Q3 2020 Cheesecake Factory Inc Earnings Call
SK Hynix and gentlemen, this is the operator todays conference is scheduled to begin momentarily until that time your lines again be placed on music hold thank you for your patience.
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This time all participants are in a listen only mode. After the speakers presentation, there will be a question and answer session.
SK question during the session you any depressed star one on your telephone if you require any further assistance. Please press star Zero I will now they tend to conference over to your speaker today Stacy Feit. Thank you. Please go ahead ma'am.
Thank you good afternoon, and welcome to our third quarter fiscal 2020 earnings call on the call today are David over.
Huh.
I'm Gonna Chief Executive Officer, David Gordon, our President and our executive Vice President and Chief Financial Officer.
Before we begin let me quickly remind you that during this call items will be discussed that are not based on historical facts and are considered forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995 X.
Actual results could be materially different from those stated or implied in forward looking statements. As a result for the factors detailed in today's press release, which is available on our website at investors Dod the Cheesecake factory dotcom and in our filings with the Securities and Exchange Commission.
All forward looking statements made on this call speak only as of today's date and the company undertakes no duty to update any forward looking statements.
In addition throughout this conference call, we will be presenting results on an adjusted basis, which reflects the potential impact of the conversion of the company's convertible preferred stock into common stock.
An explanation of our use of non-GAAP financial measures and reconciliations to the most directly comparable GAAP measures appear in our press release on our website as previously described.
David Overton will begin today's call with some opening remarks, and David Gordon will provide an operational update Matt will then briefly review our third quarter results and provide a current financial update with that I'll turn the call over to David overtime. Thank you Stacy.
Cheesecake factory restaurants continue to build throughout the third quarter was relatively strong comparable sales performance.
In light of the mandated capacity restrictions related to the COVID-19 pandemic.
Third quarter comparable sales.
Find approximately 23%.
We ended the quarter with comp sales down approximately 2% in September.
We're able to reopen additional dining rooms, notably.
Notably we have 20 Cheesecake factory locations with positive comparable sales during.
During the quarter, despite only being able to operate on average with 50% indoor dining capacity.
Those locations, we have been able to achieve this sales recovery given continued strong demand.
Turning to our restaurants, coupled with sustained strength in our off premise.
Steve.
Stock.
Well to maintain the vast majority of our off premise sales from the second quarter.
Even with the additional restaurants.
Partially reopened indoor dining rooms during the third quarter. We believe this underscores the broad consumer appeal and strong guest affinity for the Cheesecake factory.
Top priority for any person dieting.
He is to provide the safe comfortable.
The experience for our guests and our staff. We are proud to have been recognized for these efforts in the recent nation's restaurant news consumer picks code would follow up survey.
Subsequent to the quarter and culinary dropout opened in Scottsdale, Arizona and posted the strongest weekly sales of FRC restaurants can his first weeks of operations.
We continue to monitor operating conditions in markets, where we have new unit under development and at present expect one Cheesecake factory and one Blanco open during the remainder of the fourth quarter. We believe our collection strong context, coupled with our financial flexibility will put us in a position to further.
Accelerated growth across our concepts as we emerge from this pandemic.
COVID-19 continues to provide uncertainty I'm encouraged by the steady sales recovery from the beginning stages of the pandemic and proud of the way our teams have respond.
With that I will now turn it over to David Gordon.
Thank you David.
The increased demand we've seen for in person dining underscores our guests desire to experience the Cheesecake factory magic once again.
And that the various measures we've taken our helping guests feel safe and comfortable in our restaurants.
In fact, we've recently installed glass partitions and approximately 50 Cheesecake factory restaurants to increase our capacity where jurisdictions allow while also prioritizing guests safety and maintaining the upscale look and feel of our restaurants.
And we have additional locations lined up to have partitions installed in the coming weeks, which we expect will bring us to about two thirds the cheesecake factory locations in total.
Fiscal fourth quarter to date through October 27th we have recaptured on average approximately 90% of prior year annualized sales volumes and Cheesecake factory restaurants with open dining rooms.
