Q4 2021 Cheesecake Factory Inc Earnings Call

Speaker 1: related contingent consideration, compensation, and amortization expense, as well as reserves for uncertain tax positions.

Compensation and amortization expense.

As well as reserves for uncertain tax positions.

Speaker 1: An explanation of our use of non-GAAP financial measures and reconciliation to the most directly comparable GAAP measures appear in our press release on our website as previously described.

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.

Speaker 1: David Overton will begin today's call with some opening remarks, and David Gordon will provide an operational update.

David Overton will begin today's call with some opening remarks, and David Gordon will provide an operational update.

Speaker 1: Matt will then briefly review our fourth quarter results and provide a financial update.

Matt will then briefly review our fourth quarter results and provide a financial update.

Speaker 1: With that, I'll turn the call over to David Overton. Thank you Etienne. We had another solid quarter with fourth quarter total revenues reaching a new all-time high maker.

With that I will turn the call over to David Overton.

Again, we had another solid quarter with fourth quarter total revenues, reaching a new all time high Mark Despite the surge in COVID-19 cases towards the end of the year.

Speaker 2: despite the surge in COVID-19 cases towards the end of the year.

Speaker 2: Comparable sales at the Cheesecake Factory restaurants increased 7.7% relative to the fourth quarter of fiscal 2019 and continued to outperform both the Naptrack and Black Box casual dining industries.

Comparable sales at the Cheesecake factory restaurants increased seven 7% relative to the fourth quarter of fiscal 2019 and continue to outperform both the Knapp track and black box casual dining indices.

Speaker 2: reinforcing our competence in the strength of the brand and our ability to take market share. Once again, our operators manage their restaurants very well during the quarter with sequential improvements in food efficiencies, labor productivity, and hourly staff and manager retention.

Reinforcing our confidence in the strength of the brand and our ability to take market share once again, our operators manage their restaurants very well during the quarter with sequential improvements in food efficiencies on labor productivity and hourly staff and manager retention.

Speaker 2: We believe our operating results would have been in line with expectations, but for the softer sales trend during the last two weeks of the quarter, which coincided with the Omicron surge.

We believe our operating results would have been in line with expectations, but for the softer sales trends during the last two weeks of the quarter, which coincided with the omicron search.

Speaker 2: Our first quarter sales trends have started strong. In fact, we have further increased our gap to the casual dining industry since the most recent quarter.

First quarter sales trends have started strong in fact, we have further increased our gap to the casual dining industry since the most recent quarter.

Speaker 2: The Cheesecake Factory physical 2022 first quarter comparable sales through February 15 are up 24.3% versus the prior year.

Cheesecake factory fiscal 2022 first quarter comparable sales through February 15th are up 24, 3% versus the prior year.

Speaker 2: Looking ahead to 2022, our development pipeline remains robust as we look to further accelerate our unique growth. However, while all the sites that we have been working on remain in our pipeline, we are cognizant of the current environment and the effects supply chain, governmental and local jurisdiction permitting approvals are having on timing of the open.

Looking ahead to 2020 to our development pipeline remains robust as we look to further accelerate our unit growth. However, while all the sites that we have been working on remain in our pipeline. We are cognizant of the current environment and the effects supply chain governmental.

In local jurisdiction permitting approvals.

Are having on timing of the openings.

Speaker 2: As such, we now expect to open as many as 17 to 19 new restaurants in fiscal year 2022, including as many as five Cheesecake Factory restaurants, five to seven North Italians, and as many as seven other FRC restaurants, including three to four Power Child locations. We also currently expect one Cheesecake Factory restaurant to open internationally under a licensing agreement.

As such we now expect to open as many as 17 to 19, new restaurants in fiscal year 2022, including as many as five Cheesecake factory restaurants, 5% to seven north Italians and as many as seven other FRC restaurants, including three to four hour trial.

Locations. We also currently expect one cheesecake factory restaurants to open internationally under licensing agreement.

Speaker 2: We believe that we have made strategic investments to best manage through the continued volatile environment while positioning ourselves to achieve our long-term goals of driving both comparable sales growth and 7% unit growth across our brand.

We believe that we have made strategic investments to best manage through the continued volatile environment, while positioning ourselves to achieve our long term goals of driving both comparable sales growth and 7% unit.

Growth across our brands, we remain committed to managing structural and permanent cost pressures to protect our four wall margins over time.

Speaker 2: We remain committed to managing structural and permanent cost pressures to protect our four wall margins over time.

Speaker 2: To that point, we are currently in the process of rolling out our new Cheesecake Factory menu, which includes approximately 3.25% menu price increase in total that will put our year-over-year menu pricing increase at 4.75%. We will continue to monitor the inflationary environment to determine what level of pricing will be needed during our next menu roll-out.

To that point, we are currently in the process of rolling out our new Cheesecake factory menu, which includes approximately three and one quarter percent menu price increase in total that will put our year over year menu pricing increase at 475%, we will continue to monitor the inflationary.

Environment to determine what level of pricing.

We'll be needed during our next menu rollout.

Speaker 2: I remain as confident as ever that our best-in-class operators will continue to effectively manage through this volatile operating environment and with our development pipeline in place and solid comparable sales trends across our brands, we are well positioned to continue to take market share. With that, I will now turn the call over to David Boren.

I remain as confident as ever that our best in class operators will continue to effectively manage through this volatile operating environment and with our development pipeline in place and solid comparable sales trends across our brands.

We are well positioned to continue to take market share.

With that I'll now turn the call over to David Gordon. Thank.

Thank you David.

Speaker 2: We continue to be focused on our commitment to excellent service and hospitality through the selection, training, and retention of high quality staff.

We continue to be focused on our commitment to excellent service and hospitality.

The selection training and retention of high quality staff and.

Speaker 2: and believe this to be foundational to achieving our longer term goal of growing comparable sales, particularly in this challenging operating and staffing environment.

We believe this to be foundational to achieving our longer term goal of growing comparable sales, particularly in this challenging operating and staffing environment.

Speaker 2: To that end, during the fourth quarter, we drove sequential increases to both our Cheesecake Factory manager and hourly staff industry leading retention rates, contributing to the improvement in year-end staffing levels relative to 2019 as compared to where we began the quarter.

To that end during the fourth quarter, we drove sequential increases to both our cheesecake factory manager and hourly staff industry, leading retention rates.

<unk> to the improvement in year end staffing levels relative to 2019 as compared to where we began the quarter.

Following that in January we saw a 10% to 15% increase in staff hiring compared to the Q4 trend.

Speaker 2: Following that, in January , we saw a 10 to 15 percent increase in staff hiring compared to the Q4 trend.

Speaker 2: Combined with improved retention rates, we have increased our total hourly staffing by 2% already from just the end of 2021. Correlated to our improvement in staffing, we drove up to 2% in the last year.

Combined with improved retention rates, we have increased our total hourly staffing by 2% already from just the end of 2021.

Correlated to our improvement in staffing we drove sequential.

<unk> improvements in our guest satisfaction metrics.

Speaker 2: importantly, all our Dynin Net Promoter scores improved, including pace of experience, staff service and hospitality, and food quality.

Importantly, all our dine in net promoter scores improved including patient experience staff service and hospitality and food quality.

Speaker 2: the Cheesecake Factory off-premise channel trend can remain solid with fourth quarter sales accounting for 27 percent of total sales.

The Cheesecake factory off premise channel.

Trend can remains solid.

With fourth quarter sales accounting for 27% of total sales.

Speaker 2: The annualized fourth quarter average weekly sales for this channel continued to trend close to twice the 2019 annual level.

The annualized fourth quarter average weekly sales for this channel continued to trend close to twice the 2019 annual levels.

As I shared previously with the strength of our sales performance, we have shifted our marketing for the Cheesecake factory restaurants, primarily back to brand based messaging to raise the profile of the Cheesecake factory brand.

Speaker 2: As I shared previously, with the strength of our sales performance, we have shifted our marketing for the Cheesecake Factory restaurants, primarily back to brand-based messaging to raise the profile of the Cheesecake Factory brand, while continuing to upgrade and enhance our marketing and technology platform.

While continuing to upgrade and enhance our marketing and technology platforms.

Speaker 2: Moving this effort forward, we launched our refreshed website just two weeks ago.

Moving this effort forward, we launched our refreshed website, just two weeks ago.

Speaker 2: along with a more contemporary look, the more commerce-forward platform delivers a better guest experience.

Along with a more contemporary look more commerce forward platform delivers a better guest experience with the goal of driving higher conversion rates and average order values for online ordering.

Speaker 2: with the goal of driving higher conversion rates and average order values for online ordering.

Speaker 2: We also migrated our email database to a more robust CRM system to work hand in hand with the rewards program for which we are now planning to launch the pilot in the middle of the year.

We also migrated our E mail database to a more robust CRM system to work hand in hand, with the rewards program for which we are now planning to launch the pilot in the middle of the year.

Now turning to North Italia.

Speaker 2: Now turning to North Italia, fourth quarter comparable sales grew a robust 14% versus 2019.

Fourth quarter comparable sales grew a robust 14% versus 2019.

Speaker 2: That trend has carried into 2022 with quarter to date through February 15th comparable sales up approximately 38% versus 2021 levels with off-premise comprising approximately 15% of sales at north.

That trend has carried into 2022 with quarter to date through February 15th comparable sales up approximately 38% versus 2021 levels with off premise comprising approximately 15% of sales at north.

FRC drove similarly strong topline performance during the fourth quarter, we continue to be confident in the developing brands in our portfolio and their ability to contribute to our unit growth.

Speaker 2: FRC drew similarly strong top-line performance during the fourth quarter. We continue to be confident in the developing brands in our portfolio and their ability to contribute to our unit growth.

And lastly, I'd like to thank all of our teams for their continued passion and efforts and navigating through a constant wave of consumer and business headwinds over the past 23 months, while continuing to deliver delicious memorable experiences for our guests.

Speaker 2: And lastly, I'd like to thank all of our teams for their continued passion and efforts in navigating through a constant wave of consumer and business headwinds over the past 23 months, while continuing to deliver delicious, memorable experiences for our guests.

