Q2 2024 Darden Restaurants Inc Earnings Call

Hello and welcome to the Darden Fiscal Year 2024 Second Quarter Earnings Call. Your lines have been placed on a listen-only mode until the question and answer session. To ask a question, you may press star 1 on your touch-tone phone. We ask you please limit yourselves to one question and one follow-up, then return to the queue.

Hello, and welcome to the Darden fiscal year 'twenty 'twenty four second quarter earnings call. Your lines have been placed on a listen only mode until the question and answer session to ask a question you May Press Star one on your Touchtone phone. We ask you. Please limit yourselves to one question and one follow up then return to the queue.

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This conference is being recorded. If you have any objections, please disconnect at this time. On now, turn the call over to Mr. Kevin Telekack. Thank you, you may begin.

This conference is being recorded if you have any objections. Please disconnect at this time I'll now turn the call over to Mr. Kevin Kallikak. Thank you you may begin.

Thank you, Kevin. Good morning, everyone, and thank you for participating on today's call. Joining me today are Rick Cardenas, Darden's President and CEO , Kevin

Thank you Kevin.

Kevin Kallikak: Everyone and thank you for participating on today's call joining.

Speaker Change: Joining me today are Rick Cardenas, Darden's, President and CEO and Rajiv <unk> CFO.

As a reminder, comments made during the call will include forward-looking statements as defined in the private security's litigation reform act of 1990.

Speaker Change: As a reminder comments made during the call will include forward looking statements as defined in the private Securities Litigation Reform Act of 1095.

These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projects.

Speaker Change: These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections.

Those risks are described in the company's press release, which was distributed this morning, and in its filings with the Securities and Exchange Committee.

Speaker Change: Those risks are described in the company's press release, which was distributed this morning and in its filings with the Securities and Exchange Commission.

We are simultaneously broadcasting a presentation during this call which is posted in the investor relations section of our website at Darden.com.

Speaker Change: We are simultaneously broadcasting presentation. During this call, which is posted in the Investor Relations section of our website at Darden dotcom.

Today's discussion and presentation includes certain on-gap measurements and reconciliation of these measurements are included in that presentation.

Speaker Change: Today's discussion and presentation include certain non-GAAP measurements.

Speaker Change: Reconciliations of these measurements are included in that presentation.

Looking ahead, we plan to release fiscal 2024 third quarter earnings on Thursday, March 21st, before the market opens, followed by a conference.

Speaker Change: Looking ahead, we plan to release fiscal 'twenty 'twenty four third quarter earnings on Thursday March 21st before the market opens followed by a conference call.

During today's call, any reference to pre-COVID when discussing second quarter performance is a comparison to the second quarter of fiscal 2020. Additionally, all references to industry results during today's call refer to black box intelligence, casual dining benchmark, excluding Darden, specifically Olive Garden, Longhorn Steakhouse, and Cheddar Scratch.

Speaker Change: During today's call any reference to pre Covid when discussing second quarter performance as a comparison to the second quarter of fiscal 2020.

Speaker Change: Additionally, all references to industry results during today's call refer to black box intelligence casual dining benchmark, excluding darden, specifically olive garden, Longhorn steakhouse and Cheddar scratch kitchen.

Speaker Change: During our second fiscal quarter industry same restaurant sales decreased one 3% and industry same restaurant guest counts decreased four 8%.

During our second fiscal quarter, industry's same restaurant sales decreased 1.3%, and industry's same restaurant guest counts decreased 4.8.

This morning, Rick will share some brief remarks in the quarter and Roger will provide details on our financial results and an update to our fiscal 2024 financial outlook. Now I'll turn the call over to Rick.

Speaker Change: This morning, Rick will share some brief remarks on the quarter and Raj will provide details on our financial results and an update to our fiscal 'twenty 'twenty four financial outlook now I will turn the call over to Rick.

Thank you, Kevin. Good morning, everyone. I'm pleased with our results this quarter, which outperformed the industry benchmark for same restaurant sales and traffic. Total sales were $2.7 billion, an increase of 9.7%

Rick Cardenas: Thank you, Kevin and good morning, everyone.

Rick Cardenas: I'm pleased with our results this quarter, which outperformed the industry benchmark for same restaurant sales and traffic.

Rick Cardenas: Total sales were $2 $7 billion, an increase of nine 7% in.

and adjusted, diluted net earnings per share, were $1.84. We open.

Rick Cardenas: And adjusted diluted net earnings per share were $1.84.

Rick Cardenas: We opened 17 restaurants during the quarter physics.

fiscal year today we have open 27 restaurants in 16 states, four of which were reo

Rick Cardenas: Fiscal year to date, we have opened 27 restaurants in 16 states four of which were reopening.

We continue to stick to our strategy, driven by our four competitive advantages of significant scale, extensive data and insights, rigorous strategic planning, and a results oriented

Rick Cardenas: We continue to stick to our strategy driven by our four competitive advantages are significant scale extensive data and insights rigorous strategic planning and our results oriented culture.

and our brands are relentlessly focused on executing our back to basics operating philosophy anchored in food service and out

Rick Cardenas: And our brands are relentlessly focused on executing our back to basics operating philosophy anchored in food service and atmosphere.

This focus on being brilliant with the basics enables our brands to consistently perform at a high level.

Rick Cardenas: This focus on being brilliant with the basics enables our brands to consistently perform at a high level.

Our internal guest satisfaction metrics remain strong across all of our brands. In fact, Olive Garden, Longhorn Stake House, Yard House, Cheddar Scratch Kitchen, Season 52, and Bahama Breeze reached all time highs for overall guest satisfaction during the quarter.

Our internal guest satisfaction metrics remained strong across all of our brands.

Rick Cardenas: In fact, olive garden, Longhorn Steakhouse yard house, Cheddar scratch kitchen seasons, 52, and Bahama Breeze.

Rick Cardenas: Its all time highs for overall guest satisfaction during the quarter.

Rick Cardenas: Longhorn also ranked number one among major casual dining brands in six of the seven key measurement categories within technomic industry tracking tool <unk>.

Longhorn also ranked number one among major casual dining brands in six of the seven key measurement categories within Technomics industry track

including food, service, atmosphere, and valve.

Rick Cardenas: Including food service atmosphere and value.

Longhorns continued adherence to their strategy is driving strong execution, which can also be seen in the fact that they established an all-time high stakes-reel correctly score.

Rick Cardenas: Longhorns continued adherence to their strategy is driving strong execution, which can also be seen in the fact that they established an all time high Stakes wrote correctly score.

Rick Cardenas: During the quarter Olive Garden ran never ending pasta Bowl.

It was offered at the same price point as last year, making it an even stronger value.

Rick Cardenas: It was offered at the same price point as last year make it making it an even stronger value.

Rick Cardenas: Guest demand was higher this year and our restaurant teams did a great job delivering outstanding guest experiences achieving the highest refill rate ever.

Guest demand was higher this year in our restaurant teams did a great job delivering outstanding guest experiences, achieving the high...

Rick Cardenas: This performance was driven by our focus on ensuring every guest has offered a refill whether its a limited time offer like never ending pasta Bowl or are never any first course, which is offered every day.

This performance was driven by our focus on ensuring every guest is offered a refill. Whether it's a limited time offer like never any possible or are never any first course, which is offered every day.

Rick Cardenas: This iconic promotion also satisfies all three of our marketing activity filters in.

This iconic promotion also satisfies all three of our marketing activity filters.

It elevates brand equity, it's simple to execute, and it's not at a deep discount.

Rick Cardenas: It elevates brand equity, it's simple to execute and its not at a deep discount.

Rick Cardenas: Also I'm excited to share that during the second quarter and for the first time in their history, olive garden's surpassed $5 billion in sales on a trailing 52 week basis.

Also, I'm excited to share that during the second quarter, and for the first time in their history, Olive Gardens are passed $5 billion in sales on a trailing 52-week.

The holidays are the busiest time of the year for all of our restaurant teams, and they embrace the opportunity to perform at their best.

Rick Cardenas: The holidays are the busiest time of the year for all of our restaurant teams and they embraced the opportunity to perform at their best.

Rick Cardenas: On Thanksgiving day, our teams at Ruth's, Chris the capital grille, and Eddie V's and seasons 52 did just that.

Thanksgiving Day, our teams at Ritzkris, the Capitol Grill, Eddie V's and seasons 52 did just that. With each-

Rick Cardenas: With each setting a new daily sales record.

Rick Cardenas: And while we experienced some softness at our fine dining brands during the quarter. We are encouraged by the strong holiday bookings we are seeing.

And while we experienced some softness at our fine dining brands during the quarter, we are encouraged by the strong holiday bookings we are seeing.

Yeah.

Rick Cardenas: Now let me provide a brief update on Ruth's Chris.

Even in the midst of the integration, I'm really proud of how the entire team has remained focused on the guest experience.

Rick Cardenas: And even in the midst of the integration I'm really proud of how the entire team has remained focused on the guest experience.

During the quarter, Ruth's Chris achieved the top box top overall rating score among all full-service dining brands within Technomics Industry tracks.

Rick Cardenas: During the quarter Ruth's, Chris achieved the top box top overall rating score among all full service dining brands within technomic industry tracking tool.

From an integration perspective, things are progressing well. And we are on track to complete the major systems changes by the end of the fiscal year.

Rick Cardenas: From an integration perspective things are progressing well and we are on track to complete the major systems changes by the end of the fiscal year.

During the quarter, we closed their former corporate office and the Ruth's Chris support team moved into our restaurant support center. We are excited to have them here.

Rick Cardenas: During the quarter, we closed their former corporate office and the Ruth's Chris support team moved into our restaurant support center. We are excited to have them here.

Rick Cardenas: In October we successfully transitioned 21 restaurants to one of our distribution centers and we plan to transition the remaining company operated restaurants to our distribution system between January and March.

In October , we successfully transitioned 21 restaurants to one of our distribution centers, and we planned to transition the remaining company operator restaurants to our distribution system between January and March.

This phase approach allows us to gather learning and improve the transition for the other restaurants. While capture.

Rick Cardenas: This phased approach allows us to gather learnings and improve the transition for the other restaurants, while capturing supply chain synergies.

Rick Cardenas: We are deliberate with the timing of any changes to ensure that we minimize the operational impact as much as possible.

We are deliberate with the timing of any changes to ensure that we minimize the operational impact as much as possible.

We are on track to deploy our people management systems by the end of the calendar year. And beginning, begin rolling out our proprietary point of cell system after valentine.

Rick Cardenas: We are on track to deploy our people management systems by the end of the calendar year and beginning begin rolling out our proprietary point of sale system. After Valentine's day.

Rick Cardenas: With the goal of completing all systems integration by the end of the fiscal year.

the goal of completing all systems integration by the end of the fist squeeze.

Part of the investments we announced on our last call, we have made some strategic decisions at company-owned restaurants that will impact total sales in the third quarter.

Rick Cardenas: As part of the investments we announced on our last call. We have made some strategic decisions at company owned restaurants that will impact total sales in the third quarter.

First, we stop third party delivery, second, we eliminate lunch wherever possible, and we will be closing most restaurants on Fancras.

Rick Cardenas: First we stopped third party delivery second we eliminate lunch wherever possible and we will be closing most restaurants on Christmas day.

Rick Cardenas: I can't say enough about the tremendous partnership between the Ruth's, Chris team and our integration team.

I can't say enough about the tremendous partnership between the Ruse-Krist team and our integration.

Integration is never easy, but it has been a collaborative process and I'm happy with the progress we're making.

Rick Cardenas: Integration is never easy, but it has been a collaborative process and I'm happy with the progress we are making.

Rick Cardenas: We have reached the halfway point in our fiscal year and I'm pleased with our performance thus far.

We have reached a halfway point in our fiscal year and I'm pleased with our performance

All of our brands remain focused on managing the business for the long term and the power of Darden positions us well for the future. We also continue to work in

Rick Cardenas: All of our brands remain focused on managing the business for the long term and the power of darden's positions us well for the future.

Rick Cardenas: We also continue to work in pursuit of our shared purpose to nourish and delight everyone. We serve.

One of the ways we do this for our team members and their families is through our next core scholarship program. Open Remedies inspired by31 tx, Spirit Individuals

Rick Cardenas: One of the ways, we do this for our team members and their families is through our next course scholarship program.

Rick Cardenas: Applications opened last month for the program, which awards post secondary education scholarships were $3000 each to children or dependents of Darden team members.

awards post-secondary education scholarships worth $3,000 each to children or dependents of young, solidarity

Last year, we awarded nearly 100 scholarships to children of team members at both our restaurants and our supports.

Rick Cardenas: Last year, we awarded nearly 100 scholarships to children of team members at both our restaurants and our support center.

Rick Cardenas: The next course scholarship creates a lasting impact on the lives of our team members families and I'm excited that we are offering the program for a second year.

The next course scholarship creates a lasting impact on the lives of our team members families. And I'm excited that we are offering the program for a second.

Rick Cardenas: Finally, as I said earlier the holidays are the busiest time of the year for our restaurant teams I am so proud of the focus and commitment that all our teams continue to have everyday.

Finally, as I said earlier, the holidays are the busiest time of the year for our restaurant.