This would equate to about nine $5 million per unit on average on an annualized basis. Despite the mandated capacity restrictions supported by approximately 40% off premise sales mix.
Currently 187 Cheesecake factory locations have indoor dining rooms open.
On average these locations are operating is 50% capacity.
Our teams have also been able to drive sales and locations operating patios only at present 17 Cheesecake factory restaurants in California in Toronto operating with this restriction have done fiscal fourth quarter to date sales volumes of over 90% on average of Cheesecake factory restaurants off.
For an in person diabetes.
I believe that speaks to our operational excellence and creativity, specifically, our ability to respond to challenging operating conditions, which will continue to be paramount throughout the pandemic.
An aggregate across restaurant operating models fiscal fourth quarter to date through October 27th comparable sales at the Cheesecake factory restaurants are down approximately 7% and are outpacing the quarter to date black box casual dining industry index.
As I mentioned, we've continued to sustain strong momentum in the off premise channel.
Even with a meaningful increase in in person dining capacity quarter to date, we continued to maintain nearly 90% of elevated covid off premise sales a cheesecake factory restaurants with reopened dining rooms.
I believe this indicates that are meaningful increase an off premise sales driven by our digital platforms could be a longer term sales driver as we emerge from the pandemic.
And turn our marketing team is capitalized on the Cheesecake factory's broad appeal across consumer demographics to produce effective on brand marketing campaigns to raise awareness in the off premise channel and drive sales with a particular emphasis on the typically slower day parts.
Or $15 a month special which include will a slice of our legendary cheesecake saw a tremendous guest response, thereby increasing awareness of our lunch offerings, while successfully driving sales to the late afternoon shoulder period.
October is national dessert month, and and Cheesecake factory fashion, we have spent the month celebrating with our guests.
We kicked off the celebration by offering any slice of cheesecake for $5 and are closing the month with our guests favorite treat treat promotion this week.
Our cheesecakes are a key differentiator and these creative offers continue to drive demand from our guests.
Our marketing campaigns have really resonated with the delivery guest with sales growth in this channel, particularly strong during the third quarter.
We've had specific success driving new customers to the Cheesecake factory as well as strong reorder rates and we also continue to see an overall customer order frequency increase supporting strong return on investment on a marketing campaigns this year.
Besides our guests love of our Cheesecakes, the breath of our menu across cuisines and price points has always been another key differentiator for the Cheesecake factory and.
And we believe this has been fundamental to our COVID-19 sales recovery.
When others are simplifying their menus, we are leaning into our offerings with the launch of are timeless classic special menu card nationally after successful test in southern California.
It highlights prior fan favorites and party in a sense of nostalgia at a time when a consumer craves, just that and as a compelling price points to provide additional value to our guests as well.
Our consumer package goods business continues to perform well with our famous brown bread, leading the way.
In fact, new retailers have been added while existing retailers have recently increased or are planning to increase the number of S. K used they carry.
As you know this October embarked one year since the closing of our acquisition of North Italia and FRC.
COVID-19 is certainly impact of the restaurant industry landscape the performance of north and the FRC concepts. During the pandemic has further reinforced our confidence in the strength of these brands and our excitement for their long term growth potential.
Currently 21, north locations have indoor dining rooms open and two are open for outdoor dining.
Fiscal fourth quarter to date through October 27th comp store sales are down approximately 4% supported by 25% off premise sales mix.
Currently.
49, FRC locations have indoor dining rooms open.
One is open for outdoor dining in three locations remain closed.
When we acquired FRC. We believed are presented unique opportunity to serve as an incubation engine for concepts of the future.
And the spirit of continuous innovation in December FRC is planning to launch a pop up virtual concept inspired by the dilbert menu.
The off premise channel in the Phoenix market.
FRC is also planning to launch a flower child pop up early next year.
This location plans to offer a streamlined menu primarily focused on the off promise channel with some limited indoor capacity to serve guests on premise and we will test a number of digital elements.