Speaker 2: With that, I'll now turn the call over to Matt for our financial review.

I'll now turn the call over to Matt for our financial review.

Thank you David.

Speaker 2: As David Overton alluded to in his opening remarks, we, along with the broader casual dining industry, experienced a deceleration in sales relative to 2019 towards the end of the quarter, which coincided with the Omicron surge.

As David Overton alluded to in his opening remarks, we along with the broader casual dining industry experienced a deceleration in sales relative to 2019 towards the end of the quarter, which coincided with the omicron Serge.

Speaker 2: Specifically, fourth quarter comparable sales at the Cheesecake Factory were running at 10.6%, going into the third week of December relative to fiscal 2019, compared to the full quarter results of 7.7%.

Specifically fourth quarter comparable sales at the Cheesecake factory, we're running at 10, 6%.

Going into the third week of December relative to fiscal 2019 compared to the full quarter results of seven 7%.

In addition, we incurred approximately $3 8 million of incremental costs related to COVID-19 sick time paying.

Speaker 2: In addition, we incurred approximately $3.8 million of incremental costs related to COVID-19 sick time.

Speaker 2: Staying 100% of restaurant management quarterly bonuses and higher natural gas expense.

Paying 100% of restaurant management quarterly bonuses.

Higher natural gas expenses with none of these impacts factored into our initial outlook for the quarter.

Speaker 2: with none of these impacts factored into our initial outlook for the quarter.

We estimate the impact from the slower sales versus prior trend during the last two weeks of the year, coupled with the incremental costs I just outlined to.

Speaker 2: We estimate the impact from the slower sales versus prior trend during the last two weeks of the year, coupled with the incremental costs I just outlined, to be about $0.16 to $0.21 of earnings per share for the quarter.

To be about 16 to 21 of earnings per share for the quarter.

Speaker 2: Importantly, aggregate commodities, wage inflation, and many of our key business indicators for the quarter largely came in line with our expectations.

Importantly, <unk>.

<unk> commodities wage inflation in many of our key business indicators for the quarter largely came in line with our expectations speaking to our ability to appropriately navigate the ongoing business environment as we head into 2022.

Speaker 2: speaking to our ability to appropriately navigate the ongoing business environment as we head into 2022. Now to some

Now to some specific details around the quarter.

Speaker 2: Fourth quarter comparable sales at the Cheesecake Factory restaurants increased 68% year-over-year and relative to 2019 period comp sales were up 7.7.

Fourth quarter comparable sales at the Cheesecake factory restaurants increased 33, 8% year over year and relative to 2019 period comp sales were up seven 7%.

Speaker 2: Revenue contribution from North Italia and FRC totaled $129.7 million.

Revenue contribution from North Italia, and FRC totaled $129 $7 million.

Speaker 2: North Italia comparable sales increased 37% year over year and were up 14% versus the 2019 period.

North Italia comparable sales increased 37% year over year and were up 14% versus the 2019 period.

Speaker 2: Sales per operating week at FRC, including Flower Child, for approximately $104,000.

Sales per operating week at FRC, including flower child for approximately $104000.

Speaker 2: and including $17.5 million in external bakery sales. Total revenues were $776.7 million during the fourth quarter of fiscal 2021.

And including $17 $5 million in external bakery sales total revenues were $776 7 million during the fourth quarter of fiscal 2021.

Speaker 2: Moving to expenses, as usual, I'm going to provide year-over-year detail. But of course, note that the significant disparity in revenues given the greater impact from COVID in the fourth quarter last year drove some abnormal year-over-year variance.

Moving to expenses as usual im going to provide year over year detail photos.

Of course note that the significant disparity in revenues given the greater impact from Covid in the fourth quarter of last year drove some abnormal year over year variances.

Cost of sales increased by 10 basis points, primarily driven by slightly higher commodity inflation and menu pricing.

Speaker 2: Cost of sales increased by 10 basis points, primarily driven by slightly higher commodity inflation than menu prices.

Speaker 2: Labor declined 220 basis points, primarily reflecting sales leverage and partially offset by higher wage rates and training.

Labour declined 220 basis points, primarily reflecting sales leverage partially offset by higher wage rates and training costs.

Speaker 2: Other operating expenses declined 320 basis points, primarily due to sales leverage relative to the prior year period.

Other operating expenses declined 320 basis points, primarily due to sales leverage relative to the prior year period.

Speaker 2: Note that versus our expectations, we had over $3.4 million in incremental costs associated with the items I outlined earlier in this line item.

Note that versus our expectations, we had over $3 4 million in incremental costs associated with the items I outlined earlier in this line item.

Speaker 2: This translated to about 45 basis points of impact to margin.

This translated to about 45 basis points of impact to margins.

Speaker 2: G&A as a percentage of sales declined 120 basis points, also primarily due to sales leverage, as well as tight cost control.

G&A as a percentage of sales declined 120 basis points also primarily due to sales leverage as well as tight cost controls.

Speaker 2: Pre-opening costs were $3.9 million in the quarter compared to $2.8 million in the prior year period.

Pre opening costs were $3 9 million in the quarter compared to $2 $8 million in the prior year period.

Speaker 2: A total of four restaurants opened during the fourth quarter this year versus three in the prior year period.

A total of four restaurants opened during the fourth quarter of this year versus three in the prior year period.

Speaker 2: In the fourth quarter, we recorded a $17.5 million non-cash impairment charge primarily related to five restaurant locations.

In the fourth quarter, we recorded a $17 5 million noncash impairment charge, primarily related to five restaurant locations.

Speaker 2: We also reported $6.9 million in acquisition related expense, as well as a $4.7 million reserve for uncertain tax positions.

We also recorded $6 9 million of acquisition related expense as well as a $4 7 million reserve for uncertain tax positions.

Speaker 2: Fourth quarter GAAP diluted net income per common share was 4 cents and adjusted net income per share was 49 cents.

Fourth quarter GAAP diluted net income per common share was <unk> <unk> and adjusted net income per share was <unk> 49.

Now turning to our cash flow and balance sheet.

Speaker 2: The company generated approximately $94 million of cash flow from operating activities during the fourth quarter.

The company generated approximately $94 million of cash flow from operating activities during the fourth quarter.

Speaker 2: Excluding the $37 million in payroll tax repayment related to the CARES Act, the company generated nearly $250 million in cash flow from operating activities for the year.

Excluding the $37 million in payroll tax repayment related to the cares Act the company generated nearly $250 million in cash flow from operating activities for the year.

Speaker 2: This performance enabled us to end the year with total available liquidity of approximately $430 million, including a cash balance of approximately $190 million and $240 million available on a revolving credit facility.

This performance enabled us to end the year with total available liquidity of approximately $430 million, including a cash balance of approximately $190 million.

$240 million available on our revolving credit facility.

Speaker 2: Total debt outstanding at the end of the year was $475 million, including $345 million of 0.375% convertible senior notes due in 2026 and $130 million drawn on a revolving credit facility.

Total debt outstanding at the end of the year was $475 million, including $345 million of 375% convertible senior notes due in 2026 and $130 million drawn on our revolving credit facility.

Speaker 2: CAPEX totaled $18 million during the fourth quarter for required maintenance and new unit development.

Capex totaled $18 million during the fourth quarter for required maintenance and new unit development.

Speaker 2: While we will not be providing specific comparable sales and earnings guidance, given that the operating environment continues to be very dynamic, we want to provide some thoughts on our underlying expectations for 2022, including some of the timing nuances.

While we will not be providing specific comparable sales and earnings guidance given that the operating environment continues to be very dynamic we want to provide some thoughts on our underlying expectations for 2022, including some of the timing nuances.

Speaker 2: Let me begin by reiterating what David Overton mentioned earlier.

Let me begin by reiterating what David Overton mentioned earlier.

Speaker 2: we remain committed to protecting our longer term four-well margins and will take appropriate actions, including additional menu pricing, to offset structural and permanent costs as needed.

We remain committed to protecting our longer term four wall margins and will take appropriate actions, including additional menu pricing to offset structural and permanent costs as needed.

Speaker 2: However, as we have previously noted, we will likely continue to absorb short-term cost fluctuations driven by the current environment.

However, as we have previously noted we will likely continue to absorb short term cost fluctuations driven by the current environment.

First with respect to sales base.

Speaker 2: Based on extrapolating current trends and assuming no further material impacts from virus surges,

Based on extrapolating current trends and assuming no further material impacts from virus surges, we would anticipate total revenues for the year could be approximately three three to $3 4 billion.

Speaker 2: We would anticipate total revenues for the year could be approximately 3.3 to 3.4 billion dollars.

With Cheesecake factory, <unk>, reaching over $12 million.

Speaker 2: with Cheesecake Factory AUVs reaching over $12 million.

Speaker 2: Note that this includes the impact of the 53rd operating week we have.

Note that this includes the impact of the 50 <unk> operating week, we have this year.

Next for fiscal year 2022, we now expect commodity inflation of low double digits on an annual basis.

Speaker 2: Next, for fiscal year 2022, we now expect commodity inflation of low double digits on an annual basis.

Speaker 2: Specifically, we're modeling for year-over-year commodities pressure to lessen as we go through the year.

Specifically, we are modeling for year over year commodities pressure to lessen as we go through the year.

Speaker 2: starting with mid-teens pressure in the first quarter and ending with mid to high single digit pressure for the fourth quarter.

Starting with mid teens pressure in the first quarter and ending with mid to high single digit pressure for the fourth quarter.

On an absolute cost per unit basis, we're modeling commodities to be fairly stable through the year with the variability in inflation driven primarily by the comparison to the different price points and the corresponding quarters in 2021.

Speaker 2: on an absolute cost per unit basis. We're modeling commodities to be fairly stable through the year with the variability in inflation driven primarily by the comparison to the different price points in the corresponding quarters in 2021.

Speaker 2: The labor market also continues to be dynamic with a lot of moving parts.

The labor market also continues to be dynamic with a lot of moving parts.

Speaker 2: Inclusive of known minimum wage increases, we are currently modeling net total labor inflation of about 5% when factoring in wage rates, channel mix, as well as other components of labor.