I'm so proud of the focus and commitment that all our teams continue to have every day.

On behalf of our Senior Leadership Team and Board of Directors, I want to thank our more than 190,000 team members for everything you do to delight our guests and help create special holiday memories. I wish you and your families a wonderful holiday season. Now I will...

Rick Cardenas: On behalf of our senior leadership team and board of directors I want to thank our more than 190000 team members for everything you do to delight, our guests and help create special holiday memories I wish you and your families. A wonderful have holiday season, now I will turn it over to Raj.

Raj: Thank you Rick and good morning, everyone.

Raj: Our teams did a great job managing their businesses again, this quarter, resulting in meaningful restaurant level and total margin growth.

Our teams did a great job managing their businesses again this quarter, resulting in meaningful restaurant level and total margin growth.

This margin growth was driven by positive same Russian sales growth, strong labor management and lower than anticipated restaurant and commodity

Raj: This margin growth was driven by positive same restaurant sales growth strong labor management and lower than anticipated restaurant in commodities expenses.

Raj: We generated $2 $7 billion of total sales for the second quarter, 9.7% higher than last year driven by the additional 78 company owned Ruth's, Chris Steak House restaurants, forty-five legacy Darden, new restaurants, and same restaurant sales growth of two 8%.

We generated $2.7 billion of total sales for the second quarter, 9.7% higher than last year, given by the addition of 78 company-owned Ruth Kriss-Takehouse restaurants, 45 legacy, dot-nure restaurants, and same restaurant sales growth of 2.8%.

Our same Russian sales for the quarter all pays the industry by 410 basis points and same Russian gas counts exceeded the industry by 370 basis.

Raj: Our same restaurant sales for the quarter outpaced the industry by 410 basis points and same restaurant guest counts exceeded the industry by 370 basis points.

Our focus on managing the business and controlling costs resulted in adjusted, deluded nerd earnings per share from continuing operations of $1.84 in the second quarter, an increase of 21% from last year's reported earnings per share.

Raj: Our focus on managing the business and controlling costs resulted in adjusted diluted net earnings per share from continuing operations of $1.84 in the second quarter, an increase of 21% from last year's reported earnings per share.

Raj: We generated $403 million of adjusted EBITDA and returned approximately $340 million of capital to our shareholders.

We generated $4303 million of adjusted EBITDA and returned approximately $340 million of capital to our shareholders.

through 158 million dollars in dividends and 181 million dollars of share reports.

Raj: Through $158 million in dividends and $181 million of share repurchases.

Now looking at our adjusted margin analysis compared to last year.

Raj: Now looking at our adjusted margin analysis compared to last year.

Food and beverage expenses were 190 basis points better, given by pricing leverage. Total commodities inflation was flat to prior year for the quarter, and slightly better than our expectation.

Raj: Food and beverage expenses were 190 basis points better driven by pricing leverage total commodity inflation was flat to prior year for the quarter and slightly better than our expectations.

While beef inflation continues to track in line with our expectations. Most other categories are seeing some favorability.

While beef inflation continues to track in line with our expectations, most other categories are seeing some favourable.

Russian labor was 20 basis points better than last year, driven by productivity improvement at our brands as pricing and inflation were roughly equal at 5%.

Raj: Restaurant Labor was 20 basis points better than last year, driven by productivity improvements at our brands as pricing and inflation were roughly equal at 5%.

Russian expenses were 30 basis points favorable, primarily due to lower worker compensation expense and deflation in utilities.

Raj: Restaurant expenses were 30 basis points favorable primarily due to lower workers compensation expense and deflation in utilities.

Raj: Marketing expenses were 10 basis points higher than last year consistent with our expectations.

Marketing expenses, what 10 basis points higher than last year, consistent with our expectations.

Raj: All of these factors resulted in restaurant level EBITDA of 18.8%.

All of these factors resulted in restaurant level EBDAF 18.8% 230 basis points

Raj: 230 basis points higher than last year.

GNA expenses were $109 million, which was consistent with what we previously communicated.

Raj: G&A expenses were $109 million, which was consistent with what we previously communicated.

GNA as a percent of sales was unfavorable 40 basis points to last year.

Raj: G&A as a percent of sales was unfavorable 40 basis points to last year.

Raj: This unfavorable it is primarily driven by higher incentive compensation expense due to the strong growth in sales and EPS for the quarter.

This unfavorable ability is primarily driven by higher incentive compensation expense due to the strong growth in sales and EPS for the quarter and wrapping a low incentive accrual in the second quarter of last year.

Raj: And wrapping it low incentive accrual in the second quarter of last year.

Raj: Impairments was 40 basis points unfavorable to last year as we are wrapping on a $9 million gain from the sale of restaurant assets.

Impairments were 40 basis points unfavorable to last year as we are wrapping on a $9 million gain from the sale of restaurant at

Raj: Interest expense increased 50 basis points versus last year due to the financing expense expenses related to Ruth's, Chris actually acquisition and the increase in short term debt as of second quarter is typically our peak funding need period for the year.

Interest expense increased 50 basis points versus last year due to the financing expense expenses related to Ruchkras acquisition and the increase in short term debt as the second quarter is typically a peak funding need period for the year.

Raj: And for the quarter adjusted earnings from continuing operations was 8.1% of sales 60 basis points better than last year.

And for the quarter, a gestured earnings from continuing operations was 8.1% of sales, 60 basis points better than last year.

Looking at our segments, Olive Garden increased total sales by 6.3% given by SameRussian sales growth of 4.1% outperforming the industry benchmark by 540 basis points.

Raj: Looking at our segments Olive garden increased total sales by six 3% driven by same restaurant sales growth of 4.1% outperforming the industry benchmark by 540 basis points.

The strength of never-ending possible contributed to flat-same Russian guest counts for the quarter, 480 basis points about the industry.

Raj: The strength of now, but anything possible contributed to flat same restaurant guest counts for the quarter 480 basis points above the industry.

Raj: This sales growth along with improved labor productivity and higher pricing related inflation drove segment profit margin increase of 240 basis points at Olive garden.

This sales growth along with improved labor productivity and higher pricing related inflation drove segment profit margin increase of 240 basis points at all of guns.

Raj: At Longhorn total sales increased seven 1% driven by same restaurant sales growth of four 9% outperforming the industry by 620 basis points.

At long-horn, total sales increased 7.1% driven by same Russian sales growth of 4.9% outperforming the industry by 620 basis points.

Raj: Segment profit margin of 17, 4% was 310 basis points above last year.

Segment profit margin of 17.4% was 310 basis points of all last year.

Raj: Pricing leverage favorable menu mix and improved labor productivity drove Longhorns strong margin growth this quarter.

Pricing Leverage, favourable menu mix and improved labour productivity drove long haunts, strong margin growth this quarter.

Raj: Total sales had fine 19th segment increased with the addition of Ruth's Chris Company owned restaurants.

Total sales at fine dining segment increased with the addition of Ruzquist company owned restaurant.

Simrush and sales at both Capraville and Eddie V's were negative as the fine dining category as a whole continues to be challenged the order here. This resulted in lower segment

Raj: Same restaurant sales at both capital grille, and Eddie V's was negative as the fine dining category as a whole continues to be challenged year over ear.

Raj: This resulted in lower segment profit margin than last year.

Raj: The other business segments sales increased slightly with the addition of Ruth's, Chris franchised and managed location revenue.

The other business segments, they also increase slightly with the additional Ruth's Chris Franchise and Manage Location Revenue.

This was mostly offset by combined negative same-resistant sales of 1.1% for the brands in the other segments.

Raj: This was mostly offset by combined negative same restaurant sales of 1.151, 1.1% for the brands in the other segment.

Raj: However, this was still 20 basis points to have all the industry benchmark.

However, this was still 20 basis points about the industry benchmark.

Segment profit margin of 12.9% was 130 basis points better than last year, given by the additional royalty revenues and pricing relative to inflation.

Raj: Segment profit margin of 12, 9% was 130 basis points better than last year, driven by the additional royalty revenues and pricing really due to inflation.

Raj: Now turning to our financial outlook for fiscal 'twenty 'twenty four we.

Now, turning to our financial outlook for fiscal 2024, we've updated our guidance to reflect our year-to-date results and expectations for the back half of the year.

Raj: We've updated our guidance to reflect our year to date results and expectations for the back half of the year.

Raj: We now expect.

Total sales of approximately $11.5 billion.

Raj: Total sales of approximately $11.5 billion.

Same Russian sales growth of 2.5% to 3% 50 to 55 new restaurants Capital

Raj: Same restaurant sales growth of 2.5% to 3%.

Raj: 50 to 55, new restaurants.

Raj: Capital spending of approximately $600 million.

Total inflation of 3% to 3.5% including commodities inflation of approximately 2%.

Raj: Total inflation of 3% to three 5%, including commodities inflation of approximately 2%.

Raj: And annual effective tax rate of close to 12, 5%.

an annual effective tax rate of 12 to 12.5%, and approximately 121 million diluted average shares outstanding for the year.

Raj: And approximately 121 million diluted average shares outstanding for the year.

Raj: This result in increased all in and increased our adjusted diluted net earnings per share outlook of $8.75 to $8.90.

This results in an increased or adjusted deluded nerd earnings per share outlook of $8.75 to $8.97.

It excludes approximately 55 million dollars of pre-tax transaction and integration related costs.

Raj: It excludes approximately $55 million of pre tax transaction and integration related costs.

Looking at the third and fourth quarters, we expect the EPS growth rate to be consistent with what we previously shared. We expect third quarter growth rate to be similar to the first quarter, and the fourth quarter to have the lowest EPS growth rate for the year.

Raj: Looking at the third and fourth quarters, we expect the EPS growth rate to be consistent with what we've previously shared we expect third quarter third quarter growth rate to be similar to the first quarter and the fourth quarter to have the lowest EPS growth rate for the year.

This is primarily a function of the pricing cadence we communicated at the beginning of the year.

Raj: This is primarily a function of the pricing cadence we communicated at the beginning of the year.

We anticipate pricing and inflation to be relatively equal in the third quarter and we expect to price significantly below inflation in the fourth quarter.

We anticipate pricing and inflation to be relative.

Raj: Relatively equal in the third quarter, and we expect to price significantly below inflation in the fourth quarter.

Raj: So to wrap up we continue to be very pleased with how our teams are managing their businesses and delivering strong results.

So to wrap up, we continue to be very pleased with how our teams are managing their businesses and delivering strong results.

We remain disciplined in adhering to our strategy and we're confident in the strength of our business model. And we're.

Raj: We remain disciplined in adhering to our strategy and we're confident in the strength of our business model.

Raj: And with that we'll take your questions.

Thank you. We're now making a question and answer session. As a reminder, we ask that you please ask one question, one follow up, then return to the queue. Next, star one to be placed in the question queue and star two to be removed from the queue. One moment, please.

Speaker Change: Thank you well now be conducting a question and answer session. As a reminder, we ask that you. Please ask one question. One follow up then return to the queue Thats star one to be placed in the question queue. It start to be removed from the Q1 moment. Please while we poll for questions. Our first question is coming from Jon Tower from Citi. Your line is.

Our first question is coming from John Power from City Your Line. It's now live.

Jon Tower: Now life.

Great, thanks. I appreciate you taking the question. I guess maybe starting off, curious to get your thoughts, it seems that it's obviously the consumer backdrop this weekend a little bit, as we move here through your fiscal second quarter. And perhaps into this fiscal third quarter, and I know obviously never any possible seem to work exceptionally well driving traffic on a relative basis throughout the quarter. So I'm curious how you're thinking about promotions for the balance of the year. And you know it.

Jon Tower: Great. Thanks, I appreciate you taking the question.

Speaker Change: I guess, maybe starting off I was curious to get your thoughts it seems that that's obviously that the consumer backdrop. This weekend a little bit as we've moved here through your fiscal second quarter.

Speaker Change: Perhaps into this fiscal third quarter, and I know, obviously never ending pasta bowl seem to work exceptionally well driving traffic on a relative basis throughout the quarter. So I'm curious, how you're thinking about promotions for the balance of the year.

Speaker Change: And you know it.

I know that never any possible has traditionally been once a year type of timing, but given the weakness we're starting to see broadly across the category, does that alter your thinking either with promotions at Olive Garden or any of the other brands for the balance of fiscal 24?

Speaker Change: I know the never ending pasta Bowl has traditionally been once a year type of timing, but given the weakness we're starting to see broadly across the category does that alter your thinking either with promotions at olive garden or any of the other brands for the balance of fiscal 'twenty four.

Speaker Change: Hey, John Thanks for the question.

John: Nothing that we've seen is altering our plans for the balance of the year. We're really pleased with the performance of our brands, where right along where we expect it to be and so we don't anticipate doing anything different.

John: Okay.

Thank you. Next question is coming from Chris Corrill from RBC Capital Markets or Linus Nellie.

Speaker Change: Thank you. Your next question is coming from Chris <unk> from RBC capital markets. Your line is now live.

Chris: Hi, good morning, and thanks for the question so.

