Page 143 - Tom Finocchiaro - RPI Apple Onboarding

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DAVID PARADISE

BOARD CHAIRMAN APPLE SUPPLY CHAIN CO-OP

Succeeding in the restaurant business is not easy. There is an increasingly complex landscape
of issues and opportunities that require focus. While applying focus on a specific challenge helps us overcome, it also
blurs other aspects of our operation that may need attention. That’s why your CSCS team, led by CEO Mike Leikam, is so
vital to our long-term success. They strive to create a competitive advantage for every Member every day by focusing on
one of the biggest contributors to the bottom line – our supply chain. That advantage is delivered through achieving the
lowest possible sustainable prices, ensuring continuity of supply, and coordinating with Applebee’s in development and
innovation.

This year saw the initiation of the Restaurant Profitability Improvement (“RPI”) project, a joint effort between CSCS,
Applebee’s and PricewaterhouseCoopers to create a sustainable process for restaurant margin improvement. While the
project promises to deliver significant savings in 2018 without impacting the guest experience, the real value will be in
institutionalizing new methods of collaboration and teamwork to make this a focus moving forward. You will be hearing
much more about RPI throughout 2018.

We are coming off a year in 2017 that experienced a 2.3% reduction in our market basket of goods compared to 2016,
made possible by Mark Smith and his team of Procurement professionals. Their performance was primarily driven
through savings in the beef and poultry categories, which were offset by increases in seafood and oils. This is on top of
the 4.0% market basket decrease we saw the previous year, marking two consecutive years of market basket deflation.

Maintaining a healthy distribution network is as important to our bottom lines as negotiating competitive prices. The
transportation industry challenges have been well publicized, and the Logistics team, led by Paul Allegri, is focused on
developing creative solutions to mitigate these macro-economic trends. As I mentioned in last year’s letter, strengthening
our partnerships in this area is critical as our distributors face mounting challenges to labor, capacity, industry mandates,
and other input costs.

The Brand Program team, led by Chris McNutt, is responsible for managing the supply chain elements of menu changes.
Brand program management performance is based on objective scorecard criteria, and the team delivered by exceeding
expectations on all seven scorecards. The Administration team, led by Dustin Pittman, produced the ninth consecutive
clean financial audit while making continued improvements to our technology platform, setting the stage for advanced
analytics in the near future.

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