Inclusive of known minimum wage increases we are currently modeling.

Net total labor inflation of about 5% when factoring in wage rates channel mix as well as other components of labor.

Other operating expenses, which in total is less inflationary pressure then labor is expected to start the year around 25, 5% of sales.

Speaker 2: Other operating expenses, which in total has less inflationary pressure than labor, is expected to start the year around 25.5% of sales.

Speaker 2: And with the benefit of pricing over time, we would anticipate we could end the year at about 25% of sales, with the middle two quarters roughly between those points.

And with the benefit of pricing over time, we would anticipate we could end the year at about 25% of sales with the middle two quarters roughly between those points.

Speaker 2: We anticipate GNA to be approximately $50 million for the first quarter and ramp up to $55 million by the fourth quarter, which as a reminder includes an extra week.

We anticipate G&A to be approximately $50 million for the first quarter and ramp up to $55 million by the fourth quarter, which as a reminder includes an extra week this year.

Speaker 2: We are assuming pre-opening of about $19 million for the year to support our development plans, with approximately three-fourths of the expense occurring in the back half of the year.

We are assuming preopening of about $19 million for the year to support our development plans with approximately three fourths of the expense occurring in the back half of the year.

Finally, we expect about $90 million and depreciation for the full year and we are using a tax rate of approximately 13% for modeling purposes.

Speaker 2: Finally, we expect about $90 million in depreciation for the full year, and we are using a tax rate of approximately 13% for modeling purposes.

Speaker 2: Given the complexity involved with all of these moving parts, I will also provide a little bit more detail to help with the first quarter.

Given the complexity involved with all of these moving parts I will also provide a little bit more detail to help with the first quarter.

Speaker 2: First, if we take a similar approach to the full year and extrapolate our current sales trends for the balance of the quarter, assuming no further material disruption,

First if we take a similar approach to the full year and extrapolate our current sales trends for the balance of the quarter, assuming no further material disruptions.

Speaker 2: we would anticipate Q1 to be between $770 million and $790 million in total revenue.

We would anticipate Q1 to be between $770 million and $790 million in total revenue.

Speaker 2: Next, as David mentioned, we are currently rolling out a 3.25% menu price increase, which will give us a total of 4.75% year-over-year menu pricing increase.

Next as David mentioned, we are currently rolling out a three 5% menu price increase which will give us a total of 475% year over year menu pricing increase.

Speaker 2: This level of pricing is consistent with the range we had anticipated taking for this menu change and with our objectives of both growing comparable sales and supporting four-wall and enterprise level profit.

This level of pricing is consistent with the range, we had anticipated taking for this menu change.

And with our objectives of both growing comparable sales and supporting four wall and enterprise level profit margins.

Speaker 2: On the incremental pricing, based on the timing of the rollout, it is weighted approximately 50% in the first quarter, for an effective full Q1 rate of just under 4%.

On the incremental pricing based on the timing of the rollout it is weighted approximately 50% in the first quarter for an effective full one.

<unk> Q1 rate of just under 4%.

With the difference in commodities inflation by quarter noted previously as well as the timing of our pricing actions in Q1 sales trends, we would expect our four wall margins to be at their lowest levels of the year in the first quarter.

Speaker 2: With the difference in commodities inflation by quarter noted previously, as well as the timing of our pricing actions and Q1 sales trends, we would expect our four wall margins to be at their lowest levels of the year in the first quarter.

Speaker 2: and around 2 percentage points below 2019.

And around two percentage points below 2019.

Speaker 2: Keep in mind that the first quarter historically has lower margins overall than the annual average due primarily to sales leverage, and we would still expect that trend to follow this year.

Keep in mind that the first quarter historically has lower margins overall than the annual average due primarily to sales leverage and we would still expect that trend to follow this year.

Speaker 2: Also note that given our increased scale and leverage, we would anticipate the enterprise operating margin to be much closer to 2019 than the four-wall in the first quarter as we leverage G&A, depreciation and pre-opening.

Also note that given our increased scale and leverage we would anticipate the enterprise operating margin to be much closer to 2019 and the four wall in the first quarter as we leverage G&A depreciation and Preopening.

Speaker 2: We would also anticipate taking another menu price increase towards the middle of the third quarter, as is our historical norm. If inflation trends were to remain in line, we would anticipate taking another menu price increase towards the middle of the third quarter.

We would also anticipate taking another menu price increase towards the middle of the third quarter as is our historical norm.

If inflation trends were to remain in line.

With our current assumptions.

Speaker 2: which are higher than our prior assumptions, we believe we may need to take close to an incremental 2% menu price increase to regain our 2019 four-wall margin by the back half of 2022.

Which are higher than our prior assumptions, we believe we may need to take close to an incremental 2% menu price increase to regain our 2019 four wall margin for the back half of 2022.

Speaker 2: However, we believe given the volatility in the commodities market and the potential for some degree of reset, it is prudent to remain flexible while maintaining a long-term lens with respect to our margin recapture.

However, we believe given the volatility in the commodities market and the potential for some degree of reset it is prudent to remain flexible while maintaining a long term loans with respect to our margin recapture.

Speaker 2: With regard to development, we plan to open as many as 17 to 19 new restaurants this year, most of them in the second half of the year.

With regard to development, we plan to open as many as 17 to 19, new restaurants. This year most of them in the second half of the year.

Speaker 2: We would anticipate approximately $150 million in capex to support this level of unit development, as well as required maintenance on a restaurant.

We would anticipate approximately $150 million in Capex to support this level of unit development as well as required maintenance on our restaurants.

Speaker 2: With the filing of our 10K and related compliance certificate associated with our revolving credit agreement, we also anticipate that the company will be in a position to resume capital distributions to shareholders in future quarters, and our board of directors is actively evaluating strategies in this area.

With the filing of our 10-K and related compliance certificate associated with our revolving credit agreement. We also anticipate that the company will be in a position to resume capital distributions to shareholders in future quarters, and our board of directors is actively evaluating strategies in this area.

Speaker 2: In closing, it is important to note that despite the ongoing challenges in the environment, our best-in-class operators have maintained the hallmark of operational consistency that the Cheesecake Factory is known for.

In closing it is important to note that despite the ongoing challenges in the environment are best in class operators have maintained a hallmark of operational consistency, but the cheesecake factory is known for.

Speaker 2: This has helped enable our business to remain remarkably resilient and in support of the ongoing consumer demand for our brand.

This has helped enable our business to remain remarkably resilient and supporting the ongoing consumer demand for our brands.

Speaker 2: While current inflation in our industry is unprecedented, we believe the scale of our business, combined with a strategic pricing plan, can deliver solid earnings per share and help recover profit margins in 2022, while importantly, protecting our brands to enable long-term market share gains.

While current inflation in our industry is unprecedented we believe the scale of our business combined with the strategic pricing plan can deliver solid earnings per share and help recover profit margins in 2022, while importantly, protecting our brands to enable long term market share gains.

With the breadth of our high quality growth vehicles. We also believe we are one step closer to achieving our 7% unit growth objective.

Speaker 2: With the breadth of our high quality growth vehicles, we also believe we are one step closer to achieving our 7% unit growth objective. With that said, we'll...

With that said, we'll take your questions.

Speaker 3: At this time, I would like to remind everyone in order to ask a question, press star then the number one on your telephone keypad.

At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad.

Yeah.

Speaker 3: Your first question today comes from the line of Sharon Zaksia with William Blair. Your line is now open.

Your first question today comes from the line of Sharon Zackfia with William Blair.

Your line is now open.

Speaker 3: Hi, good afternoon. I guess a couple of questions around the inflationary dynamic. You know, I was struck by your comment that the year over year increase was really just a reflection of the year ago comparisons when you're looking at that inflation on the commodity side and the unit costs you're projecting are relatively stable. Does that mean you're actually seeing a lot of the

Hi, good afternoon.

I guess, a couple of questions around the inflationary dynamic.

Struck by your comment that.

The year over year increases was really just a reflection of the year ago comparisons when youre looking at that inflation on the commodity side.

And the unit cost youre projecting a relatively stable does that mean youre actually seen stabilization in the unit cost as we speak.

Speaker 3: stabilization in the unit costs as we speak. And then secondarily, it sounded as if, and I just want to clarify that you are willing to kind of defend your four wall margins if you need to in the second half of the year with incremental price in the third quarter. I just want to make sure I understood that correctly. And if you could comment on how you've seen the elasticity of demand as you've taken price increases over the past year.

And then secondarily it sounded as if and I just wanted to clarify that you are willing to kind of defend your four wall margins. If you need to in the second half of the year with incremental price in the third quarter I just want to make sure I understood that correctly and if you could comment.

You had sandy elasticity of demand as you've taken price increases over the past year.

Speaker 2: Sure, Sharon, this is Matt, and I think those are probably the most pertinent questions we'll get, so thank you for leading off with that.

Sure Sharon this is Matt and I think those are probably the most pertinent questions will get so thank you for leaving off with that.

The first thing I would say is with regards to the commodities inflationary environment, we are somewhere around 60% to 65% booked for the year, which is pretty close to where we would normally be right normally we'd be around 67%.

Speaker 2: The first thing I would say is with regards to the commodities inflationary environment, we are somewhere around 60 to 65% booked for the year, which is pretty close to where we would normally be. Normally we'd be around 67%. We have much better visibility than we did a couple months ago into where the markets are headed. You've probably heard of a lot of companies.

So we have much better visibility than we did a couple of months ago into where the markets are headed I think you've probably heard with a lot of companies.

Speaker 2: There might have been some hope, which is not a business plan, but there was some hope that things would come down quicker. We are projecting it to be relatively stable, and we have a few things that may help it over time. We feel good about that. It's basically accepting that there's been some inflation, but locking in some of the risk and booking it and then...

There might have been some hope which is not a business plan, but there was some hope that things would come down quicker book, we are projecting it to be relatively stable and we have a few things that may help it over time. So we feel good about that it's basically accepting that theres been some inflation, but locking in.