I, good morning and thanks for the question. So I just on the sales outlook, can you maybe comment a little bit more on what drove the change in the comp and revenue outlooks for the year? I know it just changed a little bit, maybe a little narrower toward the lower end of the range, but it's early in the three queue, but is there anything you're seeing thus far that warrants perhaps a more conservative outlook here?

Just on the sales outlook can you maybe comment a little bit more on what drove the change in the comp and revenue outlooks for the year I know it just changed a little bit maybe a little narrower toward the lower end of the range.

Chris: It's early in the <unk>, but is there anything youre seeing thus far that warrants, perhaps some more conservative outlook here.

All right Chris, let's start with the guidance at high level. From a sales guide perspective, you know, if you just go back to the time we provided our original guidance, we mentioned that, you know, there's obviously the consumer background was a little tough, but not too terribly bad for us. And we thought, you know, if things slowed down a little bit, we should expect inflation environment to improve a little bit. And halfway through our fiscal year, that's really the dynamic we're seeing.

Speaker Change: Alright, Chris let's start with the guidance at high level from a sales guy perspective.

Chris: You know that if you if you just go back to the time, we provided our original guidance.

Chris: We mentioned that you know, there's obviously the consumer Brac background was a little tough, but not not too not a terribly bad for us than we thought.

Chris: You know if things slow down a little bit we should expect inflation environment improve a little bit and and halfway through our fiscal year. That's really the dynamic we're seeing we've seen some check softness that's being offset by lower inflation, which is why we went to the lower end of our sales range, while increasing our earnings outlook.

We've seen some check softness that's being offset by lower inflation, which is why we went to the lower end of our sales range, while increasing our earnings out to...

In fact, if you're looking at our underlying traffic assumption, it still implies flat to slightly negative traffic for the full year. It's really that check is coming down to about 50 basis points. And so in the grand scheme of things, we're talking about the midpoint moving by 25 basis points from where we started these.

Chris: In fact, if youre looking at our underlying traffic assumption are it still implies flat to slightly negative traffic for the full year, it's really that check is coming down about 50 basis points and so in the Grand scheme of things, we're talking about the midpoint moving by 25 basis points from where we started the year.

Now as we look to the question that I wanted to date in December , we're really only two full weeks into the quarter. And so holidays are still in front of us. And as as

Chris: Now as we look to the question that arent quarter to date in this in December will really only two full weeks into the quarter.

Chris: And so holidays are still in front of us and as as.

Chris: And I think Rick mentioned in his prepared remarks, we're encouraged by the strong holiday bookings, we're seeing at our reservation brands and so our guidance contemplates everything we know.

I think Rick mentioned his prepared remarks. We're encouraged by the strong holiday bookings we're seeing at our reservation brands. And so our guidance contemplates everything we know.

Yeah.

God, thank you. And then I guess I'm pricing, Raj, you did mention some detail in your prepare remarks around pricing, does there anything else you could add there? Maybe perhaps at a brand level and any incremental insight about how you're thinking about pricing here going forward.

Speaker Change: Got it thank you.

Speaker Change: And then I.

Speaker Change: Guess I'm pricing Raj you did mention.

Speaker Change: You know some detail in your prepared remarks around pricing, but is there anything else you could add there maybe perhaps at a brand level any incremental insight about how you're thinking about pricing here going forward. Thanks.

Speaker Change: Sure, Chris I'll say, let's start with our pricing I think we mentioned at the beginning of the or the pricing carryover from actions last year.

Sure Chris. I'll say let's start with our pricing. I think we mentioned at the beginning of the year the pricing carry over from actions last year is about three percent

Speaker Change: He is about 3% on a full year and I and our guidance talks about three and half to 4%. So you can imagine theres not a lot of actions. This fiscal year I can tell you that for example at Olive Garden, we haven't taken any pricing this fiscal year and we don't at least at this point don't expect to take any more any or any additional action in the near term.

And our guidance talks about 3.5 to 4% so you can imagine there's not a lot of actions this fiscal year. I can tell you that for example at Olive Garden, we haven't taken any pricing this fiscal year. And we don't at least at this point don't expect to take any additional action in the near term. And so as you look at that check road.

Speaker Change: And so as you look at that checked wrote a check growth is likely going to moderate into the mid twos, two and into the third quarter and closer to 2% in the fourth quarter, that's kind of the assumption we have in here.

Check out this likely going to moderate into mid-toes into the third quarter and close it to 2% in the fourth quarter. That's kind of the assumption we have in here.

Speaker Change: Great. Thanks, so much.

Bacon next question is coming from Brian Bittner from Oppenheimer. Your line is now live.

Speaker Change: Thank you. Your next question is coming from Brian Bittner from Oppenheimer. Your line is now live.

Brian Bittner: Thanks, Good morning.

Thanks, good morning. Rick, I wanted to ask about your updated thoughts on delivery, you know, recently a QSR competitor of yours that's long been again.

Brian Bittner: Rick I wanted to ask about your updated thoughts on delivery you know recently GSR competitor of yours, that's long been against third party systems had decided to jump on and and you seem to be bearing further in the opposite direction. Given you said this morning that you're taking third party delivery away from.

third party systems that decide to jump on and and you seem to be varying further in the opposite direction given you said this morning that you're taking third party delivery away from from Ruth

Brian Bittner: Ruth and it seems like at this point you know you could price third party delivery in a way that would represent a very incremental profitable transaction that incremental customer, particularly at olive garden.

And it seems like at this point, you know, you could price third party delivery in a way that would represent a very incremental, profitable transaction, an incremental customer, particularly at Alvgarden. So can you just refresh us on why this seems to still be off the table as an opportunity and profit opportunity?

Speaker Change: So can you just refresh us on an on why there seems to still be off the table.

Speaker Change: It was opportunity profit opportunity.

Hey Brian , yes, it's still off the table for us as we mentioned we eliminated it at Ruth's Chris.

Speaker Change: Hey, Brian Yes, its still off the table for us as we mentioned we eliminated it at Ruth's Chris.

And it's not all about the price and the profit. And it is profitable sales growth we're looking for. But it is also the execution and restaurant, what it does to our teams, and how we can execute our existing.

Speaker Change: And it's not all about the price and the profit in there.

Speaker Change: It is profitable sales growth we're looking for.

Speaker Change: But it is also the execution in the restaurant.

Speaker Change: What it does to our teams and how we can execute our existing our to go business and we've made investments over the last few years to make that experience even better for our consumer and we continue to do that we've had third party delivery and a few restaurants for quite a while.

to go business and we've made investments over the last few years to make that experience even better for our consumer and we continue to do that.

We have had third party delivery in a few restaurants for quite a while. And the performance in those restaurants isn't significantly different than the ones that don't have it. So we still feel really confident about our decision to stay out of the third party delivery. Even if we had to price more to cover that, our consumer would see that as our price. Not necessarily the price for the...

Speaker Change: And the performance in those restaurants isn't significantly different than the ones that don't have it. So we still feel really confident about our decision to stay out of the third party delivery, even if we had to price more to cover that our consumer would see that as our price not necessarily the price for delivery. So as of now we're still steadfast in our resolve to stay.

So as of now, we're still steadfast enough to stay out of third part of it.

Speaker Change: Out of third party delivery.

Thanks for that and Raj, as my follow up, you said in your prepare remarks that you anticipate price to price significantly below inflation in 4Q. That worked significantly perknight years a little but I'm just curious if you could give any color on what you do think price first costs will be in 4Q.

Speaker Change: Thanks for that and as my follow up you said in your prepared remarks that you anticipate.

Speaker Change: Price to price significantly below inflation and for Q.

Speaker Change: That were significantly hurt my years, a little bit I'm. Just curious if you could give any color on what you do think price versus cost will be for Q.

Yeah, Brian , I'd say we're looking at some add in the 150 to 200 basis point range in the fourth quarter because we do expect pretty low price in the fourth quarter and we expect inflation to be a little bit higher. Just a function of rap. I think really on the inflation, the first half of the year benefited from chicken deflation. Chicken is about 8% of our sales and we don't have that tail when going into the back half.

Speaker Change: Yeah, Brian I'd say, where we're looking at somewhere in the 150 to 200 basis point range in the fourth quarter, because we do expect pretty low price.

Speaker Change: In the fourth quarter, and we expect inflation to be a little bit higher just a function of rap Ah I think are really on the on the inflation. The first half of the year benefited from a chicken deflation a chicken is about 8% of ourselves and our and we don't have that tailwind going into the back half.

Speaker Change: Okay.

Speaker Change: Thank you.

Thank you next question today coming from Eric Gonzalez from Keybank Capital Market. Your line is now live.

Speaker Change: Thank you next question today is coming from Eric Gonzalez from Keybanc capital markets. Your line is now live.

Eric Gonzalez: Hey, good morning, and thanks for taking the question.

A good morning and thanks for taking the question. My question is on the other business segment, you know, Stanza Stales Growth in the Second was negative for the first time in a few years. So I'm wondering if you can give us a sense about what's happening within that division, which I know includes Cheddar. So I'm wondering if this does something about the low income consumer, if there's anything else worth calling out with regards to that division.

Eric Gonzalez: Questions on the other business segment same store sales growth in the segment was negative for the first time in a few years. So I'm wondering if you could give us a sense about what's happening within that division, which I know includes cheddar. So I'm wondering if that says something about the low income consumer or if there's anything else worth calling out with regards to that.

Eric Gonzalez: <unk>.

Yeah, let me start with the other segment and maybe I'll turn it over to Rick to talk about the consumer in general. So let's start, you know, when we look at our other segment, we're actually pretty happy with the performance overall. When you look at it, the business as a total top line and bottom line.

Speaker Change: Yeah, Let me start with the other segment and maybe I'll turn it over to Rick talk about the consumer in general So let's start you know when we look at our other segment, we're actually pretty happy with the performance overall when you look at it.

Rick Cardenas: The business as a total topline and bottomline.

because you know as much as they had negative say a same restaurant sales

Rick Cardenas: Because you know as much as they had negative same restaurant sales. They were still have all the industry by 20 basis points as a segment.

They were still above the industry by 20 basis points as a segment.

uh... now there is they you know i don't want to get into exactly the details but there are some things on a year over a dynamic especially at one of four southeastern that's primarily you know weather weatherbound and patio related all that stuff we don't want to get into those but by the way when we look at traffic for the for the

Rick Cardenas: Now that is that you know I I don't want to get into exactly the details, but there are some things on a year over year dynamics, especially at one of our southeast brands. That's primarily you know rather rather a bar and patio related all of that stuff, we don't want to get into those but by the way when we look at traffic for the for the quarter are at the other segment. It was actually very strong.

uh... at the other segment it was actually very strong at not the hundred basis points gap to the industry positive gap so we feel really

Rick Cardenas: Wrong at North of 100 basis point gap to the industry positive gap. So we feel really good about that and then other segment was also more profitable this quarter.

And then other segment was also more profitable this quarter. Even when you exclude the franchise income from roots, their segment profit was higher than last year. So I'd say all in all, that's a pretty good outcome. And then I'll have Rick talk about consumer.

Rick Cardenas: Even when you exclude the franchise income from routes are their segment profit was higher than last year. So I'd say all in all that that's a pretty good outcome and then I'll have Rick talk about consumer.

Eric, and I just want to reiterate, we're really pleased with performance of our other segment and all of our segments. Profitable sales growth is what we shoot for, and they all had profitable sales growth. Some might have been negative comp, but we still grew. But on the consumer overall, the consumer still continues to appear both resilient, but a little bit more selective as we've talked about in our check and we've seen that for a couple of quarters.

Rick Cardenas: Yeah, Eric and I, just want to reiterate we're really pleased with performance of our other segment and all of our segments profitable.

Rick Cardenas: Profitable sales growth is what we shoot for and they all had profitable sales growth somebody had been negative comp, but we still grew.

Rick Cardenas: But on the consumer overall, the consumer still continues to appear both resilient, but a little bit more selective as we've talked about in our check and we've seen that for a couple of quarters.

Our data shows we're gradually moving back to our pre-COVID demographic.

Our data shows we're gradually moving back to a pre COVID-19 demographic mix.

which with a bigger changing Q2 and moving back to pre pre-COVID demographics gets us to feel like we're getting closer to what normal is

Rick Cardenas: Which with the bigger change in Q2, and moving back to pre Covid demographics gets us to feel like we're getting closer to what normal is.

I will say we had across all of our segments household incomes above $200,000 or higher mix in last year, but still below pre-COVID levels.

Rick Cardenas: I will say, we had across all of our segments household incomes above $200000 or higher a higher mix than last year, but still below pre COVID-19 levels and incomes below $75000 or under last year, but still above pre COVID-19 levels.

And income below $75,000 or under last year, but still above pre-COVID levels. And the biggest drop was those.

Rick Cardenas: And the biggest drop was those under $50000.

And this shift was most pronounced interestingly in our fine dining.

Rick Cardenas: And this shift was most pronounced interestingly in our fine dining segment.

And last thing for those under 65 years old, they're over 65 years old, their frequency has grown from prior quarters and they're dining is shifting a little bit more to lunch, so that gives you a little bit of a check mix there too.

Rick Cardenas: And last thing for those under 65 years old therefore over I'm, sorry over 65 years old Theyre frequency has grown from prior quarters and their dining is shifting a little bit more to lunch. So that gives you a little bit of a check mix there too.