These are two great. Examples of how we can continue to harness frc's creativity and experiment in a very cost effective manner, we look forward to seeing how guests respond.
I want to thank every one of our staff members across our restaurants and bakeries at the corporate support center in California, and the big kitchen at FRC. It.
It has not been easy, but our company has shown tremendous resilience our results this quarter speak to our ability to get the job done.
I believe the strength of our team and our brands positions us well to continue to execute in this environment and capitalize on opportunities in the post Covid world.
With that I will now turn the call over to Matt for our financial review.
Thank you David.
Third quarter comparable sales of the Cheesecake factory restaurants declined 23, 3%.
The sales recovery was largely linear throughout the quarter.
Improving from a decline a 32% in July two down approximately 10% in September.
Off premise represented approximately 45% of total Cheesecake factory restaurant sales during the third quarter.
Revenue contribution from North Italian and FRC totaled $63 $9 million.
North of North Italia comparable sales declined 22%.
Sales for operating week of FRC, including flower child, where approximately 61.
$120.
And including 17 $8 million, an external bakery sales total revenues were $517.7 million during the third quarter of fiscal 2020.
As we would have expected.
Most of the year over year expense variances in the third quarter, we're due to covid related sales deleverage, though I will provide the usual line item veto.
Cost of sales increased 10 basis points, primarily reflecting a shift in sales mix.
Labour increased 230 basis points, primarily attributable to the cost of maintaining our full restaurant management team and group medical benefits and the reduced sales environment.
This was partially offset by lower hourly labor.
Other operating expenses increased to 37% of sales due primarily to sales deleverage increased marketing and costs, such as additional cleaning and PPE associated with Covid.
We are pleased with the sequential margin improvement we drove in the third quarter versus the second quarter.
Based on Cheesecake factory restaurants comparable sales performance in aggregate.
Third quarter restaurant level margins, where solid with approximately 35% flow through year over year inclusive of covid related costs and restaurant level management deleverage.
This performance was within our expectations, particularly when you consider the changing nature of capacity restrictions that are operators had to contend with.
And G&A increased 110 basis points also reflecting sales deleverage net of savings initiatives.
Preopening costs were $2.4 million and a quarter roughly in line year over year.
Two flower child locations open during the third quarter versus one Cheesecake factory opening in the prior year period.
In the third quarter, we recorded a $10.4 million impairment charge associated with our portfolio optimization efforts as we continue to take a hard look at underperforming locations.
Fox only five $4 million of discharge was related to cash lease termination expense for the Cherry Hill, New Jersey Grand Lodge Cafe location that closed in the third quarter.
In Rockford, or which is scheduled to close at the end of the year.
The remainder was primarily related to non-cash accelerated depreciation associated with Grand Luxe Cafe, Cherry Hill, and accrued lease termination expense associated with another grandma's cafe very expect to close by the end of the year.
In addition, flower child, Rockville will not reopen following it's covid related closure.
We recorded approximately $2.6 million of Covid related expenses and the third quarter for costs, such as sick pay additional sanitation and personal protective equipment.
Approximately 80% of these costs were in the other operating expense line as a reference with the remainder and labor and G&A.
A specific breakdown between line items can be found related footnote in our earnings release issued this afternoon.
Gap diluted net loss per share was 76.
Reflecting the potential impact of the conversion of the companies convertible preferred stock into common stock.
And excluding the covid related costs impairment charge as well as other items, including $1.4 million an acquisition related contingent consideration.
Augusta net loss per share for the third quarter of 2020 was 33.
Now turning to our balance sheet and cash flow.
We ended the third quarter of $244 million in cash and $376 million in debt.
The company generated positive cash flow from operating activities of $3 million.
Note that this is net of cash lease termination expense associated with our portfolio optimization.
With the business stabilizing and returning to positive cash flow generation subsequent to quarter, and we repaid $96 million on a revolving credit facility.
Bringing our that balance down to $280 million.
This will enable meaningful cash interest expense savings, while maintaining our overall liquidity position.