Some of the risk right and booking it and then secondarily to your point being willing to take the pricing to protect that and that's certainly where we're at if you think about our pricing for the quarter versus where the inflation is in mid teens for the first quarter I don't think we would have ever contemplated taking enough pricing for that.

Speaker 2: secondarily, to your point, being willing to take the pricing, you know, to protect that. And that's certainly where we're at. If you think about our pricing.

Speaker 2: for the quarter versus where the inflation is in mid-teens for the first quarter. I don't think we would have ever contemplated taking enough pricing for that. A digit doesn't make that much sense as we progress through the year, get closer to double digits and then even into the single digits.

That just doesn't make that much sense as we progress through the year get closer to double digits, and then even into the single digits.

Speaker 2: you know that that's going to make a lot more competitive sense.

Thats going to make a lot more competitive.

Speaker 2: with retaining guests while getting the margins. You know, once we get through the first quarter, really, as we look forward, it's not a perfect crystal ball, but it's a lot closer to 2019, second quarter through fourth quarter combined with progressive improvements quarter to quarter.

With retaining guests while getting the margins once we get through the first quarter really as we look forward, it's not a perfect crystal ball, but it's a lot closer to 2019 second quarter through fourth quarter, combined with progressive improvement quarter to quarter.

Great and then have you seen any consumer bulk I'm sorry at the price increases.

Speaker 3: Great. And then have you seen any consumer bulk thus far at the price increases?

Speaker 2: You know, historically, the ability for Cheesecake to take pricing has been very strong. The varied menu, anything from, you know, $7.95 to $30, and the ability for guests to share, you know, in 16 years here through a lot of different cycles, I've never seen us not get the pricing that we're going after. And frankly...

Historically, the ability for cheesecake to take pricing has been very strong the varied menu anything from $795 to $30.

And the ability for guests to share in 16 years here through a lot of different cycles of <unk>.

Never seen us not to get the pricing that we're going after and frankly, we're targeting and I think to the benefit of our ability to execute our supply chain's ability to manage effectively pricing slightly below both grocery and our competitive set so if anything we're going to be in a better position realm.

Speaker 2: We're targeting, and I think to the benefit of our ability to execute, our supply chain's ability to manage effectively, pricing slightly below both grocery and our competitive set. So if anything, we're going to be in a better position relative to consumers coming out of this than most companies in our space. And we feel good about the past year and specific to your question.

To consumers coming out of this than than most companies in our space and we feel good about the past year and specific to your question.

Okay. Thank you.

Your next question comes from the line of Brian Mullan with Deutsche Bank. Your line is now open.

Speaker 4: Your next question comes from the line of Brian Mullen with Dutch Bank. Your line is now open.

Speaker 3: Hey, thank you. Just question on the dining business at the core factory brand sales per week basis that that was down about mid single digits in the 4th quarter recovery, sequentially or improvements sequentially from the 3rd quarter. And you have to deal with, um, so, as you think about operating in a normal environment for a 12 month period. Can you discuss your degree of optimism specifically that those dining volumes come all the way back to what they were or even perhaps exceed.

Okay. Thank you just a question on the dine in business at the core Cheesecake factory brand.

Sales per week basis that was down about mid single digits in the fourth quarter recovery sequentially improvements sequentially from the third quarter and you have to deal with Omnicom. So as you think about operating in a normal environment for a 12 month period can you discuss your degree of optimism specifically that those dining volumes come all the way back to what they were.

Or even perhaps exceed.

Speaker 2: Sure, this is Matt again. I mean, just looking at the simple math, you know, 11 weeks through the fourth quarter, we're running at 10.6 Cheesecake Factory Consumers of 2019. Per our specific prepared remarks, you know, if you extrapolate out the current sales trends for the year, it gets to a Cheesecake Factory AUV of over $12 million.

Sure. This is Matt again.

Just looking at the simple math.

11 weeks through the fourth quarter, we were running at $10 six Cheesecake factory costs versus 2019 per our specific prepared remarks.

If you extrapolate out the current sales trends for the year it gets to a cheesecake factory.

Over $12 million. So I think just by stating that we feel good about the sales trends the thing that we've seen time and time again through the multiple stages of the pandemic is that every time the brand actually comes back a little bit stronger than before the pent up demand continues to build the execution.

Speaker 2: I think just by stating that we feel good about the sales trends. The thing that we've seen time and time again through the multiple stages of the pandemic is that every time the brand actually comes back a little bit stronger.

Speaker 2: than before, the pent-up demand continues to build, the execution of our teams relative to the competition has only made us better and more resilient. And I think that the dine-in business is what obviously has regrown with the off-premise kind of remaining stable. So we haven't lost that, but we continue to recapture over time the dine-in to support that level of business.

<unk> of our teams relative to the competition has only made us better and more resilient.

And I think that the dine in business is what obviously has regrown with the <unk>.

Off premise kind of remaining stable. So we haven't lost that but we continue to recapture overtime the dine in to support that level of business.

Okay. Thank you.

Speaker 4: Your next question comes from the line of David Tarantino with Baird. Your line is now open.

Your next question comes from the line of David Tarantino with Baird. Your line is now open.

Speaker 5: Hi, good afternoon, Matt, I was wondering if you could maybe piece together how you're building the revenue outlook that you commented and and I guess my first question is, what exactly do you mean by extrapolating current trends? Is that something you're seeing in the most recent weeks? Or is that your quarter to date trend? And then I may have a couple of follow ups related to that.

Hi, good afternoon.

Matt I was wondering if you could.

Maybe piece together, how youre building the revenue outlook that you commented on.

I guess my first question is what exactly do you mean by extrapolating current trends is that something you are seeing in the most recent weeks or is that your quarter to date trend.

I may have a couple of follow ups related to that.

Speaker 2: Yeah, I think, you know, to be fair, David, it's that.

Yes, I think to be fair, David its Matt.

Speaker 2: We're looking more at the last three to four weeks. The first week or two, we're still sort of in the Omicron holiday situation. But as we look at where we've gotten to in this quarter, and if we effectively seasonalize that sales performance on a dollar basis, that's what we mean by extrapolating current trends. Hopefully that makes sense to you.

We're looking more at the last three to four weeks the first week or two we're still sort of in the omicron holiday.

Situation, but as we look at where we've gotten to in this quarter and if we effectively seasonal is that sales performance on a dollar basis.

What we mean by extrapolating current trends hopefully that makes sense to you.

Speaker 5: Understood, yes. And then I guess maybe it would help if you told us what that would imply from a comps perspective for the Cheesecake Factory and potentially even for North Italia if that's relevant. If you could give us some sense for what level of comp would be embedded in that.

Understood and then I guess.

Maybe it would help if you.

Told us what that would imply from a comps perspective for the Cheesecake factory and potentially even for north Italia if that.

Relevant but.

If you could give us some sense for what level of comp would be embedded in that estimate.

Well.

Speaker 2: Well, you know, we're sort of in a funny space because I'm trying to figure out what calm people want to talk about, whether it's 2019, which is now three years ago or 2021, which in the first quarter still has some of the noise. You know, we're trying to help with that by giving the sort of the AUV at the $12 million. I mean, I think.

We're sort of in a finance space, because I'm trying to figure out what comp people want to talk about weather as 2019, which is about three years ago or 2021, which in the first quarter still has some of the noise. We're trying to help with that by giving the sort of the 12.

$12 million.

Speaker 2: If you're, if you're referring to 2021.

<unk>.

If you're referring to 2021.

Speaker 2: You know, we're really, it's still early to say what that total number would be, and we're not giving guidance specifically on a comp number, because I think the comparisons become a little bit muddy with all the moving ups and downs of the virus.

We're really it's still early to say what that total number would be and we're not giving guidance specifically on a comp number because I think the comparisons become a little bit muddy with all the moving ups and downs of the virus.

Speaker 5: Got it. But I guess if you could maybe confirm, you know, our math would suggest that if you're looking relative to pre-pandemic levels, you'd need to see a pretty meaningful step up from Q1 to the rest of the quarters. And, you know, one, could you confirm that? And I guess two, is it mainly just coming off the Omicron impacts or are you assuming something else is in there?

Got it but I guess.

If you could maybe confirm our math would suggest that if youre looking relative to pre pandemic levels.

Our need to see a pretty.

Meaningful step up from Q1 to the the rest of the quarters.

One could you confirm that.

And I guess two is it mainly just coming off the omicron impacts are you assuming.

<unk> else is in there.

Speaker 2: Yeah, I mean, sort of generally thinking after we lapped the Q1 downturn last year, right, we would assume that we would at least fully capture pricing in Qs 2, 3, and 4 relative to 2021. Got it. Okay.

Yes.

Sort of generally thinking after we lap the Q1 down turn last year right. We would assume that we would at least fully capture pricing in Qs two three and four relative to 2021.

Got it okay. Thank you for that.

Youre welcome.

Speaker 4: Your next question comes from the line of Brian Bittner with Oppenheimer. Your line is now open.

Your next question comes from the line of Brian Bittner with Oppenheimer. Your line is now open.

Speaker 6: Thank you. Good afternoon guys. So as we stand here today, I guess your commodity outlook is a little higher than originally expected for 22 and your labor outlook seems to remain in line and you're taking this upcoming price increase that gets you to a 4.75% price factor.

Thank you good afternoon guys.

So as we stand here today I guess your commodity outlook is a little higher than originally expected for 2002 and your labor outlook seemed to remain in line and you're taking this upcoming price increase that gets you to 475% price factor so.

Speaker 6: I guess assuming that your cost outlook is correct, are you saying that all these pieces add up to being able to achieve the 2019 operating margin levels in 22? Is that kind of how we should take your comments? And if things get a little bit worse, you need to take the 2% price increase later in the year.

I guess, assuming that your cost outlook is correct are you, saying that all of these pieces add up to being able to achieve the 2019 operating margin levels. In 2002 is that kind of how we should take your comments and.

And if things get a little bit worse, you need to take the 2% price increase later in the year.

Speaker 2: No, Brian , so let's just make sure we walk through that, just to make sure that everybody gets that map.

No Brian So let me, let's just make sure we work through that as Matt just to make sure that everybody gets that Matt.