So, but again, what does that mean for us? What does that mean for the brands that we have? We believe that operators can deliver on their brand promise, which we've said before, and value will continue to appeal to consumers. Confident we're well positioned and prepared for what we have to deal with.

Rick Cardenas: So, but again what does that mean for us what does that mean for the brands that we have we believe there are operators that can deliver on our brand promise, which we've said before and value will continue to appeal to consumers I'm confident we're well positioned and prepared for what we have to deal with.

Thanks to the breadth of our portfolio and our astounding team members and what they do every day to create exceptional experiences for our guests.

Rick Cardenas: Thanks to the breadth of our portfolio and our outstanding team members and what they do every day to create exceptional experiences for our guests.

That's really helpful. And as a follow-up, while we're on the topic of the smaller divisions, community comments on fine dining and comfort, whether we add to the woods when it doesn't relate to the abnormal seasonality and the post-COVID lapse, should we start to see positive comps in the back half in that part of the business?

Rick Cardenas: That's really helpful and as a follow up while we're on the topic of the smaller divisions can maybe comment on fine dining and talk about weather.

Rick Cardenas: Or are we out of the woods when it does it relates to the abnormal seasonality in the post Covid labs should we start to see the positive comps in the back half of that that part of the business.

Speaker Change: Yeah, so from a fine dining perspective, if you recall, we talked about Ah seasonality trends are normalizing and we talked about last year. There was some exuberance in the summer months that that kind of continued into the into the fall a little bit and so as we look at where we are this quarter, we actually ended the quarter.

Yeah, so from a fine dining perspective, if you recall, we talked about seasonality, trans-normalizing, and we talked about last year, there was some exuberance in the summer months that kind of continued into the fall a little bit. And so as we look at where we are this quarter, we actually ended the quarter with positive same Russian sales in November , and with, as Rick mentioned on his, in his prepare marks about record Thanksgiving.

Speaker Change: With positive same restaurant sales in November.

Speaker Change: And with with as Rick mentioned on his in his prepared remarks about record Thanksgiving sales all of our fine dining brands in reservation brands had record Thanksgiving sale. So November was a you know an improvement.

All of our fine dining brands and reservation brands had record tanks giving sales so the November was you know any

If you look at fine-dining segment in general is also where we're seeing the most negative check mix year over year and it's really driven by alcohol

Speaker Change: If you look at our fine dining segment in General is also where we're seeing the most negative check mix year over year, and it's really driven by alcohol no I'll tell you that we are the preference for alcohol today is actually consistent with where it was pre COVID-19 just that last year was a lot.

Now I'll tell you that we are the preference for alcohol today is actually consistent with where it was pre-covid.

just that last year was a lot higher and so we are over here that's a pretty big drag drag. In fact I think our fine dining mix is almost negative 200 basis points and that's really one of the things we've noticed. Now as we get into the holidays and past some of that should a bit.

Speaker Change: And so we had a year over year, that's a pretty big drag drag in fact, I think our fine dining mix is almost a negative 200 basis points and that's really one of the things. We've noticed now as we get into the holidays and pass some of that should abate because we started to see this dynamic in our fiscal Q4 last year.

because we started to see this dynamic in our fiscal Q4 last.

And then last point I'll make is as Rick mentioned, we are encouraged to see strong bookings in both reservations and private events going into the holidays.

Speaker Change: And then last point I'll make is as Rick mentioned, we are encouraged to see strong bookings in both reservations and private private events are going into the holidays.

Speaker Change: Thanks.

Speaker Change: Thank you. Your next question today is coming from Andrew Charles from TD Cowen. Your line is now live.

Thank you. Next question today is coming from Andrew Charles from TD Cowan Your Lines. Is that live?

Great, thank you. Rick, does the early access to never-ending possible three-club members this quarter lead you encouraged to lean more into the 15 million or so Al-Guardanee Club member database in the back half of the year recognizing this won't be an avenue for discounting, obviously, is your focus on profitable growth? Or is it that it was an immaterial impact just for that extra week of early access in the quarter?

Great. Thank you Rick does the early access to never ending Pasta Bowl Free club members. This quarter leave you encouraged to lean more into the $15 million or so olive Garden club member database.

Speaker Change: In the back half of the year, recognizing this won't be an avenue for discounting obviously as youre focused on profitable growth.

Speaker Change: Or is it that it was an immaterial impact just for that extra week of early access in the quarter.

Speaker Change: Yeah Andrew.

Andrew, it wasn't a huge impact for early access, but it was something that delighted our E-Club users. So they got something that no one else can get. We'll continue to find ways to talk to them, to give them benefits of being part of the E-Club, without necessarily having to discount. That's what we continue to look at. That was one of the first tries at it. We're encouraged by the results there, but we'll continue to look for other ways to use that E-Club.

It wasn't a huge impact for early access, but it was something that delighted R. R. E club users right. So they got something that no one else can get and so we'll continue to find ways to talk to them to give them benefits of being part of the E club without necessarily having to discount.

So that's that's what we continue to look at and that was that one of the first first tries at it we're encouraged by the results there, but we'll continue to look for other ways to use that eclipse.

great and then roger's curious uh... with the inflation guidance how does that breakdown between cogs and labors we think about the back half of the year

Speaker Change: Great and.

Speaker Change: And then Raj just curious with the inflation guidance, how does that break down between Cogs and labor as we think about the back half of the year.

Raj: Yeah, I'd say on the Cogs front as we said, we're basically looking at 2% for the full year are approximately which means back half is closer to you know.

Yeah, I'd say on the COGS Fund, as we said, we're basically looking at 2% for the full year, approximately, which means back half is closer to 3%, 2.5 to 3, Q1 being a little bit lower, Q4 being the highest in terms of food inflation.

Raj: Closer to 3% two and a half to three Q1 being a little bit lower Q4, being the highest in terms of food inflation.

Again, it's a function of rap and contracts and all that stuff. Not necessarily seeing the absolute prices are going up. It's just the fact that what we're wrapping on you're over here. From a labor perspective, our annual is that on five, as you saw, you know, from plus quarter to second quarter, we saw a slight moderation of about 50 basis points in total labor inflation.

Raj: Again, it's a function of wrap on contracts and all of that stuff not necessarily seeing the absolute prices are going up. It's just the fact that what we're wrapping on a year over year from a labor force back to our annual lease around five as you saw from first quarter to second quarter. We saw we saw a slight moderation of about 50 basis points in total labor inflation.

We are not projecting significant further moderation, but to the extent that it's some, that would welcome that. But at this point, we're assuming it's closer to that 5% for the back half for labor.

Raj: We are not projecting significant further moderation, but it's a you know if and to the extent there is some that would be the.

Raj: We would welcome that but at this point, we're assuming it's closer to that 5% for the back half for labor.

Speaker Change: Great. Thank you very much.

Thank you. Next question today is coming from Brian Harbor from Oregon Stanley. Your line is now live.

Speaker Change: Thank you. Your next question today is coming from Brian Harbor from Morgan Stanley. Your line is now live.

Brian Harbor: Yes, Thank you and good morning, guys, Hey, Raj.

Yeah, thank you, good morning guys. May, Rod's just undercoming about maybe a little bit lower check versus what you'd previously expected. Is that, you know, specific to any brand? Is it more than not all of Garden Brands? Is it something you're seeing in all of Garden as well?

Brian Harbor: Just on your comment about maybe a little bit lower check versus what you'd previously expected is that.

Brian Harbor: You know specific to any brand is it more than non olive garden brands or is it something you're seeing at olive garden as well.

Yeah, look, I think we've talked about, it's kind of continuation of what we saw a little bit in the first quarter where we talked about, at our casual brands, we're seeing about 50 basis points of negative mix in general, and mostly driven by alcohol. So when you think about,

Speaker Change: Yeah look I think we've talked about it as kind of continuation of what we saw a little bit in the first quarter, where we talked about at our casual brands. We're seeing about 50 basis points of negative mix in general and mostly driven by alcohol. So when you think of art.

check growth in the mid single digits 50 basis points is not a huge is not as big as it used to be It would be in a normal environment when you're talking about a 2% check growth We would say oh 50 is a big deal, but when you're talking about closer to mid single digit check growth

Speaker Change: Check growth in the mid single digits 50 basis points is not a huge is not as big as it used to be you. It would be in a normal environment. When you were talking about a 2% check growth. We would say Oh 50 is a big deal, but when you're talking about closer to mid single digit checker at 50 basis points is not as big.

50 basis points is not as big. So from that perspective, but also as I said earlier, the bigger drag is from fine dining, which as we get into Q4 should be a bit, but right now that's another factor that we didn't necessarily anticipate the level of check mix going into the fiscal year. But traffic is, you know, again, as I said,

Speaker Change: So from that perspective, but also as I've said earlier, the bigger drag is from fine dining.

Speaker Change: As we get into Q4 should a bad but right now that's a that's another factor that we didn't necessarily anticipate the level of check mix going into the fiscal year.

Speaker Change: But traffic is you know again as I said.

We focus more on what's happening with traffic and to the extent we can say six months into the year that our traffic is similar to the levels we thought at the beginning of the year, that's a great place to be.

Speaker Change: We focus more on what's happening with traffic in and to the extent, we can say six months into the year that our traffic is similar to the levels. We thought at the beginning of the year, that's a great place to be.

Okay, yeah, make sense. And it's just a question of food costs side as well. Were there any specific items that kind of come in more favorable than you expected? Or is there also, you know, maybe just kind of some scale benefits that you've been able to lead to?

Okay, Yeah that makes sense and just a question on the food cost side as well, where there any specific items that have kind of come in more favorable than you expected or is there also maybe just kind of some scale benefits that you've been able to lead to recently.

Speaker Change: Yeah, I think as as I said on in my remarks pretty much all categories, except beef came in a little bit better than we thought we are you know we did a farther up just negotiate a contract for chicken that for that now we're locked in for the rest of the year basically at 90%.

Yeah, I think as I said in my remarks, pretty much all categories except beef came in a little bit better than we thought.

We are, you know, we did further up just negotiate a contract for chicken that for that now we're locked in for the rest of the year basically at 90%. And that's going to be a low single digit inflation for the back app, which is...

Speaker Change: And that's going to be low single digit inflation for the back half, which is a you know which is which is something we can deal with AR and AR from other items different you know seafood continues to be deflationary and then produce was a little bit better than we thought going into the year. We thought there was going to be some challenges with the produce.

which is something we can deal with. And from other items, seafood continues to be deflationary. And then produce was a little bit better than we thought. Going into the year, we thought there was going to be some challenges with produce based on just some of the contracts we had, but our team was able to go back.

Speaker Change: First on just some of the contracts, we had but our team was able to go back to our partners and negotiate given the environment in the market and that was that was a favorable <unk>.

to our partners and negotiate, given the environment in the market. And that was a favorable to us from what we thought at six months ago or three months ago.

Speaker Change: To us from what we thought six months ago three months ago.

Thank you. Next question is coming from Jeffrey Bernstein for Barclays. Your line is not live.

Speaker Change: Thank you next question is coming from Jeffrey Bernstein from Barclays. Your line is now live.

Speaker Change: Yeah.

Great, thank you very much. Rick, I think you mentioned to an earlier question that there was no change in your second half promotional plans, things seem to be going as expected. I'm just wondering if you could talk about the broader competitive behavior across.

Jeffrey Bernstein: Great. Thank you very much.

Jeffrey Bernstein: Rick I think you mentioned to an earlier question that there was no change in your second half promotional plans things seem to be going as expected and I'm. Just wondering if you could talk about the.

Jeffrey Bernstein: Broader competitive behavior across casual dining.

There's some that are incrementally concerned of an uptick in promotions and discounting to drive traffic.

Jeffrey Bernstein: I think there are some that are incrementally concerned of an uptick in promotions and discounting to drive traffic.

Jeffrey Bernstein: Kind of in conjunction with the industry, maybe seeing some softening sales trends, especially if commodities continue to ease. So can you just talk about again beyond just your plans what youre seeing across broader casual dining in terms of that.

again, beyond just your plans, what you're seeing across broader casual dining in terms that outlook and then add one follow.

Speaker Change: Outlook, and then I had one follow up.

Speaker Change: Jeff Yeah, we're seeing what you see an increase in TV advertising, sometimes at a discount, but we're as I said focus on profitable sales growth.

Jeff, you know, we're seeing what you see, an increase in television advertising sometimes at a discount, but we're, as I said, focus on profitable sales growth. Even with the increase in competitive activity, we saw on Q2, we exceeded the industry by 410 basis points.

Speaker Change: Even with the increase in competitive activity. We saw in Q2, we exceeded the industry by 410 basis points and that was which was the same as second quarter, we exceeded by 410 in second quarters, I'm, sorry last quarter as well.

And that was, which was the same as second quarter. We exceeded by 410 and second quarter, I'm sorry, last quarter as well. This is on top of the 370 basis point gap we had last year. So we feel like what we're doing is working, even with competitive and a little bit of an increasing competitive intensity. By the way, we also improved our segment profit margin by 230 basis points from last.

Speaker Change: This is on top of the 370 basis point gap, we had last year. So we feel like what we're doing is working.

