisees. But is this reflective of maybe more openings to come? Or maybe if you can share some color on that quarter?
Yes. I mean, listen, we are -- we still have active real estate. We're still looking at sites. We're still selecting sites. We're still signing deals. I made a small comment in my prepared remarks saying, we're not letting COVID define us. And we're just sitting here and waiting for it to end. We've got a business to run. We've got people who count on us, and we're going to grow the company. And that means we're going to continue to be aggressive in looking at the right size. Our Harvey's brand is doing great. There -- I never released stuff like this, but they are positive same-restaurant sales. So we have businesses that are strong, will continue to be strong. And where we feel that they're going to be -- have an opportunity to grow and be successful, we're going to do those deals.
Okay. And then just one last one for me, more of a housekeeping item. Can you provide us some color on how the CEWS was played out? Is there any way to get the dollar amounts across the segment so we can sort of have a baseline for next year, the $33 million?
Yes, not really Saba. We're not going to share that level of detail, but we know the program is going to be reducing in a material way. And ideally, it's also going to be reducing for us because our sales are increasing.
Our next question comes from the line of George Doumet with Scotiabank.
Can you please share the number of locations that are currently under mandated shut down? And are the level of takeout and delivery at those locations, are they similar to what we saw during the first wave?
Yes. I mean I think we have a total of 484 restaurants, George, that are currently in some stage of closure, dining rooms. In Quebec alone, we have 92 St-Hubert restaurants that the dining rooms are closed.Yes, we're seeing similar kind of pickups. Probably not maybe this time of year or whatever. I don't know if we're picking up as much in the St-Hubert network on the off-premise side to make up for dining rooms as we saw earlier, but it's just that would be off maybe a couple of points. But again, we come back to this. We need to get these restaurants open. And there is absolutely no data that suggests they should be closed, none. So got it, yes, anyway.
Okay. No, that's fair. And on that topic of off-premise. I'm just curious, are you guys seeing any meaningful shift at all between takeout and delivery? Are you seeing more takeout on the expense of delivery? Or is it, it kind of been stable a little bit?
Well, we have a certain amount of ability to influence that, right, by basically on how we promote, and we prefer to promote takeout. And so call ahead, using our app to place your order and come and pick up. We prefer that channel. Candidly, it's a more profitable channel. We actually think the experience is a little bit better versus the aggregators. So -- but that -- and it's also fishing where the fish are. That's always been kind of the natural fall is that on off-premise. Again, we've had Swiss Chalet and St-Hubert that's offered dining rooms, takeout and delivery for 60 or 70 years. And that has always been the natural fall. Delivery has the least volume of all of those channels. And so we're seeing that also kind of play out in our other brands that are really now just sort of developing their off-premise. The Keg, for example, won't -- it's not going to do delivery, but its takeout business has certainly grown through this process.
Okay. Great. Maybe over to Ken. Can you give us an update on the rent certainty program? I think last quarter, we had 500 signed up. Where is that number today? And are you seeing that number maybe going up in the context of the mandated shutdowns?
Yes. So George, good question. The rent certainty program, the actual number signed up, it was 462 restaurants. And that's kind of a frozen number. That group of restaurants signed up for the 9-month program starting April through to December. So it's -- really don't have movement within that group other than there's a question of how much rent support they need based on their sales and the percentage of rent that we're charging them based on sales. In some cases, restaurants are doing okay, that percentage rent resembles the regular rent. So there's not much support. In other cases, especially when they're closed like they're dealing within certain markets now, then we're subsidizing more of that rent. But again, it's a -- it's a program for the whole year for those 462 restaurants, and we continue to support them and want to make sure that those restaurants and the economics are healthy.
Okay. Great. I've got just one last one, maybe for Frank. Looking at brighter days here, do you think the pandemic has at all changed what Recipe looks at when making future acquisitions?
It's a good question, George. I mean I think it's -- you certainly look at the -- we look at the brands that we have that have strong moats around them. Obviously, they're the ones that have decent off-premise and their product travels well. So I think what you're seeing what the industry is actually facing is this dealing in an omnichannel world. Again, we were fortunate enough that we were sort of well positioned for that.But yes, I think it's certainly going to be a factor. We're looking at restaurant brands, and we just don't feel like they have another channel that's really decent other than just dine-in, that probably is going to impact our decision-making. It's not -- it cannot be -- every case is going to be based on the brand itself. But yes, I mean, ideally, people are used to now wanting to have the ability to have what they want, where they want it, when they want it. And that's just a fact of life, and I don't see that reversing.
And there are no further questions at this time. I'd like to turn the call back over to Mr. Hennessey.
Okay. Well, thank you, everybody. I appreciate you taking the time out today. I hope all is well. And I hope you enjoy. And have a wonderful weekend. Thanks, everybody.
Ladies and gentlemen, this concludes today's conference call. You may now disconnect.