Speaker 2: The first part, you're correct. So the commodities are, I don't know, call it two to 3% higher for the year in our current outlook than when we had our last call.

The first part you're correct to the commodities are I don't know call it 2% to 3% higher for the year in our current outlook than when we had our last call.

Speaker 2: And so in order for us to compensate for that, if those commodities stay at that elevated level,

And so in order for.

For us to compensate for that if those commodities stay at that elevated level.

Speaker 2: We would need to take normally we take one and a half percent, let's say in the summer to lap around. We'd probably need to take 2% in the summer to fully offset that and recoup the 2019 margins, but also just to be clear.

We would need to take normally we take one 5%, let's say.

In the summer to lap around we'd probably need to take 2% in the summer to fully offset that and recoup the 2019 margins, but also just to be clear really we're not attempting to do that in the first quarter because of the 15, 14% commodity.

Speaker 2: Really, we're not attempting to do that in the first quarter, because at the 15, 14 percent commodity inflation, we don't feel like it's appropriate, nor would the timing of our pricing have enabled it, right? So we're really talking about more the second quarter through the fourth quarter about recapturing those.

Asian, we don't feel like its appropriate nor with the timing of our pricing have enabled that right. So we're really talking about more the second quarter through the fourth quarter about recapturing those now.

Speaker 2: Now, you know, if commodities come back to where we were before and it's only a couple percent decline, then, you know, we'd be just lapping our pricing over. So that's sort of the toggle that we're looking at. Does that make sense?

<unk> come back to where we were before and it's only a couple percent decline then we'd be just lapping our pricing over so that's sort of the toggle that we're looking at does that makes sense.

Speaker 6: It does and I think the bottom line is is you remain committed to achieving those 2019 operating margins this year I guess is the point. That's 100% our goal for this year and again it's a little bit more just timing. I just reiterate it wouldn't make sense to try to price for that in the first quarter alone. Given the uncertainty and some of the movement and commodities as well as just maintaining a competitive balance.

It does and I think the bottom line is as you remain committed to achieving those 2019 operating margins. This year I guess is the point that's 100% our goal for this year and again it is a little bit more just timing I would just reiterate it wouldn't make sense to try to price for that in the first quarter alone given the uncertain.

And some of the movement in commodities as well as just maintaining a competitive balance for where we want to be but we feel good that over the course of the next six months, we'll get a lot more clarity about where that will be and we will be able to effectively roll within actually it at a lesser level than.

Speaker 2: for where we want to be, but we feel good that over the course of the next six months, we'll get a lot more clarity about where that will be and we'll be able to effectively roll it in. We're actually at a lesser level than we did this time, right? So we rolled in three and a quarter percent on a six month basis. So we feel like the ability to get to two is very viable.

We did this time right. So we rolled in 3.25% on a six month basis. So we feel like the ability to get to two is very viable.

Speaker 6: Great. And just a quick following up, just a model question. You talked about net labor inflation of about five percent.

Great and just a quick.

Following up just a model question you talked about net labor inflation of about 5%.

Speaker 6: this year. So how do you want us to think about translating that into our models as we model kind of same-store labor costs? Do you want to match that 5% inflation or is there some variances or differences in how the actual costs are going to flow through?

This year. So how do you want us to think about translating that into our models as we model kind of same store labor costs do you wanted to add that 5% inflation or is there some welcome variances or differences in how the actual costs are going to flow through.

Speaker 2: Well, two things Brian , you know, we're not we're not necessarily fans of the operating dollar approach because of the differences in our brands and some of the components, right? So we're thinking about helping people model it as a percentage of sales.

Well two things, Brian I know, we're not we're not necessarily fans of the operating dollar approach because of the differences in our brands and some of the components right. So we're thinking about helping people model it as a percentage of sales.

Speaker 2: So, roughly speaking, in those quarters where we have close to 5% pricing, you're roughly neutral on a percentage of sales. However, you've got to go back and make sure you look at, you know, the other quarter's commentary, which I don't have in front of me. Sometimes there were anomalies, I think, like in the third quarter, particularly with pretty high group medical, right, which would not be included in our outlook for this year, and so those kinds of pieces we'll leave to you.

So roughly speaking in those quarters, where we have close to 5% pricing youre roughly neutral on a percentage of sales. However, you got to go back and make sure you look at the other quarters commentary, which I don't have in front of me, sometimes there are anomalies I think like in the third quarter, particularly with pretty high group medical.

Right, which would not be included in our outlook for this year and so those kinds of pieces will lead to you.

Great. Thanks, Matt.

Speaker 4: Your next question comes from the line of Jeffrey Bernstein with Barclays. Your line is now open.

Your next question comes from the line of Jeffrey Bernstein with Barclays. Your line is now open.

Speaker 6: Great. Thank you very much. Two questions. One, I'm just wondering if you can talk bigger picture about mall traffic in general. Obviously, you guys are heavily penetrated and typically higher end malls. Seems like through the pandemic, there were concerns around slowing traffic.

Great. Thank you very much.

Two questions. One just wondering if you can.

Bigger picture about mall traffic in General obviously, you guys are heavily penetrated in.

Typically higher end malls.

Seems like through the pandemic there were concerns around slowing traffic.

Speaker 6: Now we're hearing things about maybe a resurgence from a traffic perspective. So, David, let's hope maybe you could just share your thoughts in terms of the mall positioning today versus, you know, two, three years ago from the health of the platform, broadly speaking. And then I had one follow-up.

Now, we're hearing things about maybe a resurgence from a traffic perspective so.

David was hoping maybe you could just share your thoughts in terms of the the mall positioning today versus two three years ago from the health of the platform broadly speaking and then I had one follow up.

Speaker 6: Sure, Jeff, this is David Gordon. To your earlier point about early on in the pandemic and, you know, the pressures that were felt at the mall, I think that

Sure Jeff This is David Gordon.

To your earlier point about early on in the pandemic and the pressures that we felt at the mall I think that we proved out during that time.

Speaker 6: We proved out during that time that Cheesecake Factory is a destination and continues to be a destination by the sales that we were attributed early on in the pandemic. And as traffic continues to come back to malls, we only can build off of the great traffic that we saw coming purely for a destination. So

<unk> factory is a destination and continues to be a destination by the sales that we were distributed early on in the pandemic.

As traffic continues to come back to malls.

We only can build off of the great traffic that we saw coming purely for a destination. So it won't be pre.

Speaker 6: It'll be pre-pandemic, and we had talked about maybe a lunch part, day part being a little bit softer, and some of the places where we saw lesser traffic. We've done a good job of building awareness around lunchtime, and as traffic comes back, we would hopefully anticipate that we'll continue to take market share because of the execution that's happened in all the restaurants, off-premise and on-premise during that time. So, we feel good about our.

Pre pandemic when we had talked about maybe a lunch part day part being a little bit softer in some of the places where we saw lesser traffic we've done a good job of building awareness around lunchtime.

As traffic comes back we would hopefully anticipate that we will continue to take market share because of the execution that has happened in all the restaurants off premise and on premise during that time. So we feel good about our positioning.

Speaker 6: We feel good about looking for A sites only, whether that be at a mall or outside of a mall. We will continue to work closely with that historical strategy and move forward.

Feel good about looking for sites only whether that be at a mall or outside of a mall will continue with that historical strategy and move forward.

Speaker 5: Understood. And then just to follow up, I think you mentioned, you know, the board is keen to discuss return of capital to shareholders once.

Understood.

And then just a follow up I think you mentioned.

The board is keen to discuss return of capital to shareholders. Once I think you said the revolvers paid off in this first quarter.

Speaker 5: You said the revolvers paid off in this first quarter. So I'm just wondering, you know, the pros and cons, I'm assuming we're talking about share of purchase versus dividend, but maybe any early thoughts in terms of what the thought process is there. And presumably, I guess at this point, you're not assuming share of purchase of any kind in the 2022 guidance that you offered or does that still remain to be seen?

I'm, just wondering the pros and cons I'm, assuming we're talking about share repurchase versus dividend, but maybe any early thoughts in terms of what the.

The thought process is there.

Presumably I guess at this point youre not assuming share purchase.

Of any kind in the 2022 guidance that you offered or is that still remain to be seen.

Speaker 2: Hey Jeff, it's Matt. Good, good question. You know, I think everything is on the table. Just to clarify.

Hey, Jeff It's Matt <unk>.

Good question I think everything is on the table just to clarify we will we will exit the sort of pandemic restrictions of the covenants, but we do still have the 130 on the revolver. So that is an option to obviously the interest rates are low.

Speaker 2: We will exit the sort of pandemic restrictions of the covenant.

Speaker 2: But we do still have the $130,000 on the revolver. So that is an option, too. Obviously, the interest rates are low, even with some of the movement up. I think that, to be fair, the board's first focus has been around the dividend reinstatement.

Even with some of the movement up I think to be fair. The board's first focus has been around the dividend reinstatement.

Speaker 2: But they're also supportive of anti-dilutive repurchase at least, right? We have an equity compensation plan and to be able to begin to, you know, make sure that we're just offsetting that piece of it, you know, I think.

But there are also supportive of anti dilutive repurchase at least try wherever the equity compensation plan and to be able to begin to make sure that we're just offsetting that piece of it.

I think some form of both of those are on the table in.

Speaker 2: Some form of both of those are on the table in future quarters for this year.

In future quarters for this year.

Speaker 5: Understood. So similar to the strategy you guys pursued prior to Holt in that return.

Understood. So similar to the strategy you guys pursued prior to hold in that return.

Speaker 2: I think so, maybe just in the beginning, particularly a little bit lighter on the repurchase component, particularly given that we have another avenue with the revolver to pay down and also that our growth has increased, there will be more CapEx. So I think just as an emphasis point, it's dividend first, followed by maybe some support from ShareRepo anti-dilution. Thanks

I think so maybe just in the beginning, particularly a little bit lighter on the repurchase component, particularly given that we have another avenue with the revolver to pay down and also that our growth is increase there'll be more capex. So I think just as an emphasis point dividend first followed by maybe.

Some support from share repo anti dilution.