Speaker Change: Even with competitive and a little bit of an increasing competitive intensity.

Speaker Change: By the way, we also improved our segment profit margin by 230 basis points from last year, and so we're going to stick to our strategy, providing everyday value to our guests and continue to use our filters, which we've talked about many times to evaluate any marketing understood.

And so we're going to stick to our strategy, providing every day value to our guests, and continue to use our filters, which we've talked about many times to evaluate any marketing.

Speaker Change: Understood.

understood and then Roger the the fiscal 24 guidance the openings If we're through the year we're actually tweaked higher which Is somewhat unusual. I feel like the past few years if there was going to be a change in opening plans It was too tweaked lower So I'm wondering if you could talk maybe about what the driver that is

Speaker Change: And then Raj.

Speaker Change: Raj the fiscal 'twenty guidance.

Speaker Change: Openings halfway through the year, we're actually tweaked higher which somewhat unusual I feel like the past few years. If it was gonna be a change in opening plans. It was to tweak lower so I'm wondering if you could talk maybe about what the driver of that is.

have heard of improvement in speed of permitting and construction, or maybe you're just seeing lower build costs, you're kind of accelerating your plans, or better real estate availability, anything to talk about in terms of that uptick and the unit openings as it pretends to the broader industry. I assume that's the reason for the cat-bex uptick as well, but any color you can provide on that would be great. Thank you.

Speaker Change: Some have heard of improvement and maybe speed of permitting and construction are.

Speaker Change: Maybe you were just seeing lower build costs, you're kind of accelerating your plans or better real estate availability or anything to talk about in terms of that uptick in the unit openings as it pretends to the broader industry I assume that's the reason for the Capex uptick as well, but any color you can provide on that would be great. Thank you.

Sure Jeff, let me start with the comment around the uptake in the openings for the year.

Speaker Change: Sure Geoff let me start with the comment around the uptick in our the openings for the year.

We were able to open some restaurants that we thought would be after the holidays before the holidays And frankly, I think our team was a little bored You know, we had we got burned the last two years in terms of having some rosy projections and so we probably were a little bit more

Speaker Change: We were able to open up some restaurants that we thought would be after the holidays before the holidays and and frankly I think our team was little born Oh, we have we got burned in the last two years in terms of having some rosy projections and so we probably were a little bit more conservative in terms of how we thought about the timeline that was built based on the actuals last two years.

conservative in terms of how we thought about the timeline that was built based on the actual last two years And so that that that timeline is getting a little bit better So that's helping us deliver a little bit more and that's really what's showing up

Speaker Change: And so that's that that timeline is getting a little bit better.

Speaker Change: So that's helping us Delaware, a little bit more and that's really what's showing up look our focus is continuing to want to grow but cost effectively we are going to focus on balancing the two and so you know.

Look, our focus is continuing to want to grow, but cost effects.

We are going to focus on balancing the two. And so, you know, and our teams understand that and we're working towards that. And to your point about CAPEX, yeah, that CAPEX is driven by the uptick in the NROs.

Speaker Change: And our teams understand that and we're working towards that and to your point about capex, yeah that capex. He is driven by the uptick in the DNR OS.

Speaker Change: Thank you.

Speaker Change: Yeah.

Back in next question today is coming from Joshua Long from Stevens, your line is now live.

Speaker Change: Thank you next question today is coming from Joshua long from Stephens. Your line is now live.

Joshua Long: Great. Thank you so much I was curious if we could dig into the segment profitability trends that impressive to see the consistency there and particularly on the longhorn side, but at olive garden as well just given a lot of the pushes and pulls when you think about the second half of this year are there particular areas and do the best back to basics approach really touches on kind of a holistic approach.

Great, thanks so much. We're curious if you can dig into the segment profitability trends. The impressive to see the consistency there, and particularly on the long-horn side, but at all garden as well, I've just given a lot of the pushes and pulls. When you think about to the second half of this year, are there particular areas that are the best back-to-basics approach really touches on kind of a holistic approach to the business? But any particular areas that you've been impressed with and or are driving the majority of kind of...

Joshua Long: The business, but any particular areas that you are bidding.

Joshua Long: <unk> been impressed with <unk> are driving the majority of our kind of the.

The strength and the appropriate profit margin turns the event putting up.

Joshua Long: The strengthened.

Joshua Long: Segment profit margin trends that you've been putting up.

Joshua Long: Yeah.

Yeah, look, the biggest growth in the segment profit this year is really coming from COG.

Speaker Change: Yeah, I'd say look the biggest.

Speaker Change: Growth in segment profit this year is really coming from Cogs.

which was a big unfavorable deal last two years. So we're starting to kind of as commodities moderate. That's really helping drive food costs get better on a year-over-year basis. So that's one of the drivers of Segment Profit.

Speaker Change: Which you know it was it was a big unfavorably. The last two years, so were starting to kind of as commodities moderate that's really drive helping drive our food costs get better on a year over year basis. So that's that's one of the drivers of segment profit growth. We also talked about the difference in pricing versus inflation, we do have a little bit.

growth. We also talked about the difference in pricing versus inflation. We do have a little bit more pricing versus inflation and the first half that also helps.

Speaker Change: More pricing versus inflation and in the first half that also helped but I think if you look at overall segment profits as we got to fourth quarter of last year. It was very strong I think at the Darden level, we were over 20% and so we are you know we had some we felt like there was probably more opportunity to get a little bit more in the first half than the back half.

But I think if you look at overall segment profits, as we got to fourth quarter of last year, it was very strong. I think at the darkened level we were over 20%.

And so we are, we had some, we felt like there was probably more opportunity to get a little bit more in the first half than the back half.

Speaker Change: But but in general all of our segments all of our teams are focused on the right things one of the things we talked about at the beginning of the year with our teams is focusing on controlling what we can control and our teams rally around that and focused on managing our costs better and that's that's showing throughout the P&L and so there's no one specific.

But in general, all of our segments, all of our teams are focused on the right things. One of the things we talked about at the beginning of the year with our teams is focusing on controlling what we can control. And our teams rally around that and focus on managing our costs better. And that's showing throughout the PNL. And so there's no one specific thing I'd pick on. In general, we're very happy with the progress our teams have made and we'll continue to be disciplined.

Speaker Change: Vic thing I'd pick one in general we're really happy with.

Speaker Change: The progress our teams have made and will continue to be disciplined.

Speaker Change: Thank you.

Speaker Change: Thank you next question today is coming from Peter Saleh from <unk>. Your line is now live.

Thank you. Next question today is coming from Peter Sulev from BTIG. Your line is now on.

Speaker Change: Yeah.

Great, thanks for taking the question. I did just want to come back to the conversation around development and construction costs.

Peter Saleh: Great. Thanks for taking the question I did just want to come back to the conversation around development and construction costs could you just give us an update on where the individual construction costs are coming in are they coming in lower than you guys are expected in line how is that trajectory and then just more broadly.

Could you just give us an update on where the individual construction costs are coming in? Are they coming in lower? You guys are expected in line. How's that trajectory? And then just more broadly, what are you seeing from independence? Are you seeing more of a willingness to build more units? Are you seeing more of restaurant formation out there? Or is it kind of more of the same that you've been seeing over the past several quarters? Thanks.

Speaker Change: What are you seeing from independents or are you seeing more of a willingness to build more units are you seeing more of a restaurant formation out there or is it kind of more of the same that you've been seeing over the past several quarters. Thank you.

Yeah, let me start with the costs. Costs in general on the development are in line with where we thought on average. We obviously have some unique deals. One off here and there where the costs are coming in more than we thought.

Speaker Change: Yeah, let me start with the cost our cost in general on the development or are you now in line with where we thought on average we obviously have some unique deals are one offs here and there where the costs are coming in more than we thought but going into this year, we had embedded some higher costs into the <unk>.

But going into this year, we had embedded some higher costs into the openings based on the experience we have had over the last couple of years. And so what I would say at this point is we believe that the inflation has peaked and we are, you know, we may have said this last call too, we're starting to receive more bits that are kind of in line with our projected, our project budget.

Speaker Change: Openings based on the experience we've had over the last couple of years and so what I would say at this point is we believe that the inflation has peaked and we are you know are we may have said this last call too where we're starting to receive more beds that are kind of in line with our projected a project budgets.

And so that's a good thing. From an independent standpoint, I think it's hard for us the data that we're seeing to say that there's actually a lot of excitement from independence on building new restaurants, given the way the interest rate environment is. So the financing costs have gone up. And in fact, to some extent, that's also impacting some developers from what we hear. So we'll, you know,

Speaker Change: And so that's that's a good thing.

Speaker Change: From an independent standpoint, I think it's hard for us the data that we're seeing to say that there's actually a lot of excitement from independents on building new restaurants, given given the where the interest rate environment is so the financing costs have gone up and in fact to some extent that's also impacting some devil apart from what we hear so well you know.

The macro, you guys know the macro better than I do, but I would say overall, we're still happy with our overall development. The number of restaurants we're opening and how we're thinking about it. And as I mentioned in my prior comments earlier today, about we're going to cost effectively build our build the resistance. That's the focus. We want to get growth, but we're going to do it cost-effective. In our account, rent, we are spreading, Conventional,960, inches, weaponry and climate reviewed technology. Exile, micro-f Auth new funds and electronic feedback

Speaker Change: The macro you guys know the macro better than better than I do but I would say overall, we're still happy with our overall development Ah.

Speaker Change: The number of restaurants, we're opening and how we're thinking about it and as I mentioned in my prior comments earlier today.

Speaker Change: We're going to cost effectively build our build these restaurants. That's the focus we wanted we want to get growth, but we got to do it cost we're going to do it cost effectively.

Speaker Change: Yeah.

Speaker Change: Thank you.

Speaker Change: Yeah.

Speaker Change: Thank you next question is coming from David Palmer from Evercore ISI. Your line is now live.

Thank you. Next question is coming from David Palmer from Evercore ISI. Your line is now live.

Speaker Change: Thanks.

So a question on labor productivity, you guys have done a great job there. It looks like labor cost per unit was up maybe 2% a little bit over that in the...

David Palmer: A question on labor productivity, you guys have done a great job there it looks like labor cost per unit was up maybe 2% a little bit over that in the quarter versus up a little over 5% in the first quarters.

I think you said wage increase was roughly 5% in both quarters.

Speaker Change: Thank you said wage increase was roughly 5% in both quarters. So.

hearing that right is labor hours down a few percent in fiscal 2Q.

Speaker Change: If I'm hearing that right as labor hours down a few percent in fiscal <unk> and <unk>.

And if so, could you clarify maybe what are some of the drivers of that productivity?

Speaker Change: And if so could you clarify maybe what are some of the drivers of that productivity.

Speaker Change: Hey, David Yeah, There's we've had a history of discipline and improvement in productivity enhancements. This year is no different we're getting more of it because we've had lower turnover than we've had over the last few years. We're still we're still investing in training to get those team members up to speed quicker.

Hey David, yeah, we've had a history of discipline and improvement and productivity enhancements. This year's no different. We're getting more of it because we've had lower turnover than we've had over the last few years. We're still investing in training to get those team members up the speed quicker.

Speaker Change: We also are spending training dollars on getting our existing team members, even more productive so our productivity enhancements were the difference between our wage inflation in our labor inflation.

We also are spending training dollars on getting our existing team members even more productive. So our productivity enhancements were the difference between our wage inflation and our labor inflation.

I will also say our teams continue to get better with forecasting our business. We've added some AI tools to their to their tool belt to be able to forecast their their restaurant business by you know in 15-minute increments even better than it did before and we're seeing added benefit as I said

Speaker Change: I would also say our teams continue to get better with forecasting our business.

Speaker Change: We've added some AI tools to their to their tool belt to be able to forecast their restaurant business by you know in 15 minute increments, even better than it did before.

Speaker Change: And we're seeing added benefit as I said from lower turnover.

Speaker Change: That's great are you are you thinking that that sort of a labor productivity should continue in the second half and I guess related to that I wonder what you're thinking about California in.

That's great. Are you thinking that that sort of labor productivity should continue in the second half? And I guess related to that, I wonder what you're thinking about California and with the minimum wage is coming in April . Is that...

Speaker Change: With the minimum wage is coming in in April is that how does that affect the wage or the total labor outlook for you. Thank you.

Yeah, David, our total labor outlook isn't necessarily that different than where it's been in the first half of the year. I think we're still having wage inflations that are around the mid-single digits, which is pretty much back to pre-COVID levels. We do anticipate that as turnover continues to tick down, which we expect it should, to get us closer to pre-COVID levels, that we'll continue to have some productivity enhanced.

Speaker Change: Yeah, David or our total labor outlook isn't necessarily that different than where it's been in the first half of the year I think we're still having wage inflation at around the mid single digits, which is pretty much back to pre COVID-19 levels. We do anticipate that as turnover continues to tick down.

Speaker Change: Which we expect it should.

Speaker Change: To get us closer to pre Covid levels that will continue to have some productivity enhancements.

In regards to the fast act in California, you know, we're monitoring that, everything that we have contemplated is contemplated in our guidance. I will say we have an amazing employment proposition and across all of our states and all of our brands, but in California, it even better employment proposition. Our turnover is lower in California that is in most places and our wages are higher. So we feel pretty confident that we're okay in California, but if something changes, we'll react.