Capex totaled eight $8 million during the third quarter for required maintenance and completion of construction for the recent unit openings.
A four $8 million dividend for the third quarter of fiscal 2020 was paid in time to holders of the companies convertible preferred stock.
But we will not be providing specific guidance given the level of continued uncertainty associated with the virus, we want to provide some thoughts on our expectations for the balance of year in 2021.
With the number of indoor dining rooms, we currently have open and at current comp sales levels under continued capacity restrictions, we would anticipate generating positive operating profit and earnings per share for the fourth quarter.
For modeling purposes, we are used a lot using a normalised tax rate of approximately 10%.
While we still expect some deleveraging labor as we continue to think long term with respect to maintaining a restaurant management teams as well as in other operating expense line.
We would expect it to is somewhat versus the third quarter, enabling us to continue to work towards recapturing our pre covid margins.
Based on these assumptions, we expect to generate a meaningful level of cash flow from operating activities.
After an anticipated $10 million to $15 million in Capex, and a $17 million dollars acquisition consideration payment to FRC, we would still expect to build our cash balance during the fourth quarter after accounting for the debt repayment anticipated seasonal working capital inflows.
Looking ahead of 2021.
The operating environment continues to be very dynamic.
Based on early indications from our supply chain, we are expecting commodity inflation of approximately 2%.
And while we're still evaluating the potential effects of Covid on the labor environment based on current governmental roadbeds for minimum wage we expect wage rate inflation to be slightly more favorable in 2021 versus recent years.
With our anticipated building cash position, we are in the early stages of developing our initial capital deployment plans for next year.
Currently we're rebuilding our development pipeline.
To set some baseline expectations, depending on the course of the virus from here. We believe we could open as many as 12 to 14, new restaurants next year.
Spread across our portfolio of contests.
We would anticipate approximately $105 million in Capex to support this level of unit development as well as required maintenance on our restaurants.
We will refine these assumptions is more clarity on the operating environment emerges a note that we have a strong balance sheet that we expect will allow us to navigate additional challenges covid could present.
In closing I am very pleased with our operating and financial performance.
We're able to return to a positive operating cash flow physician during the third quarter, despite an unprecedented restaurant operating environment.
We are very encouraged by our sales recovery and our fourth quarter to date comp sales at the Cheesecake factory restaurants, given the continued capacity restrictions.
At these levels, we would expect momentum in our cash flow generation to continue into the fourth quarter and fiscal 2021.
I believe this outlook and the strength of our balance sheet will continue to enable us to act in the company's best interest for the long term.
Our concepts and our people stand out in today's restaurant environment, which we believe will enable us to take market share.
And is the operating environment normalizes, we expect to be in a position to further accelerate our growth.
With that said, we'll take your questions in order to accommodate as many questions as possible we used to limit yourself to one question and then requeue with any additional questions.
And at this time, if you have a question please press down.
Alright, then in about one on your telephone keypad and your first question comes from Joshua along the pipeline Piper Sandler.
Great. Thank you for taking the question encouraged to see the continued improvement in topline trends here and to four Q and.
In the context still having meaningful capacity reductions or maybe meaningful capacity opportunity going forward could you talk about what you've learned in terms of recapturing those same store sales.
While still operating in a 50% capacity environment, and any sort of initiatives or areas, where you've been able to unlock.
Pieces of growth to support that as we go into <unk> and then early next year.
Thanks, John This is David Gordon.
I think we've learned that there is demand.
From our guests to come out and dine in Cheesecake factory.
And we've seen that in every geography.
Across the country, when we've been able to increase capacity we.
We see guests didn't want to come out and died in a safe environment that we've created while at the same time being able to keep the majority of those off premise sales and.
As I mentioned earlier, I think that our strategic marketing that we put in place around the off premise business.
Has kept us and guests mind and our ability to execute on that off premise business. I think is what's allowing us to see could reorder rates as I mentioned from jordache.
And continued strong off premise sales.
I do think that the safety of our restaurants can't be overlooked.
Oh today want to continue to feel safe no matter.