Great. Thank you.

Your next question comes from the line of John Glass with Morgan Stanley . Your line is now open. Thanks.

Speaker 7: Thanks very much. First, Matt, as you think about 22, stimulus played a role in 2021. I think if you said $12 million in EVs, and that's, I think, over 53 weeks, it would assume that average sales are on par with what you experienced during 21. Do you think there was a benefit or as you look back at the data, do you think is there a risk that you got excess demand in second and third quarter of last year that you don't repeat? How do you think about the role of stimulus played last year and how we think you think about revenue growth or EV growth during 2022?

Very much first Matt as you think about 'twenty two no stimulus played a role in 2021 I think if you said $12 million vs and Thats I think over 53 weeks. It would assume that average weekly sales are.

On par with what you experienced during 'twenty. One do you think there was it a benefit or as you as you look back at the data do you think is there a risk that you got excess demand in the second and third quarter of last year that you don't repeat or how do you think about the rule of stimulus played last year and how we think you think about revenue growth or EV growth during 2022.

Speaker 2: Sure, John . I think.

Sure John I think.

Speaker 2: I think, you know, 80 views would be over $12 million, to be honest, you know, and that's probably.

I think he views will be over $12 million to be honest.

And thats, probably excluding the extra week.

We don't anticipate that we'll be at the same level of 'twenty. One we are comping up now and we anticipate that that will be true at least at the pricing level, even once we lap the full reopening.

Speaker 2: We're just noting the confidence and the off-premise that we've recaptured and built on that we don't think we're going to lose that piece of it. I don't think stimulus...

We're just noting that confidence in the off premise that we've recaptured and built on that we don't think we're going to lose that piece of it I don't think stimulus made much of a difference to us. The biggest thing that we saw if you look at the cadence of the comps last year was the reopening right. So as soon as you saw.

Speaker 2: made much of a difference to us. The biggest thing that we saw, if you look at the cadence of the comps last year, was the reopenings, right? And so as soon as you saw a wave of reopening, our comps stepped up and then were just remarkably consistent throughout the different periods of time, absent really the Omicron surge. So I think that we're gonna see positive build on AWS.

Dave of reopening our comp stepped up and then it was worth just remarkably consistent throughout the different periods of time absent really the omicron third so I think that we're going to see positive build on AWS for the Cheesecake factory and really for all for all of our brands.

Speaker 2: for the Cheesecake Factory and really for all of our brands.

Speaker 7: Thank you. If I follow up, the operating margins at the North Italia segment actually sequentially improved, even though the cheesecake margins were under pressure. Is that dynamic about just maturation of stores? You're sort of getting some benefit. How do you think about their margins in 22 versus the core business? Could that end up being a positive, if you will, as those stores you've opened more recently start to mature? How do you think about that? Well, I would say, first of all, it was...

Thank you.

Follow up.

The operating margins at the North Italia segment actually sequentially improved even though the cheesecake margins were under pressure is that dynamic about just margin maturation of stores Youre still getting some benefit how do you think about their margins in 'twenty two versus the core business could that end up being a positive if you will as those stores you've opened more recently.

Start to mature how do you think about that.

I would say first of all.

It was a big focus for David and David in the North team coming out of the summer because they had kind of gotten to a point, where they could stabilize and focus it is a smaller brand. The staffing challenges were greater so the team put a lot of work into building momentum going into 2022, our supply chain team did some.

Speaker 2: For David and David and the North team coming out of the summer because they had kind of gotten to a point where they could stabilize and focus. It's a smaller brand. The staffing challenges were greater. So the team put a lot of work into building momentum going into 2022. Our supply chain team. SydneySky Records

Speaker 2: did some work. I mean, frankly, we would have thought we would be more integrated from a supply chain if it were not for the pandemic, right? So we are just beginning some of the work to be able to support those margins. And I think that's starting to show from a maturation standpoint, as you noted, John . And then also the strength of the sales. I mean, really, the fourth quarter north, I think,

More I mean, frankly, we would have thought we would be more integrated from a supply chain. If it were not for the pandemic right. So we are just beginning some of the work to be able to support those margins and I think thats starting to show from a maturation standpoint as you noted John and then also the strength of the sales I mean really the fourth quarter north.

I think stood.

Speaker 2: stood above everybody and they leveraged it well. So we're cautiously optimistic. There's work to be done there, but it's clearly headed in the right direction.

Stood above everybody and they leveraged it well so we were.

We're cautiously optimistic there is work to be done there, but it's clearly headed in the right direction.

Got it thank you.

Your next question comes from the line of Dennis Geiger with UBS. Your line is now open.

Speaker 4: Your next question comes from the line of Dennis Geiger with UPS. Your line is now open.

Speaker 8: Thanks for the question and thanks for the commentary on the staffing situation and the games you've made in recent months. Wondering if you could talk though a bit more about the impact in the 4Q maybe from staffing and from the impacts to operating hours and how that impacted sales. Presumably that represents a tailwind as you move through the year and then just kind of building on that, just wondering how much more staffing you feel from here is needed. Maybe if any more staff.

Thanks for the question and thanks for the commentary on the staffing situation and the gains you've made in recent months I was wondering if you could talk though a bit more about the impact in the <unk>, maybe from some staffing and from impacts to operating hours and how that impacted sales, presumably that represent a tailwind is.

As you move through the year.

And then just kind of building on that just wondering how much more staffing you feel from from here is needed maybe if any more staffing from the hearings needed I'm curious what the what that looks like thank you.

Speaker 5: from here is needed. I'm curious what that looks like. Thank you.

Speaker 6: Thanks, Dennis. This is David Gordon. Certainly those few weeks where the surge was pretty relevant out in the restaurants, we saw some probably larger staffing pressures than we had all the way back to the beginning of the pandemic.

Thanks, Dennis This is David Gordon.

Certainly those few weeks, where the surge was pretty relevant out in the restaurants we.

We saw some probably larger staffing pressures and we had.

All the way back to the beginning of the pandemic not to the point that we had to really make any adjustments to our hours or closed for any particular day part maybe a restaurant here or there that opened or closed and our early on a particular day, but nothing that was systemic.

Speaker 6: not to the point that we had to really make any adjustments to our hours or close for any particular day part. Maybe a restaurant here or there that opened or closed an hour early on a particular day, but nothing that was systemic. And what we're seeing now coming out of that certainly is the uptick in staffing that I talked about in the prepared comments. And if that were to continue here.

And what we're seeing now coming out of that.

<unk> is the uptick in staffing that I talked about in the prepared comments.

And if that were to continue here in the next few months with a continued positive trend and I think I had mentioned that in January hiring increased 10% to 15% from the Q4 average. So if that were to continue we'd be sitting in a really strong place in certainly in no way are any of our staffing needs.

Speaker 6: the next few months with that continued positive trend.

Speaker 6: I think I mentioned that in January , hiring increased 10 to 15 percent from the Q4 average. So if that were to continue, we'd be sitting in a really strong place. And certainly in no way are any of our staffing needs

Speaker 6: Prohibiting any potential sales at this point. I think we feel really good about the restaurants being in a solid staffing position

Prohibiting any potential sales at this point I think we feel really good about the restaurants being in a solid staffing position and enabling really strong execution, whether that's for dine in or for off premise.

Speaker 6: and enabling really strong execution whether that's for dine-in or for op-rem.

Speaker 8: helpful. And then just one more. I think, Matt, you spoke to sort of the recovery that you've seen after each wave. Sounds particularly encouraging. Just wondering with this latest wave, as we think about the recovery restrictions easing, anything more to share sort of on customer behaviors, impacts to day part, or anything else that you would call out that's been particularly interesting?

That's helpful. And then just one more I think.

Matt you spoke to sort of the recovery that you've seen after each wave, particularly encouraging just wondering with this latest wave as we think about the the recovery restrictions easing anything more to share sort of on customer behaviors.

<unk> day, part or anything else that you would call out that's been particularly interesting.

Speaker 5: just over the recent weeks that maybe you hadn't seen in previous reopening waves. Thank you.

Just over.

The recent weeks that that maybe you hadn't seen in previous reopening ways. Thank you.

Speaker 2: Yeah, no, it's Matt. You know, that's an interesting question. You know, I would say that for sure we have

Yes, it does its Matt.

It's an interesting question.

I would say that for sure we have seen with <unk>.

Speaker 2: seen with some of the public announcements recently about lifting mask mandates and the like.

Some of the public announcements recently about lifting masked mandates and the like that there is a pretty fast correlation to guest traffic and I think people were cheating the medical advice over the holidays and people.

Speaker 2: that there's a pretty fast correlation to guest traffic. And I think, you know, people were heeding the medical advice over the holidays and people got sick and they stayed home and they quarantined.

Got sick and they stay at home and the quarantine.

Speaker 2: And as soon as in the jurisdiction, we see them lifting that or speaking more positively about case declines, you know, the sales.

<unk>.

As soon as in the jurisdiction, we see them lifting that are speaking more positively about case declines the sales come back really fast and so we feel like the trajectory is very positive.

Speaker 2: come back really fast. And so, you know, we feel like the trajectory is very positive. I don't know. It's also noteworthy that our off-premise continues to be very sticky despite that. I mean, that's kind of what we're saying. We think we can recapture the on-premise dining and keep the off-premise. So, we're seeing both of that happen, which I think is a really positive outlook.

It's also noteworthy that our off premise continues to be very sticky despite that I mean, thats kind of what we're saying we think we can recapture beyond premise dining and keep the off premise. So we're seeing both of that happened, which I think is a really positive outlook.

Great. Thanks, guys.

Speaker 4: Your next question comes from the line of John Ivanko with J.P. Morgan. Your line is now open.

Your next question comes from the line of John <unk> with Jpmorgan. Your line is now open.

Speaker 7: Hi, thank you. I guess when you go back and you look at, you know, the closures in your trade areas, or maybe even your malls itself, you know, that you thought, you know, were relevant to you. And actually, maybe at one point actually had Cheesecake Factory, like your customers before they closed. I guess, how impactful, you know, do you think, you know, do you think that was? In other words, when we do think about

Alright, thank you.