In regards to the fast Act in California, you know, we're monitoring that everything that we have contemplated is contemplated in our guidance.

Speaker Change: I will say, we have an amazing employment proposition and across all of our states in all of our brands, but in California, and even better employment proposition. Our turnover is lower in California than it is in most places in our wages are higher so we feel pretty confident that we're okay in California, but if something changes, we'll we'll react to it.

Speaker Change: Thank you.

Speaker Change: Okay.

Thank you. Next question today is coming from Sarah Senator from Bank of America. Your line is now live.

Speaker Change: Thank you. The next question today is coming from Sara Senatore from Bank of America. Your line is now live.

Great, thank you. One question and then a follow-up please. Just on the price versus inflation, I guess.

Sara Senatore: Okay. Thank you.

One.

Sara Senatore: Question and then a follow up please so just on that.

Sara Senatore: First name.

Sara Senatore: Inflation, I guess historically, you've priced below inflation in and you've seen traffic gains as a result.

you know historically you've priced below inflation and you've seen traffic gains as a result. Is your expectation that you know as the gap between you were pricing in your

Sara Senatore: Is your expectation that you know is the gap between your pricing and your and the inflation kind of reverses over the course of the second half so yeah inflation had a pricing.

and the inflation kind of reverses over the course of the second half. So, you know, inflation ahead of pricing that you might see in acceleration and in traffic. I know that you're already gapping out positively versus the...

Sara Senatore: Might see and and acceleration in traffic I know that you're you're already gapping out positively for states that are dealing with.

The industry, but I think, you know, assertly there's been, you know, either coincidentally or not, you kind of five under basis point gap in traffic and also in your pricing. So I guess that's the first question around, you know, as you're thinking about that trade-off, you know, kind of margin traffic and then I have a quick follow.

Sara Senatore: But I think historically, there's been a you know.

Sara Senatore: Coincidentally or not you know kind of 500 basis point gap in traffic and also in your pricing. So I guess, that's the first question around <unk>.

Sara Senatore: Just thinking about that that trade off you know kind of marching traffic and then I have a quick follow on.

Hey Sarah, so let me start with just grounding us on where we are with respect to pricing over the last four years.

Speaker Change: Hey, Sarah.

Speaker Change: So let me start with just growing us on where we are.

Speaker Change: With respect to pricing over the last four years, if you think about our price for the last four years, our pricing has basically been that aren't at the darden level has been closer to 17% Accumulatively just under 17% for the same timeframe. If you look at where full service restaurant C. P. I.

If you think about our price for the last four years, our pricing has basically been at our, at the garden level, has been closer to 17%. Cumulatively, just under 17%. For the same timeframe, if you look at where full service restaurant CPI is, that's 24%. So we have basically created a gap of 700 basis points to full service restaurant CPI over that time in the four years. Cumulatively.

Speaker Change: Is that 24%. So we are basically created a gap of 700 basis points to full service restaurants EPA over that time in the four years cumulatively in.

In fact, if you look at limited service, they're at 29%. So that's a 1200 basis point gap to them. So over the last four years, we've been very prudent and we've talked about it multiple times about how we're going to price very thoughtfully and deliberately and wanted to make sure we're creating this gap. And by the way, that overall pricing we have is below the overall CPI over that time frame by 300 basis.

Speaker Change: In fact, if you look at limited service debt at 29%. So that's a 200 basis point gap to them.

Speaker Change: Over the last 40 years, we've been very prudent and we've talked about it multiple times about how we're going to price a very thoughtfully and deliberately and wanted to make sure we're creating this gap.

Speaker Change: And by the way that that overall pricing we have is below the overall CPI or that timeframe by by 300 basis points. So from all aspects. We are we've actually stuck to our strategy of pricing below inflation, which is one of the driver so far of our of our traffic outperformance, but I'd say the other big driver.

So from all aspects, we actually stuck to our strategy of pricing below inflation, which is one of the drivers of our traffic outperformance. But I would say the other big driver is the execution, consistently executing and providing the greatest experience we can to our gas. And that's what our teams are focused on.

Speaker Change: He is the execution consistently executing and providing the greatest experience we can to our guests and that's what our teams are focused on that combined with the strategy of pricing and inflation is why we believe helps us separate ourselves from the industry and we'll continue to do that.

That combined with the strategy of pricing under inflation is what we believe helps us separate ourselves from the industry and we'll continue to do that.

I understand. I guess to your point just thinking about sort of humiliatively, it'll look a little different in the fourth quarter. I think then in the first quarter. But it sounds like you're not expecting a big swimming in sort of a traffic even as

Speaker Change: I understood I guess to your point, just thinking about sort of accumulatively, you don't look a little different in the fourth quarter I think in the first quarter.

Speaker Change: It sounds like you're not expecting a big screening in sort of that traffic.

sequentially the relative value versus inflation might change a little bit. And then I have a question on just, you know, trying to piece the other everything you said about like the different income cohorts.

Speaker Change: Sequentially that the relative value versus inflation rate, reaching terminal that and then and then I have a question I'm just trying to piece together everything you said about like a different cohort so you're not quite back up in terms of them being at the.

So you're not quite back up in terms of, you know, that the high income as a percentage of your customer base to where you're in COVID, pre-COVID, but you're there, you're getting closer, but at the same time, you're seeing check management. So I guess...

Speaker Change: The high income as a percentage of your customer base to where you were in Covid pre COVID-19, but you're there you're getting closer but at the same time, you're seeing check management.

Can you just put a finer point on it? So if the check management coming from lower income cohorts or the higher income cohort, and it sounds like some of this is just lower income cohorts. You may have splurged more in the past and now you're getting back to normal.

Speaker Change: Can you just.

Speaker Change: You know put maybe a finer point on it.

Speaker Change: Check management coming from lower income cohorts or the hiring from cohort.

It sounds like some of this is just learning from kind of worries me a splurge more in the past and now you're kind of getting back to normal.

normal patterns, but I'm sure it's everything together. Thank you.

Normal patterns today, and I'm trying to piece everything together. Thank you.

Yes, Sarah. The check management and find outing is coming more from the lower income cohorts than it is from the higher income cohorts. You know, I think they were as burging as we've talked about before, a little bit of euphoria in the last few years.

Speaker Change: Yes, there are.

Speaker Change: The check management and fine dining is coming more from the lower income cohorts than it is from a higher income cohorts you know I think they worst verging as we've talked about before a little bit of euphoria in the last few years and we're getting back to a more normal.

I mean, we're getting back to a more normal level. And in regards to pricing, is that your point on the follow-up.

Speaker Change: More normal level and in regards to pricing as you know.

Speaker Change: Your point on the follow up recall Raj said, we don't really have a whole lot of pricing in the back half most of what we have is wrap so when you think about how much pricing we have versus inflation most of our pricing is already embedded.

Recall Raj said we don't really have a whole lot of pricing in the back half most of what we have is rap So when you think about how much pricing we have versus inflation most of our pricing is already embedded

And so that's really where the where the doubt is so the consumer isn't going to see a whole lot more price And they are seeing today they might see a little bit in a couple of brands So we still feel really good about where we are and we don't think it's going to really make a big big change in our

Speaker Change: And so that that's really where the where the delta is so the consumer isn't going to see a whole lot more price and they are seeing today, they might see a little bit in a couple of brands. So we still feel really good about where we are and we don't think it's going to really make a big big change in our traffic pattern.

Speaker Change: Okay.

Thank you. Next question is coming from Chris O'Call from Steve Hull, your line is now live.

Speaker Change: Thank you next question is coming from Chris O'connell from Stifel. Your line is now live.

Speaker Change: Thanks. Good morning, guys. This is Patrick on for Chris, but Raj I was curious on the traffic at Longhorn if you could just dig into that a little bit more weather relative to last quarter or relative to the industry.

Thanks, good morning guys, this is Patrick on for Chris. But, Roz, I was curious on the traffic at Longhorn. If you could just dig into that a little bit more, whether you know, relative to the last quarter or relative to the industry. And then also just check management specifically at Longhorn and are you guys seeing any different trends there than maybe what you mentioned in some of the other segments.

Raj: And then also just check management, specifically at Longhorn and are you guys seeing any different trends there than maybe what you mentioned in some of the other segments.

Speaker Change: Yeah, Patrick when I look at Longhorn they had a very strong performance for the quarter right. We talked about significantly outperformed the industry on same restaurant sales and traffic for the quarter was a.

Yeah, Patrick, when I look at Longhorn, they're a very strong performance for the quarter. We talked about significantly outperform the industry on Sam Restaurant sales. The traffic for the quarter was around negative 1%. But when you look at their attention to pre-COVID, they've held up pretty well. They're up.

Speaker Change: And at a negative 1% that's that you know, but when you look at their attention to the pre COVID-19. They have held up pretty well they are up.

both in dining room and off premise by combined by double digits in the dining room. So to have the volumes we were running at Longhorn today, we would have said four years ago, it would take 10 years to get there. And we got there in four years. So we're really happy with where Longhorn is in terms of their momentum. And we hope to see that continue.

Speaker Change: Both in dining room and off premise by a combined by double digits in the dining room and.

Speaker Change: And so to have the volumes, we're running at longhorn today, we would have we would have said for 40 years ago. He would take 10 years to get there and we got that in four years. So we're we're really happy with where longhorn is Ah Ah in terms of their momentum and we hope to see that continue.

Great, thanks. That's helpful. And then Rick, I was just curious as you step back from the business and you think about strategically how you continue to exploit the scale advantages that you have. I mean, what are the biggest opportunities over the next 12 months when you think about potentially competing in a softer environment? What you can leverage is its supply chain, is it technology or just curious to get your overall thoughts on where some of those opportunities my lie to increase the gap between you and the

Speaker Change: Great. Thanks, that's helpful. And then Rick I was just curious as you step back from the business and you think about strategically how you continue to exploit the scale advantages that you have I mean, what are the biggest opportunities over the next 12 months when you think about potentially competing in a softer environment.

Rick Cardenas: What you can leverage is that supply chain is it technology or just curious to get your overall thoughts on where some of those opportunities might lie to increase the gap between you and your competitors.

Yeah Patrick, I will say over the next 12 months, it's a little bit of short term versus the strategic things that we've been doing over the last few years. But, you know, we believe that we continue to invest in technology to make it easier for our teams to execute. As I said, we've got better AI tools for scheduling. And if we schedule better, we execute better. That drives performance.

Speaker Change: Yeah, Patrick I will say over the next 12 months pretty kind of a little bit of short term versus the strategic things that we've been doing over the last few years, but we.

Speaker Change: We believe that we continue to invest in technology to make it easier for our teams to execute as I said, we've got a better AI tools for <unk>.

Speaker Change: Scheduling.

Speaker Change: And if we schedule better we execute better that drives performance our supply chain scale advantage is pretty strong and so we're able to get a better pricing for our for our food, which we can pass on to our consumers with through lower lower overall check growth versus the industry. So there's no one nugget what I would.

Our supply chain scale advantage is pretty strong. And so we're able to get better pricing for our food, which we can pass on to our consumers with lower overall check growth versus the industry. And so there's no one nugget. What I would say is it's our back-to-basic operating philosophy that's going to continue to get us to grow. And that's excellent food, excellent service, and an inviting atmosphere.

Speaker Change: Say, it's our back to basics operating philosophy, that's going to continue to get us to grow.

Speaker Change: Excellent food excellent service and an inviting atmosphere executing better than restaurant next door.

executing better than a restaurant next door. That's not necessary strategic. That's not a silver bullet. That's hard to do and we do it really well. And that's what's really as Raj mentioned earlier. Execution is what's driving a lot of our performance. And we'll continue to execute by using our scale to help our brands get better.

Speaker Change: It's not necessary strategic that's not a silver bullet.

Speaker Change: That's hard to do and we do it really well and that's what's really as Raj mentioned earlier execution is what's driving a lot of our performance and will continue to execute by using our scale to help our brands get better.

Understood. Thanks, guys.

Speaker Change: Thank you. Our next question today is coming from Dennis Geiger from UBS. Your line is now live.

Thank you. Next question today is from Dennis Kydro from UBS. Her line is now live.

Great, thanks guys. Just wondering if you could talk a little bit more on off premise, what it was in the quarter and any thoughts on the go forward there.

Dennis Geiger: Great. Thanks, guys. Just wondering if you could talk a little bit more on off premise what it was in the quarter and any thoughts on the go forward there.

Yeah, Jenis, off-premise for the quarter at all of Garden was 23%, so pretty similar to the levels we had before. And then Longhorn is at 14%. And now, as we get into the holidays, we should see a little bit more at all of Garden. Typically, we see that, but we'll see how that goes going forward. But on a Euro-aware basis, it's slightly below, I think, across our system, we're probably 100 basis points lower or something like that. But it's stabilized in this range.

Speaker Change: Yeah, Dennis off premise for the quarter at Longhorn and Olive garden was 23% so pretty similar to the levels. We had before and then longhorn is at 14%.