It's a 25 or 50% or even expanded capacity environment and our operators dependent tremendous job. So keeping that at the forefront and I think that's allowed guests to come in time safely and I'll come back and see US again, so I think our operational expertise in keeping our management teams in place has been key to allow us to do that.
And don't see why that wouldn't continue.
Great. Thank you for that and when we think about that improvement from through the quarter and then hearing <unk> as well.
Any sort of regional performance it sounds like it's broadly.
Strengthens broadbased as you mentioned, but curious if there's any sort of regional performance or maybe.
Other other dynamics qualities you call out there outside obviously some of that.
Broader disruptions, maybe there in California with the recent fires.
Hey, Jonathan Matt I think probably similar to the industry as a whole capacity as a as a component of that and so and those geographies, where it's either opened up faster or more certainly we are seeing internally year over year performance that is that is higher than.
Some of those areas would be in the southwest, Texas and the southeast in the mid Atlantic So that that does play a role the things that have been consistent.
Definitely been the off premise those David mentioned and that that's what we're seeing across the board. So I think.
The whole Margaret Cheesecake factory with consistent performance, we're able to really track when that capacity opens up and predict effectively where we think the sales can be.
I was really help us operate effectively.
Great. Thank you.
UNH pricing comes from John Tyler.
Again.
Great. Thanks for taking the question of that you can hear me okay.
Just a couple of questions for me first I was wondering if you could talk about it sounds like the deals, particularly on the digital side, we're pretty strong during the quarter and I noticed in myself.
In terms of the frequency doesn't seem like it's something you've done before so curious to know how the margin structure looked on the deals specifically and then your thoughts on the frequency of using the deals as we kind of go out over the next several months and even in 2021.
Hey, John This is Matt I think a couple of things.
Or not.
Not necessarily a marketing companies to every dollar that we spend on marketing has to go through a pretty rigorous process to evaluate and Roy and I feel very confident that were.
Exceeding all of our expectations for the programs that we've been running I think you'll note that they are focused on the off premise channels and certainly in some areas that we feel that there's greater opportunity to rebuild sales over time thinking about places like the midweek lunch opportunity.
<unk>.
And so where you got that capacity and where you have some opportunity to recover you see greater increment galletti and I think that that has been best went through for us and in terms of the frequency of it for us.
Really looking at an environment, that's unprecedented and we believe that the stickiness of the off premise investment and it's definitely worthwhile and we're seeing that with guests, we're seeing that impact our behavior and believe that while it's not only been beneficial in the short term that there is a tale to this and it's really about.
Brand building as well as just running marketing programs.
Okay, and then I think on the last call you talked about the idea of seeing some pretty strong store level volumes with with margins down.
Excuse me with volumes at roughly 90% prior pizza I am just kind of curious.
Right now look lower than clearly peak, but still quite strong.
What should we think about for margins from from this point forward.
Yeah, I mean, it's definitely I would sort of a tale of two cities in terms of modeling and I can only give you. The your best guess was where do you think fulfills environment will be in right. That's a big a big driver for US certainly well I think we're proving with the flow through then we're seeing is that as we get back somewhere between $90.
Per cent, we're going to be at or above prior year margins and so our goal is to focus on that sales rebuilding because the environment will stabilize overtime. So that's the first and I think most important driver of where we will be.
Certainly I think it would be fair to think about Q3 in the queue for and probably a 30% to 40% flow through if you're going to model out an improvement in comp whatever that modeling leads you to from where we were to where do you think we will be in the fourth quarter, that's probably a good proxy for where margins could.
End up in the near term if that's helpful.
Okay. Thank you and then just the last one on the special menu card that you put in right now continue talking about this being potentially and LPL are limited time offer versus say permanent menu addition, and how different is it from a price point then.
This is what you've currently got.
Well. It is you know the menu of general.
Alrighty of price points, and I think the menu card has that same variety that may be a little bit lower in total but.