I guess when you go back and you look at.

The closures.

And your trade areas or maybe even your malls itself that you thought were relevant to you and actually maybe at one point actually had cheesecake factory.

Customers.

Were they close.

How impactful do you think do you think that was in other words, when we do think about 'twenty two versus 19, how much effective supply relevant to Cheesecake factory do you think actually came out of the market.

Speaker 7: 22 versus 19, how much effective supply relevant to Cheesecake Factory do you think actually came out of the market?

John This is Matt.

Speaker 2: John , this is Matt. It's a, you know, I don't know that it's moved. I mean, what I can say is that they're not reopening that quickly. So the, you know, the open opportunity or the market share opportunity, I think for 2022 continues, you know, frankly, for any small or midsize operator, and, you know, and we, we talked to too many of them still.

I don't know that its moved I mean, what I can say is that theyre not reopening that quickly so.

The open opportunity or the market share opportunity I think for 2022 continues.

Frankly for any small or midsize operator.

We talked to many of them still.

Speaker 2: there's no urgency to getting back into the game when you see labor and commodities like this. So the restaurants that closed next to us, you know, two years ago are still closed. So I think that, you know, just bears that the opportunity, you know, the sales momentum that we've built was not because more people closed, but it continues because the dynamic is there's more people that want to go out to eat than restaurant capacity. And it's not coming back quickly.

There is no urgency to getting back into the game when you see labor and commodities like this so the restaurants that closed next to us.

Two years ago, or so are still closed.

<unk>.

It bears that the opportunity is.

Sales momentum that we built was not because more people closed but it continues because of the dynamic as theres more people, who want to go out to eat then restaurant capacity and it's not coming back quickly.

Speaker 7: Yes, understood, and obviously equipment delays and permitting delays and any number of things would... Exactly. Just to try to build a new restaurant, if you don't have the scale and the capabilities that the Cheesecake Factory has, well, good luck to you.

Yes, understood and obviously equipment delays in permitting delays and yet any number of things.

Exactly.

When we try to build a new restaurant, if you don't have the scale and the capabilities of the Cheesecake factory has well good luck to you.

Speaker 7: Yes, understood. And it may be a little bit related to that, you know, as we look and you know, we can talk about this over any time period that you want, maybe we can talk about it in current time. How disparate is their performance across the chain? I mean, is there, you know, is there a tight grouping, you know, of restaurants from a sales performance perspective? 22 versus 19? Is it still very wide? I mean, are there, you know, a certain number of restaurants that are actually still pulling down your comps that could potentially contribute in the near future?

Yes, understood and it may be a little bit related to that as we look and we can talk about this over any time period that you want maybe we can talk about it in current time.

How disparate is their performance across the chain I mean is there is there a tight grouping of restaurants from a sales performance perspective 22 versus 19 is it still very wide I mean are there certain number of restaurants that are actually still pulling down your comps that could potentially contribute in the near future.

Speaker 2: Yes, to the last part. The biggest thing that we continue to see is that some of the urban and travel areas are depressed.

Yes to the last part the biggest thing that we continue to see is that some of the urban and travel areas are depressed right.

Speaker 2: Right, you know, and while they may still be doing pretty decent volumes.

And while they may still be doing pretty decent volumes are.

Speaker 2: You know, a downtown location might be doing 12 million, but it may be doing 16 before, right? So, there's, I would say I haven't looked at the exact math, but when we looked in the fourth quarter, which I'm imagining is similar, it was a 2 to 3% opportunity for those just to get back to break even, you know, because they were negative. The rest of it, you know, we do see, I think, very strong performance.

Downtown location might be doing $12 million, but maybe doing 16 before right. So there is I would say I haven't looked at the exact math, but when we looked in the fourth quarter, which I'm imagining. It's similar it was a 2% to 3% opportunity for those just to get back to breakeven.

Because they were negative the rest of it we do see I think very strong performance in suburban malls I mean, the people have to the question earlier.

Speaker 2: in suburban malls. I mean, people have, to the question earlier, have returned, but that's pretty broad-based. That's across the country. So I think the single biggest thing is really the urban tourist areas and opportunity there. If what we're hearing, that people are starting to book flights in hotels again, could help us out in the back house.

Returned.

But that's pretty broad based across the country. So I think the single biggest thing is really the urban tourist areas and opportunity there.

We're hearing that people are starting to book flights and hotels again could help us out in the back half.

Thank you.

Your next question comes from the line of Lauren Silberman with Credit Suisse. Your line is now open.

Speaker 4: Your next question comes from the line of Lauren Silberman with Credit Suisse. Your line is now open.

Speaker 4: Thank you. First, I just want to clarify the trends that you're seeing in recent weeks. How do those underlying trends compare to pre-Omicron levels?

Thank you first I just want to clarify the trends that youre seeing in recent week, how do those underlying trends comparative pre all mccann level.

Speaker 2: Lauren, it's Matt. We have gotten pretty much right back to where we were pre-OMICON in the latest period.

Lauren it's Matt.

We have gotten pretty much right back to where we were three o'clock on.

In the latest period.

Great. Thank you and im pricing the $4 seven 5% menu price.

Speaker 4: Great, thank you. Then on pricing, the 4.75% menu price, which as you said, below what we're seeing across the industry in grocery, definitely appreciate being prudent. Do you see any risk to not taking more price now if we start to see more consumer elasticity of price, really across the entire consumer landscape?

What we're seeing across the industry in grocery definitely appreciate being prudent do you see any risk to not take any more price now we start to see more consumer elasticity of price really across the entire consumer landscape.

I think that.

Speaker 2: where our positioning is enables us to be flexible. Like I said, you know, we take pricing twice a year. We've done it for 43 or four years, whatever it is at this point now, we've always been effective in capturing it. And the difference we're talking about a 50 basis point.

Where our positioning is enables us to be flexible like I said you know we.

We take pricing twice a year, we've done it for 43 or four years whatever it is at this point now we've always been effective in capturing it and the difference we're talking about a 50 basis points.

Speaker 2: doesn't concern us at all. We'll be smart about where we place it. You know, we've got the menu variation. So we're not talking about a big gap. We're just talking about seeing the tea leaves a little bit longer. It's not like we need to take 3 or 4% more.

It doesn't concern us at all we will be smart about where replace it.

We've got the menu variation so we're not talking about a big gap, we're just talking about seeing the tea leaves a little bit longer it's not like we need to take 3% or 4% more.

Got it and then just on off premise versus on premise off premise.

Speaker 4: Got it. And then just on off-premise versus on-premise. Off-premise, we talked about nearly 2x pre-COVID. Seems pretty steady over the last few quarters. How are you thinking about the growth of on-premise versus off-premise from here? Do you expect opportunities for continued off-premise growth versus on-premise outperforming as you continue to capture? So just how are you thinking about those components?

At nearly <unk> pre COVID-19 seems pretty steady over the last few quarters.

Are you thinking about the growth of on premise versus off premise from here do you expect opportunities for continued off premise growth.

First is on premise.

Outperforming.

As you continue to capture.

So just how you're thinking about the components.

Speaker 6: Lauren, this is David Gordon. You know, certainly as we've said since the beginning of the pandemic that we feel that the off-premise growth is sticky and our expectation that we built into the plan for this year is for that to remain. So we're not looking to...

Lauren This is David Gordon.

Certainly as we've said since the beginning of <unk>.

The pandemic that we feel that the off premise growth is sticky and our expectation that we built into the plan for this year.

As for that to remain so we're not looking too.

Speaker 6: necessarily need to outsize where we currently are today. We'd be happy to currently to continue to be in the you know high 20s to mid 20s with off-premise. We think we can continue to do that and we will continue to do that as the capacity continues to grow back inside the restaurants as well. So that's where we stand today and we're anticipating throughout the remainder of the year.

Necessarily need to outsize, where we currently are today, we'd be happy to currently to continue to be in the.

High <unk> to mid Twenty's with off premise. We think we can continue to do that and we will continue to do that.

As the capacity continues to grow back inside the restaurants as well so.

That's where we stand today and where we're anticipating throughout the remainder of the year.

Thank you guys.

Yeah.

Speaker 9: Your next question comes from the line of Brian Picaro with Raymond James. Your line is now open.

Your next question comes from the line of Brian Vaccaro with Raymond James Your line is now open.

Speaker 6: Thanks and good evening. I guess just to close the loop on quarter to date, I just wanted to make sure my math is right. You know, if I take your one year comps that you've disclosed at various times, it seems like the quarter to date two year on cheesecake is up one and a half, two percent versus that period in early 2020 before COVID hit. Is that right?

Thanks, and good evening, I guess just to close the loop on quarter to date I just wanted to make sure. My math is right I think you are.

One year comps that you've disclosed at various times it seems like the quarter to date to year on Cheesecake is up 152% versus that period in early 2020 before COVID-19 hit is that right.

Speaker 2: You know, Brian , I honestly we can follow back up with you on that one. I don't have 2022 year in front of me. Okay, but you did just say you're back to a pre-Omicron trend and I wanted to make sure that's versus a pre-COVID trend. So you're suggesting that you're somewhere close to 10% versus a pre-COVID trend?

You know Brian honestly, we can fall back up with you on that one I don't have 2022 year in front of me, Okay, but you did just say youre back to the pre Omar Khan trend and I wanted to make sure that.

Versus the pre COVID-19 trends, so youre, suggesting that youre somewhere close to 10% versus pre COVID-19 .

Speaker 2: I think the best way to think about it, the best way, in my opinion, given all the different comp variations over the years, right, because you've got moving holidays, you've got weather, you've got the Super Bowl, et cetera, where we are at today brings us back to the pre-Omicron AUV trend. So it was, you know, you always have to seasonalize, adjust it, et cetera, but it basically would get us back to the same AUV levels that we were running pre-Omicron.

I think the best way to think about the best way in my opinion, given all of the different comp variations over the years right because you've got moving holidays, you've got whether you've got the Super Bowl et cetera, where we are at today brings us back to the pre Omar Khan <unk> trend. So you always.

The seasonally adjusted et cetera, but it basically would get us back to the same AAV levels that we were running pre overcrowding.