Speaker Change: Now you know we will get it as we get into the holidays, we should see a little bit more at olive garden, and typically we see that but we'll see how that goes going forward, but on it on a year over year basis, it's slightly below I think in and across our system were probably 100 basis points lower or something like that.

Speaker Change: It's but it's pretty it's it's it's stabilized and this ranges.

Speaker Change: That's great. Thanks, Rob just one quick one and then just on any regional or not I know you talked a little bit earlier for some of the segments about some regional things can be thinking about anything broadly across brands across portfolio reasonably that you've seen.

that's great thanks for that just one quick one and just on any regional and then you talked a little bit earlier for some of the segments about some regional things to be thinking about anything broadly across brands cross portfolio regionally that you

Nothing of note to talk about. It's fairly consistent with what we mentioned last quarter where there's a little bit of softness in Texas and south, but nothing crazy. California a little bit stronger, but, but nothing meaningful.

Rob: Nothing of note to talk about it it's fairly consistent with what we've mentioned last quarter, where there's a little bit of softness in Texas, and south, but not nothing crazy, California, a little bit stronger, but but nothing meaningful.

Speaker Change: Great. Thanks, guys. Thanks Raj.

Speaker Change: Thank you next question today is coming from Lauren Silberman from Deutsche Bank. Your line is now live.

Thank you. Next question today is coming from Warren Silverman from Deutsche Bank. Your mine is not live.

Thank you, Congrats. I think you've talked about before, you've generally seen changes in check before, traffic in a more challenging environment. Do you see this check management as a precursor to traffic step down or more of a return to normal behaviors? And how are you monitoring that? Thank you.

Lauren Silberman: Thank you Congrats I think I've talked about the store you generally see changes in check before traffic in a more challenging environment.

Lauren Silberman: You see the check management as a precursor to traffic step down or more of a return to normal behavior. I mean, how are you monitoring that thank you.

Yeah Lauren, this is Rick. We see the check management a little bit more of a function of year of a year before you difference. Not necessarily the consumers feeling a lot more pinch.

Lauren Silberman: Yeah. Lauren this is Rick we see the check management, a little bit more of a function of year over year your for your difference.

Rick Cardenas: Not necessarily the consumer's feeling a lot more pinched now we as we said, we're getting closer or are the higher income households.

Now, as we said, we're getting closer, our higher income households mix is going up. The below 50 is going down, and that's both on the traffic side and a little bit on the check side. So we're not hugely concerned, or we're not really that concerned about the check management now because it was really more driven by last year versus kind of a long term.

Rick Cardenas: Mixes going up the below 50 is going down.

Rick Cardenas: That's both on the traffic side and a little bit on the check side. So we're not a huge we're not hugely concerned or we're not really that concerned about the check management now because it was really more driven by last year versus kind of a long term trend.

Great, thank you. And then just a quick one from Marketing, the 35 to 40 million range that you're currently running, is that the right run rate or should we expect to pick up?

Speaker Change: Great. Thank you and then just a quick one from marketing the $35 million to $40 million range that you're currently running is that the right run rate or should we expect a pick up thank you.

Speaker Change: Yeah, Lauren I think we've basically said, we're going to be within 10 to 20 basis points as a percent of sales versus last year. So any quarter. You should be you know if you look at last year end and we should be within 10 to 20 bps of that.

Yeah, Lauren, I think we've basically said we're going to be within 10 to 20 basis points as a percent of sales versus last year. So any quarter you should be, you know, if you look at last year and we should be within 10 to 20 bits of that.

Speaker Change: Thank you very much.

Speaker Change: Thank you next question is coming from Andy Barish from Jefferies. Your line is now live.

Thank you. Next question is coming from Andy Barrett from Jeffery. Zero line is not a lot.

Andy Barish: Hey, guys. Good morning, just one clarification on the unit side you used.

Hey guys, good morning. Just one clarification on the unit side, you used the term re-opens, were those relocated units. And then I've got one other follow up question, please.

Andy Barish: The term reopens, where those relocated units.

Andy Barish: And then.

Andy Barish: One other.

Speaker Change: Follow up question. Please.

Yeah, Andy, I think it was four. We had a couple of relocations. We had a couple of restaurants that we reopened after being temporary clothes due to fires. So that's really the both.

Speaker Change: Yeah, Andy in those in that I think it was four we had a couple of relocations. We had a couple of restaurants that we reopened have after being temporarily closed due to fire. So that's really the bulk of those four.

Okay. And just a quick update last quarter, you talked about more synergy, realization potential at Ruth Chris, but some of that gonna be reinvested. Has that reinvestment started in Ernest or is it more gonna come kind of in the back half of the year as supply chain gets integrated and things like that?

Speaker Change: Okay.

Speaker Change: And just a quick update last quarter, you talked about more synergy realization potential at Ruth's, Chris, but some of that can be reinvested.

Speaker Change: Has that reinvestment started in earnest store is it more.

Speaker Change: Gonna come kind of in the back half of the year is it supply chain gets integrated and things like that.

Speaker Change: Yeah, Andy a some of that reinvestment is already starting and then some of it happens as the supply chain converts one of the investments. We've made was an improvement in their file I don't think that's that's in every restaurant yet.

Yeah, Andy, some of that reinvestments is already starting and some of it happens as the supply chain converts. One of the investors who made was an improvement in their filet. I don't think that's in every restaurant yet. Another one of the investments that we talked about, we will be doing in December and that is for their team closing on Christmas day. So there's still some things that are coming in.

One of the investments that we talked about we will be doing in December and that is for their team closing on Christmas day. So there's still some things that are coming in.

But, you know, we're consistent, we're on track with our timeline, and we still expect a creation to be consistent with what we've shared previously. Even with those investments we're making for our team members and our guests.

Speaker Change: But you know were consistent we're on track with our timeline and we still expect accretion to be consistent work. We've shared previously even with those investments, we're making for our team members and our guests.

Speaker Change: Thank you.

Speaker Change: Sure.

The next question today is coming from Gregory Frankfurt from Google line. Your line is now live.

Speaker Change: Thank you. Your next question today is coming from Gregory Frankfurt from Guggenheim. Your line is now live.

Thanks for the question. Just one more marketing. Can you remind us how the composition of that has changed versus pre-COVID? Are there any traditional or digital or other categories? How do you think about the returns across those channels versus a few years ago? Thanks.

Gregory Frankfurt: Thanks for the question Rick just just one more on marketing can you remind us how the composition of that has changed versus pre COVID-19.

Rick Cardenas: Traditional or digital or other categories and how you think about the returns across those channels versus a few years ago.

Speaker Change: Hey, Greg Yeah versus pre Covid were a bit more digital partly because longhorn really came off of television when when we were on before Covid long run was on television. So we are a bit more digital and overall mix olive garden's mix isn't.

Hey Greg, yeah, versus pre-COVID, we're a bit more digital, partly because Longhorn really came off of television when we were on, before COVID, Longhorn was on TV. So we are a bit more digital and overall mix. Olive Garden's mix isn't substantially different than before. They did come off a little bit of television, but they also came off a little bit on the digital side. We have pretty good analytics.

Substantially different than before they did come off a little bit of TV, but they also came off a little bit on the digital side, we have a pretty good analytics to tell us.

of the returns on each of those things. And the good news is during COVID, we tested some more digital, and we were able to, because we didn't have much media on at one time, and we started turning it on, we were actually able to see what those returns are. And that was one of the benefits of COVID. We were able to test a little bit more. And we're testing other things on the digital front now, to see if there's some things that we'll add in the future. Jorge Pr dre???? ya bud, a few with the rest of the content.

Speaker Change: The returns on each of those things and the good news is during Covid, we tested some more digital and we were able to because we didn't have much media on at one time, when we started turning it on and we were actually able to see what those returns are.

Speaker Change: That was one of the benefits of the Covid, we were able to test a little bit more and we're testing other things on the digital front now to see if there are some things that will add in the future.

Speaker Change: Thanks for the perspective.

Speaker Change: Thank you next question today is coming from Andrew <unk> from BMO. Your line is now live.

Thank you. Next question today is coming from Andrew Strelsic from BMO. Your line is not live.

Andrew Charles: Hey, good morning, Thanks for taking the questions.

Thank you, good morning, thanks for digging the questions. My first one just wanted to follow up on some of the value perception, I guess, commentary that you made.

Andrew Charles: My first one just wanted to follow up on some of the value perception I guess commentary that you made.

Certainly relatives of the restaurants, you know, and certainly relative to inflation makes a lot of sense But I guess when you broaden the view on that and and look at food and home or grocery and you see You know some of the larger grocery chains talking about food deflation and more promotions and things like that Does that factor into your your calculus at all or how do you think about um

Andrew Charles: Certainly relative to other restaurants.

Andrew Charles: And certainly relative to inflation. It makes a lot of sense, but I guess when you broaden the view on that and look at food at home or grocery D. C.

Andrew Charles: Some of the larger grocery chains talking about food deflation and more promotions and things like that does that factor into your calculus at all or how do you think about.

the value perception relative to that, if you have any work on that or anything, and you thought it would be great.

Andrew Charles: The value perception relative to two that if you have any work on that or anything any thoughts would be great.

You know, a couple of things that we, as we've mentioned before, dining out is really more than just about the sustenance. It's about getting together with your family and friends to enjoy a meal. And as Raj mentioned earlier, we still have a very big gap in the pricing that we have taken over the last four years versus what's happening in retail. I mean, I would say if retail starts to, to, to, to, to,

Andrew Charles: You know a couple of things that we as we've mentioned before dining out is really more than just about the sustenance, it's about getting together with your family and friends to.

Andrew Charles: To enjoy a meal and as Raj mentioned earlier, we still have a very big gap in.

Andrew Charles: In the pricing that we've taken over the last four years versus what's happening at retail I mean, I would say if retail starts to.

Two two.

to do discounts or other deals, it's probably because they're not moving product. And so that helps us on our on our cost side. So, you know, we don't really

Andrew Charles: Prior to do discounts or other deals, it's probably because you're not moving product and so that helps us on the on the on our cost side. So.

Andrew Charles: You know, we don't really look very <unk>.

very much at the difference between food at home and food away from home, partly because as I said, people think about, I want to go out to eat. And then we they to

Andrew Charles: Very much at the difference between food at home and food away from home, partly because as I said people think about how you want to go out to eat and then we'd be determined where they want to go out to eat.

So we haven't really seen correlations in the difference in food at home, and food away from home over the long long-

Andrew Charles: And so we haven't really seen correlations in the in the difference in food at home versus away from home over the over the long long term.

Got it. Okay. That's helpful. And then just one other question on the Ruth integration. Any surprises or learnings that that's progressed. And I guess you know, the balance sheet still is in very, very good shape. So would that integration either preclude you from making another acquisition or how are you thinking about

Speaker Change: Got it Okay. That's helpful. And then just one other question.

Speaker Change: On the roof integration any surprises or learnings as that has progressed and I guess the balance sheet still is in very very good shape. So would that integration either preclude you from making another acquisition or how are you thinking about the balance sheet from here. Thanks.

Let me start by saying we're really pleased with the integration and the transition that we've had. We're six months from the close of the transaction. We still have a few changes. We have to make the restaurants and they have to absorb them over this next six months.

Speaker Change: Let me start by saying, we're really pleased with the with the integration and the transition that we've had where six months from the close of the of the end of the transaction. We still have a few changes we have to make the restaurants too and they have to absorb over the next six months.

But that doesn't preclude us from other things. We'll continue to talk to our board and determine what the right use of our capital is. As you mentioned, we do have a strong balance sheet, but we're going to continue to work on this until something else comes along.

Speaker Change: But that doesn't preclude us from other things and we'll continue to talk to our board.

Speaker Change: And determine what the right use of our capital is as you mentioned, we do have a strong balance sheet, but we're going to continue to work on this until something else comes along.

Speaker Change: Great. Thank you very much.

Speaker Change #100: Thank you next question today is coming from John I Havent Ivankov from J P. Morgan Your line is now live.

Thank you. Next question today is coming from John Ivan Ivanko from KP Morgan. Your line is not live

Hi, thank you so much. Yeah, first I was hoping maybe you could help a little bit with industry comparisons in January and February . Obviously, COVID lapse from the previous year helped but also an unusually warmer, really lack of winter. I mean, I guess if you were to kind of normalize.

John Ivankov: Hi, Thank you so much yeah first of all I was hoping maybe you could help a little bit with industry comparisons in January and February obviously, COVID-19 lots from the previous year help at all you know also.

John Ivankov: An unusually warm or really lack of winter I mean, I guess, if you were to kind of normalize.

you know, those months, I mean, how much you think you may have actually, you know, kind of been helped, you know, by kind of a bounce back in the early months of 23 that we should at least

John Ivankov: Those months I mean, how much do you think you may have actually kind of been helped by kind of a bounce back in the <unk>.

John Ivankov: Early months of 'twenty three that we should at least consider on a laughing perspective, I know, it's very tactical it's not my style, but you know I would love to hear your perspective on that and then secondly.

consider on a lapping perspective. I know it's very tactical and it's not my style, but I would love to know your perspective on that. And then secondly, my experience is that casual dining operating companies don't love presidential election years, cost of media, breaking through, disruption of consumers.