Provides a great value for guests and much like the special menu card, we put out previously it'll be out there for awhile and then we'll determine if we want to move some of those menu items into the into the main menu, we're not really based on how well they perform.
And then we will get into our Ah regular cadence of our updated menu changes once we get back to winter of next year.
Got it thank you.
Your next question.
Mary.
A year.
Good afternoon, and thanks for taking my question could you talk a little bit about how much outdoor patio and think contributing to come see you know maybe in Q3 year in October and what you think that that looks like as you move into the winter months.
Hey marriage.
Probably the most important metric I could tell you about that as an aggregate or getting about 1.5% extra benefit in the car and the quarter from extra patio seating right. There was you said before you go from summer to winter you, obviously flecks in different areas of the country.
With respect to the patio and so we would expect places like Florida, what actually increased patio utilization in the winter versus in the summer and places like Phoenix as well so in aggregate for the company, we've been able to increase a little bit, particularly in in California, and that's been again about one to one.
5% benefit of our total sales, we normally see patio sales running in the high single digits as a total and there's a little bit higher than the summer time, and I'm, a little bit lower in the winter time as I mentioned, those geography that pick up kind of offset each other and so it keeps a pretty stable.
Okay. That's great. Thank you and then just lastly, you talked a little bit about accelerating unit growth going forward, including in 2021 can you just talk a little bit about whether or not you are still committed to 6% to 7% unit growth over the long term and when it might be reasonable to think about getting back to that point.
Sure I think we definitely have the concepts to accomplish that and I think we have the balance sheet to accomplish on the teams to accomplish that I think that's a real estate environment will be there with lots of opportunities.
Certainly, giving back to that complete level will be a little bit dedicated based on what happens with the virus.
Want to move forward in a way that we're taking every opportunity return, but also making sure we're positioning ourselves for the long term. So I think at this point in time.
We can do it as early as 2022.
The environment Stabilises enough by next year, we certainly could could reopen to that full growth rate fired by 2022.
Great. Thank you very much.
Your next question comes from Jeff Farmer with Gordon.
Thank you Matt I think you just said in an answer to Johns question that.
At roughly 90% a year ago volume you can get back to year ago margin, So assuming I heard that right how.
How do you guys do that from a cost perspective.
Hey, Jeff I think I think Mark first of all just to cause yacht all else being equal it somewhere between 90% to 95% based on where we sit today and the 35% flow through that we saw going downward because there's a lot of other variables that will play out that probably are bigger than some of the covid.
Aspects really in the longer term and a lot of that has to do with things like commodity costs and labor inflation.
Certainly of labor inflation, I mean, it's been running five 5% to 6% if that were to come down one or one 5% because the labor environments better than that certainly changes the environment completely.
Essentially on a like for like basis, most can be components are pretty variable, we're getting an efficiency gain from the increase in the off premise business and that's somewhat of the piece that will help us offset any increased cost as well as get a little bit more efficiency leverage to recapture margin slightly below.
Prior year volumes.
And then just using that as a segue to a follow up question in terms of thinking about the off premise margin. However, you want to think about it I mean, the combination of to go sales as well as delivery, but if you think about the sales that are off premise.
Margin structure sort of collectively for the.
Those sales versus the.
The margin structure for for the end restaurant can you give us a new context there.
Sure.
And you'll get a slightly favorable like I said and that is a blend where delivery is slightly unfavorable but not much maybe a couple percent when new net everything together for us with the deal that we have in the way. It works and then you've got the call in an online ordering which.
Are equally slightly favorable and those are.
Making a about 60% of the total off premise versus 40% for deliveries of the waiting is just slightly better in totality.
Thank you.
Your next question comes him, Jeff Bernstein with Barclays.
Good afternoon. This is the product gone for Jeff Thanks for taking the question.
In terms of labor and we just.
Just wanted to ask you guys, how would the removal of credit and a potential new administration affect your business.
And how does that affect.
How you structure labor and your restaurants, I guess, what I'm really trying to ask is.
Is there any material difference between how you manage your California restaurants versus the ones in typically state.