Okay. Okay.

Speaker 10: Okay, okay. And at Cheesecake Factory, I want to just ask about the segment margins and looking at the quarter, I think still down, call it 250 bits versus the fourth quarter of 19. AUV is up five. I know there's a lot of noise in the numbers, but could you help us bridge that differential between temporary or one-time pressures versus structural differences and just help us with the path towards recovering historical margins at the cheesecake segment specifically? Okay.

And at Cheesecake factory I wanted to just ask about the segment margins and looking at the quarter I think it's still down call. It 250 bps versus the fourth quarter of 19, <unk> five I know theres a lot of noise in the numbers, but.

Can you help us bridge that differential between temporary or one time pressures versus structural differences and just help us with the path towards the covering historical margins at the Cheesecake segment specifically.

Speaker 2: Sure, so I would say, first of all, obviously the impact from the last two weeks and the flow through there was pretty material, you know, I would say that could be one and a half percent.

Sure. So I would say first of all obviously the impact from the last two weeks and the flow through there was pretty material.

<unk>.

We'd say that could be one 5%.

Speaker 2: of that delta. The second big piece is the commodity inflation relative to pricing.

Of that Delta the second big piece is the commodity inflation relative to pricing remember, we said we'd be at about 6% versus 3% level pricing. So youre talking about another 75 basis points right. There. So that's probably.

Speaker 2: Remember where we said we'd be at about 6% versus, you know, a 3% level pricing. So you're talking about another 75 basis points right there. So that's probably two and a quarter. The other difference really, I would say, comes down to the manager bonus and COVID pay that we.

Two in a quarter. The other difference really I would say it comes down to the manager bonus and Covid pay that we noted was around 50 basis 45 50 basis points. So that so you are talking about the <unk> impact.

Speaker 2: noted was around 50 basis 45 50 basis points so that so you know you're talking about the omicron impact

Speaker 2: the commodity inflation compared to pricing and timing, and then some one-time costs. And hopefully that gets you back to kind of in the ballpark.

The commodity inflation and competitive pricing and timing and then some onetime costs and hopefully that gets you back to kind of in the ballpark.

Okay. Okay. That's helpful. And then last one I just wanted to ask about the other operating cost line, specifically I know you called out some pressure points in the fourth quarter. It sounded like it was mostly natural gas within that specific line item, but correct me if I'm wrong on that.

Speaker 6: Okay, okay, that's helpful. And then last one, I just wanted to ask about the other operating cost lines specifically, and I need to call out some pressure points in the 4th quarter. It sounded like it was mostly natural gas within.

Speaker 6: That specific line item, but correct me if I'm wrong on that. Um, but, you know, I, I guess your guidance for 1st quarter getting into the mid 25, if I heard correctly would suggest that.

I guess your guidance for first quarter getting into the mid 25, if I heard correctly would suggest that whatever it was in Q4 that pushed the number higher as is expected to come lower am I interpreting that correctly and if so can you illuminate us on sort of what what those underlying dynamics.

Speaker 3: Whatever was in Q4 that pushed the number higher is expected to come lower. Am I interpreting that correctly? And if so, can you illuminate us on sort of what those underlying dynamics could be there?

There.

Speaker 2: Yeah, some of it is the natural gas, as you call it. Some of it is, you know, that does happen to be where we capture the the restaurant level incentive piece. And, you know, essentially for all of 2021, we just paid it 100 percent compared to a performance base, which would impact some of that. And, you know, some of it is a seasonality of what you see in Q4 versus the first quarter, and some of it is pricing leverage.

Yes. Some of it is the natural gas as you call. It some of it is that does happen to be where we capture the.

The restaurant level incentive piece.

Essentially for all of 2021, we just paid at 100% compared to our performance base, which would impact some of that.

And some of it is the seasonality of what you see in Q4 versus the first quarter and some of it is pricing leverage compared to the inflation those line items things like rent and occupancy really don't have any inflation. There just associated with the sales levels and so we should be getting some leverage as we move up to 5%.

Speaker 2: compared to the inflation. Those line items, things like rent and occupancy, really don't have any inflation. They're just associated with the sales levels. And so we should be getting some leverage as we move up to 5% pricing in an area that's maybe 1% to 2% inflationary comparatively.

Pricing in an area, that's maybe 1% to 2% inflationary comparatively.

Okay.

Alright, Thank you I'll pass along.

Speaker 9: As a reminder, if you would like to ask a question, press star, then the number 1 on your telephone keypad. Your next question comes from the line of James Rutherford with Stephen Zink. Your line is now open.

As a reminder, if you would like to ask a question Press Star then the number one on your telephone keypad.

Your next question comes from the line of James Rutherford with Stephens, Inc. Your line is now open.

Speaker 3: Thanks very much for the question. And I know there's been a lot of questions on sort of the recent trends, but I just want to tackle this from a different angle if I could. You mentioned that you've taken the last few weeks of trend and seasonalized that to get the AUV that you talked about, which is 12 million or greater for the year. If I just do simple math, that $12 million is about 13% higher than what you did in 2019, that 10.7 million in 2019.

Okay. Thanks, very much for the question and I know, there's been a lot of questions on sort of the recent trends, but I just wanted to tackle this from a different angle if I could.

You mentioned that you've taken the last few weeks trend in season like that to get the AEP that you just talked about which is $12 million or greater for the year. If I just do simple math that $12 million is about 13% higher than what you did in 2019 that $10 7 million in 2019.

Speaker 3: So is it too much of a stretch to say that your comments would imply that in the last few weeks you are running something in the low double digit percentage greater than 2019 levels?

So is it too much of a stretch to say that your comments would imply that in the last few weeks you are running.

In the low double digit percentage greater than 2019 levels.

Speaker 3: Here in the last few weeks, I'm just trying to kind of reconcile some of those comments if I could please.

Here in the last few weeks I'm, just trying to kind of reconcile some of those comments just if I could.

Please.

Speaker 2: Yeah, I think what we're saying is we are expectation is that the Chief Cake Factory AUVs will be over $12 million. And, you know, you have to take into consideration.

Yes, I think what we're saying is we our expectation is that the cheesecake factory <unk> will be over $12 million and you have to take into consideration seasonal trends as to where we would be in 2019 versus that and also as we've noted.

Speaker 2: seasonal trends as to where we would be in 2019 versus that. And also, as we've noted, it includes the expectation that we're flowing through the pricing and capturing that. So in this year, as we speak right now, we're anticipating around a 5% pricing level. So that builds on whatever trend we were pre-Omicron surge.

It includes the expectation that we're flowing through the pricing and capturing that so in this year as we speak right now we're anticipating around a 5% pricing level. So that builds on whatever trend we were pretty overgrown Serge.

Okay. Thank you.

Yeah.

Speaker 9: Your next question comes from the line of Nick Setan with Wedbush Securities. Your line is now open.

Your next question comes from the line of Nick set Tien with Wedbush Securities. Your line is now open.

Speaker 11: Hi, thank you. I apologize for belaboring this margin trajectory in 2019 in the context of 5% pricing. I think you said Q1 starts at about 200 base points below Q1'19. Please correct me if I'm wrong. Let's say we start at about 13.5%. You know, prior to the price increase in early Q3, we'd still be below the Q2'19 number in terms of U-level margin.

Hi, Thank you.

Hello, guys I believe bringing this margin trajectory in 2010.

In the context of the 5% pricing I think you said Q1 starts.

That 200 basis points below Q1 19.

Please correct me, if I'm wrong, let's say alright.

5%.

Prior to the price increase in early Q3, we'd still be below the Q2 19 number in terms of your margins then we'd be at or above in the second half the data correct interpretation.

Speaker 11: then we'd be at or above in the second half. Is that a correct interpretation?

Speaker 2: Hey Nick, it's Matt. I think that's pretty close, right? So in the second quarter, we're probably not fully offsetting that commodities, although we're getting closer, so I think you're pretty spot on with that. Then by the time we get to Q3, it's going to be roughly close, you know, if all else being equal, you know, and everything that we think is going to happen happens. And then in Q4, it could be slightly above. So, I mean, I think that that's right on your comments.

Hey, Nick it's Matt I think that's pretty close right. So in the second quarter, we're probably not fully offsetting that commodities, although we're getting closer so I think youre pretty spot on with that then by the time, we get to Q3, it's going to be roughly close.

All else being equal.

And everything that we think is going to happen happens.

And then in Q4, it could be slightly above so I mean, I think that's right on your comments.

Speaker 11: Okay, perfect. In Q3, the 2% incremental price, what's falling off when you take that 2% price?

Okay perfect.

In Q3 to 2% incremental price.

What's that.

What's falling off when you take that one.

No.

Speaker 2: Okay, so we've been following off. Yep.

Okay.

Falling off.

Speaker 11: Got it. And then just the clarification in Q4, what was pricing, menu pricing? In the quarter, it was 3% for Q4.

Got it and then just a clarification in Q4, what was pricing menu pricing.

In the quarter was 3% for Q4.

Okay. Thank you very much I.

Speaker 2: I think just to kind of hit on a point that Nick just made, our strategy here is really, again, to reiterate.

I think just to kind of hit on a point that Nick just made our strategy here is really again to reiterate commodity inflation of mid teens percentages in something that any company is going to really want a price for but as we get into a double digit to single digit scenario and we can execute on our plan.

Speaker 2: Commodity inflation of mid-teens percent isn't something that any company's going to really want to price for. But as we get into a double-digit to single-digit scenario, and we can execute on our plan, if we need to take slightly more pricing, our goal is with stabilization of sales trends to exit this scenario, the pandemic, at margins equal to or greater than on the four-wall basis for Cheesecake Factory than 2019.

We need to take slightly more pricing our goal is with stabilization of sales trends.

Exit the scenario of the pandemic at margins equal to or greater than on a four wall basis for cheesecake factory than 2019.

Speaker 9: There are no further questions at this time. This concludes today's conference call. Thank you for attending. You may now disconnect.

There are no further questions at this time. This concludes today's conference call. Thank you for attending you may now disconnect.

Okay.