John Ivankov: My experience is that casual dining operating company don't love presidential election years, like you know cost of media breaking through disruption of consumers. What have you I mean do you share that perspective, and you know is there anything that we should be you know just kind of considering.

What have you, do you share that perspective and is there anything that we should be just kind of considering as we kind of go in the calendar 24s, what is obviously gonna be another difficult election cycle? Thank you.

John Ivankov: As we kind of go into calendar 'twenty for us.

John Ivankov: What is obviously going to be another difficult election cycle. Thank you so much.

John Ivankov: Okay.

All right, John , let me try to answer in a way that it makes sense because obviously when you look at the seasonal

Alright, John let me try to answer that.

John Ivankov: In a way that makes.

John Ivankov: Makes sense, because obviously when you look at the seasonal situation third quarter last year.

Third quarter last year was wrapping on Omicron from the year before. It was just a whole different...

John Ivankov: <unk> was wrapping on omicron from the year before it was it just a whole different in terms of dynamic.

dynamic uh... but as you pointed out the weather the winter weather in that quarter for us third quarter which is December January February in aggregate was favorable to five-year to the historical averages and so we do expect

John Ivankov: But as you pointed out the weather the winter weather in the quarter for US third quarter, which is December January February in aggregate was favorable two five years to the historical averages and so we do expect a winter weather in the third quarter to be essentially a hedge.

Winter weather in the third quarter to be essentially a headwind in the third quarter just based on historical averages If the weather this year is anything like what it would have been historically It is a headwind for us. I would expect it's the same for the industry But I can't I don't want to speak confidently about the industry, but I can tell you that's how we are looking at it

John Ivankov: In the third quarter, just based on historical averages if if if developed this year is anything like what it would have been historically that it's it is a headwind for us I would expect it's the same for the industry, but I can't I don't want to speak confidently about the industry, but I can tell you that's how we're looking at it.

John Ivankov: In fact, we we.

That's part of the reason we didn't get into this earlier, but that's part of the reason our internal estimates have comps the same restaurant sales for the third quarter.

John Ivankov: That's part of the reason we didn't get into this earlier, but that's part of the reason our internal estimates have comps our same restaurant sales for the third quarter being.

being the lowest for the fish within this year, primarily because of that weather headwind. Now, I'll have maybe Rick can talk about the presidential years and how we think about it. Yeah, John , yeah, this is an election year. It's probably going to be a pretty contentious election with a lot of television advertising.

John Ivankov: Being the lowest.

John Ivankov: The fiscal it within this year.

John Ivankov: Primarily because of that rather headwind and now I'll have maybe rich can talk about the presidential years on how we think about it.

Rich: Yeah, John Yeah. This is an election year, it's probably going to be a pretty contentious election with a lot of TV advertising. The good news is we're not as reliant on T V. As we were in the past and I think casual dining was much more reliant on television and in the past and chain restaurants were much more reliant on TV.

The good news is we're not as rely on as TV as we were in the past. And I think casual dining was much more rely on television in the past and chain restaurants were much more rely on television.

But now there's other media out there, more digital, and more online video. And so we aren't as concerned about an election year as may be in the past.

Rich: But now there's other media out there more digital more online video.

Rich: And so we are we aren't as concerned about an election year.

Rich: As maybe in the past that said.

You know, it depends on how contentious this gets and how much media is out there. We feel confident that if we continue to focus on our strategies and execute, when people go out, they're gonna come out to our restaurants.

Rich: You know it depends on how contentious this gets and how much media is out there we feel confident that if we continue to focus on our strategies and execute when people go out they're going to come out to our restaurants.

Speaker Change #103: Thank you.

Thank you. Our next question is coming from Brian Vucaro from Raymond James. Your line is now live.

Speaker Change #104: Thank you. Our next question is coming from Brian Vaccaro from Raymond James Your line is now live.

Brian Vaccaro: Hi, just a quick one from me. Thank you I'm following up on your private dining bookings comments could you help frame the degree to which you're up year on year or any perspective on how that might compare looking back to pre COVID-19 levels. Thank you.

Hi, just a quick one for me. Thank you. I'm following up on your private dining bookings comments. Could you help frame the degree to which you're up your own year or any perspective on how that might compare looking back to pre-COVID levels? Thank you.

Speaker Change #106: Yeah, Brian we're not going to talk about how much were up in this current quarter on private dining year over year. So we will let you know how that happens after the quarter end.

Yeah, Brian , we're not going to talk about how much we're up in this current quarter on private dining year over year. So we'll let you know how that happens after the quarter ends.

Brian: Fair enough. Thank you.

Baker, next question is coming from Nick Shtetian from Woodbird Securities Relipe. There's no left.

Thank you next question is coming from Nick <unk> from Wedbush Securities. Your line is now live.

Thank you. I just want to follow up on the pricing below inflation. In Q4, historically, you've always priced below inflation. I guess is there really a big change in terms of the magnitude of the pricing below?

Nick: Thank you I just wanted to follow up on the pricing below inflation.

Nick: In Q4, historically, you've always price below inflation I guess is there really a big change in terms of the magnitude of the pricing below <unk>.

inflation and beyond Q4, are there enough operating initiatives to kind of maintain four-low margins, or are you willing to give up some margin in the median term?

Nick: Inflation and beyond Q4.

Nick: Is.

Are there enough operating initiatives to kind of maintain four wall margins or are you willing to give up some margin.

Nick: In the medium term.

Speaker Change #109: Hey, Nick I think part of this is really the cadence of when we took pricing actions. So if you take if you recall at the beginning of the year, we were really clear that we're going to have it on a year over year basis, where we're going to see more pricing come through in the first half than the back half.

Henik, I think part of this is really the cadence of when we took pricing actions. So if you recall at the beginning of the year, we were very clear that we're going to have it.

On a year-over-year basis, we're going to see more pricing come through in the first half than the back half.

just because that's the function of actions we took last year.

Just because that's the function of actions, we took last year theres not a lot of new pricing actions. We're taking this year. There are few and that's why instead of the 3% of the three and a half to floor that we have in total pricing is carry over from last year. So there are a few actions this year and typically we tied to our team we typically take pricing.

There's not a lot of new pricing actions who are taking this year. There are a few, and that's why, instead of the 3% of the 3.5 to 4 that we have in total pricing is carryover from last year. So there are a few actions this year.

Typically, we try to, our team, we typically take pricing with our fiscal year. So now, you know, things can change, but the way we look at it is we take a longer term view and we've been very clear on the year that we are getting some margin growth, our guidance implies margin growth, and I'll then refer you back to our long term frame.

Speaker Change #109: With our fiscal year. So now you know things can change, but the way we look at it is we take a longer term view and we've been very clear on the ear that where we are getting some margin growth our guidance in place margin growth and I'll. Then refer you back to our long term framework, which kind of talks about overtime, we expect to grow margins any given quarter.

which kind of talks about over time we expect to grow margins. Any given quarter do we give up margins? Yeah, maybe. If that's the right thing for the year. I mean, at the end of the day, we look at over longer periods of time.

Speaker Change #109: Do we give up margins yeah, maybe if that's what I think part of the year I mean at the end of the day, we look at over a longer period of time.

Speaker Change #109: Yes.

Speaker Change #110: Thank you.

Speaker Change #111: Thank you next question today is coming from Zillow Gargiulo from Bernstein. Your line is now live.

Thank you. Next question today is coming from Danilo Gardullo from Bernstein. Your line is now live.

Zillow Gargiulo: Thank you.

Thank you. Roger, I want to build on the last statement that you made on the margin expansion over time. So if you think about kind of the long run and given the solid results that you already had in the rest of the level margins, can you help us understand the task for the incremental margin expansion, meaning where do you see the biggest upside over the long run as you continue to scale?

Zillow Gargiulo: He was on the.

Zillow Gargiulo: Last evening that you've made on the margin expansion over time. So if you think about kind of the long run.

Zillow Gargiulo: And given the solid results.

Zillow Gargiulo: In the restaurant level margins can you help us understand the top sort of incremental margin expansion, meaning where do you see the biggest upside over the long run things at scale.

Zillow Gargiulo: He didn't know though this is Rick are you think about our margin. We've you know we've been fairly consistent over over the years that we're searching for profitable sales growth.

Hey, Denilo, this is Rick. You think about our margin. We've been fairly consistent over the years that we're searching for profitable sales growth. And we had just updated our long-term framework or put that back out, where we'd be at 10 to 30 basis points a year in margin expansion. And anyone year, it could be above that or below that. And we're going to get that through executing our strategy, leveraging our scale.

Rick Cardenas: And we have we had just updated our long term framework, we put that back out where we'd be at 10 to 30 basis points a year in margin expansion in any one year it could be above that or below that and we're going to get that through executing our strategy.

Rick Cardenas: Leveraging our scale.

Rick Cardenas: To be able to take costs out of the system when still over in the long term price below inflation.

to be able to take costs out of the system and still over in a long-term price below inflation.

provide a better dining experience using our back-to-basics operating philosophy and our great operators out in the field that execute better than the restaurant next door. If we do those things and we have done those things we will continue to drive profitable sales growth.

Rick Cardenas: To provide a better dining experience using our back to basics operating philosophy, and our great operators out in the field that execute better than their restaurant next door. If we do those things and we have done those things we will continue to drive profitable sales growth.

There may be years that our margins are a little bit less than that because we're gaining even more market share and we're willing to do that. There may be years on the opposite side where we still gain share, but we have margin extension opportunities.

Rick Cardenas: There may be years that our margins are a little bit less than that because we're gaining even more market share and we're willing to do that there may be years are on the opposite side, where we still gain share, but we have margin expansion opportunities.

As Raj mentioned, we don't look at it quarter to quarter. We think about it over a lot.

Rick Cardenas: As Raj mentioned, we don't look at it quarter to quarter, we think about it over the long run.

Thank you. And then can you comment on the technology roadmap? And what excites you the most about? You recently mentioned about kind of the AI implementation to improve the level of staffing in the stores. What do you think is going to be some folding in the next a few years? Thank you.

Speaker Change #113: Thank you and then can you comment on the Technology Road map.

Speaker Change #113: What excites you. The most about you recently mentioned about kind of the AI implementation to improve the level of stocking in the stores.

Speaker Change #113: What do you think is going to be unfolding in the next few years. Thank you.

Yeah, Danilo, over the last few years, we've focused a lot of energy and technology on improving the guest experience primarily in the off-premise segment, you know, making it easier to order, pick up and pay. We're working on our tech plans for the next few years.

Speaker Change #114: Yeah Danilo over the last few years, we've focused a lot of energy and technology on improving the guest experience primarily in the off premise segment.

Speaker Change #114: Making it easier to order pickup and pay we're working on our R. Tech plans for the next few years.

Speaker Change #114: But I I would think that AI would be a little bit more part of that especially on the back of the house things, maybe not necessarily as consumer facing you know our goal with technology is to eliminate friction and we've eliminated a lot of friction for the guest on the to go experience on being able to put their name on Waitlists now we want to eliminate friction and.

But I would think that AI would be a little bit more part of that, especially on the back of the house things, maybe not necessarily as consumer facing.

You know, our goal with technology is to eliminate friction. And we've eliminated a lot of friction for the guest on the Tigo experience on being able to put their name on weightless.

Now we want to eliminate friction in our team, eliminate our management friction to make it easier for them. So they don't have to spend as much time doing what we think are non-value added tasks, ordering, receiving, scheduling, which is value added, but if we can make it easier for them to schedule, they can spend less time doing that and spend a lot more time with their team and with their guests. And so the technology investments we're making, we may be making in the future, you might not see a whole lot of impact on that.

Speaker Change #114: Our team eliminate our management friction to make it easier for them. So they don't have to spend as much time doing what we think are non value added tasks ordering receiving.

Speaker Change #114: Scheduling, which is value added, but if we can make it easier for them to schedule. They can spend less time doing that and spend a lot more time with their team and with their guests and so the technology investments, we're making we may be making in the future you might not see a whole lot of impact on that.

from the consumer, you'll see it from the consumer because our teams are gonna be better trained. And so that's what we're focusing on.

Speaker Change #114: From the consumer you'll see it from the consumer because our teams are going to be better trained and so that's what we're focusing on.

Speaker Change #115: Thank you.

Thank you. We've reached end of our question and answer session. I'd like to turn the floor back over to management for any further closing comments.

Speaker Change #116: Thank you we've reached end of our question and answer session I'd like to turn the floor back over to management for any further or closing comments.

Speaker Change #116: Thank you that concludes our call I'd like to remind you that we plan to release third quarter results on Thursday March 21st before the Mark just opens with a conference call to follow Thanks again for your participation and have a happy holiday.

Thank you, that concludes our call. I'd like to remind you that we plan to release third quarter results on Thursday, March 21st before the mark to opens, with a conference call to follow. Thanks again for your participation and have a happy holiday.

Thank you. That does conclude today's telecom for the webcast. Let me disconnect your line at this time and have a wonderful day. We thank you for your participation today.

Speaker Change #117: Thank you that does conclude today's teleconference and webcast you may disconnect. Your lines at this time and have a wonderful day.

Speaker Change #118: You for your participation today.

Speaker Change #118: Yeah.