Sure maybe I'll just kind of focus on the way the end of the question asked because a lot of these labor rules come and go over time.
There is.
Regulations in California that are different an aggregate too it's not just the wage structure per se.
But invariably we look to provide the best guess experiencing focus our operations on being consistent throughout the United States. The biggest difference that obviously happens that is really the pricing structure and as California really kind of leading the way with this over the past six seven years started increase the minimum.
And there is no tip credit we started to look at having more of a market based.
Pricing strategy.
Is designed to offset the wages specifically because most of the other components are pretty much. The same. So certainly you have to look at that and it's based also on where the competition goes but when the wage structure is equivalent for everybody. Then do what you see over time is that the pricing structure has come out about the same for everybody has.
Well to make the margins work.
Got it that very helpful. And then just a quick one on your typical sale.
As we eventually migrate towards quote unquote normal how do you see the trajectory over the next 12 months I know cheesecake factory more than most.
Experiential concept than just wanted to get a sense of how you guys measures sticking it than what you can do to kind of ensure that elevated mix of to go sale.
Well I think what we've seen thus R.
We're now in months seven to eight here.
As we reopen the dining rooms that we've been able to keep that off premise business. So I think the value of the menu and the breath of the menu is the reason for that.
Again, a family of four you could easily order a couple of entrees, an appetizer complimentary Brad there's a great value.
And you can turn around three days later and try and an entirely different type of cuisine again from the Cheesecake factory. So it's one of the reasons, we think that it's been as sticky as you said it has been and why we would anticipate that we we can keep the majority of that business, even as the restaurants field.
Great very helpful. I appreciate it.
Your needs pricing consumed Brian background with remained Jane.
Thanks, Good evening and I had a question on the sales cadence that you saw through the corner in the September comps I think he said down around 10%. It would suggest that you saw pretty meaningful improvement in September started compared to July and August is that right and it's so could you walk through how much of that was due sort of increase could.
Pasadena, maybe versus an acceleration and delivery or another factor that might have been and play there.
Yeah. He writes about I think.
Most of that was really around with the capacity I think that.
From the beginning been stressing safety.
And we've always looked to get a week or two of any jurisdiction reopening under our belts.
Not just for that but also then in instances where you could add capacity is David Gordon talked about I think we're still in the process of putting in some of the opportunities in the divider between the booths.
And I think all of those things have been building kind of linearly over the course of a quarter I think the optimist has been pretty steady throughout and so I think that is a bigger percentage as we noted for the entire border I made up about 45% and a lot for the reopened it's about 40% for the die.
Any rooms that have some capacity. So I think that was the biggest component of it for us to.
To make sure that we have we're maximising the total opportunity within our footprint.
Okay, great and on the partitions could could you ballpark how much effective seating on average that will allow you to unlock and I think you said around two thirds of the cheesecakes by the end of the year.
It does allow us to to meet whatever the the capacity restriction is in that particular market soap it's moving to 75% will allow us to get to 75%.
Have been some markets there is no.
First restriction in that way, but it's just six feet, social distancing or a physical barrier will allow us to do that as well.
In a particular market where as they actually makes taken beyond a percent will you must keep 68 in those situations that could allow us obviously to have expanded capacity past that 75% will allow us to seating for a restaurant if we needed to available.
All right that's helpful and sorry, if I missed it but I think he said off premise was 45% of sales.
What percent of that was deliberate within that 45%.
The total mix was 40% delivery, 30% online and 30% call and walking of the 45%.
Perfect. Okay, and then just last one back to the margins obviously the sales volumes were quite a bit different as you move through the quarter would you be willing to comment sort of where the store margins were exiting the quarter or perhaps that you've seen so far in October.
I would just say that the linearity of the sale was corresponding to the margins.
And.
You can pretty much model it out with the consistency of our business based on that 30% to 40% flow through.
Fair enough. Thanks.
At this time there are no further questions how hand, the call back to closing.
Thank you for joining the call today.
Correct.
That concludes today's conference. Thank you for your participation you may now disconnect.