Q2 2024 Cheesecake Factory Inc Earnings Call

Etienne Marcus: I would like to remind you that during this call, items will be discussed that are not based on historical fact and are considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Results could be materially different from those stated or implied in forward-looking statements as a result of the factors detailed in today's press release, which is available on our website at investors.thecheesecakefactory.com and in our filings with the Securities and Exchange Commission.

Items will be discussed that are not based on historical fact and are considered forward looking statements within the meaning of the private Securities Litigation Reform Act of 1095.

As a result of the factors detailed in today's press release, which is available on our website at investors.thecheesecakefactory.com and in our filings with the Securities and Exchange Commission.

Etienne Marcus: All forward-looking statements made on this call speak only as of today's date, and the company undertakes no duty to update any forward-looking statement. In addition, during this conference call, we will be presenting results on an adjusted basis, which excludes impairment of assets and lease terminations and acquisition-related expenses. An explanation of our use of non-GAAP financial measures and reconciliations to the most directly comparable GAAP measures appear in our press release on our website, as previously described.

All forward-looking statements made on this call speak only as of today's date, and the company undertakes no duty to update any forward-looking statements.

In addition, during this conference call we will be presenting results on an adjusted basis which exclude impairment of assets and lease terminations and acquisition related expenses.

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

Etienne Marcus: David Overton will begin today's call with some opening remarks, and David Gordon will provide an operational update. Matt will then review our second quarter financial results and finish up with some commentary on our outlook for the third quarter and full year 2024 before opening the call up to questions. With that, I'll turn the call over to David Overton.

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

Matt will then review our second quarter financial results and finish up with some commentary on our outlook for the third quarter and full year 2024 before opening the call up to questions.

David M. Overton: Thank you, Etienne. We delivered another solid quarter with revenues finishing towards the higher end of our expected range and profitability surpassing expectations, resulting in 24% year-over-year growth in adjusted earnings per share, the third consecutive quarter of 20% or greater growth. Comparable sales at the Cheesecake Factory restaurants were 1.4% for the second quarter, once again meaningfully outperforming the casual dining industry, resulting in record-high Cheesecake Factory restaurant average weekly sales as well as total company consolidated revenues.

With that, I'll turn the call over to David Overton.

David M. Overton: Thank you, Etienne. We delivered another solid quarter with revenues finishing towards the higher end of our expected range and profitability surpassing expectations, resulting in 24% year-over-year growth in adjusted earnings per share.

Mac: the third consecutive quarter of 20% or greater growth.

Speaker Change: Comparable sales at the Cheesecake Factory restaurants were 1.4 percent.

for the second quarter. Once again, meaningfully.

Speaker Change: outperforming the casual dining industry, resulting in record-high Cheesecake Factory restaurant

Speaker Change: average weekly sales, as well as total company consolidated revenues.

David M. Overton: Annualized unit volumes at the Cheesecake Factory reached $12.5 million for the quarter, and our newest restaurant in Orem, Utah, opened to tremendous demand, underscoring the strong affinity for the Cheesecake Factory brand and the unique dining experiences we provide for our guests. Operational performance within the four walls was once again excellent in the second quarter, with our operators intensely focused on fostering an environment where delivering delicious, memorable experiences for our guests is the top priority while effectively managing their restaurants.

Speaker Change: Annualized unit volumes at the Cheesecake Factory reached 12.5 million.

Speaker Change: for the quarter, and our newest restaurant in Orem, Utah, open to tremendous demand, underscoring the strong affinity for the Cheesecake Factory brand and the unique dining experiences we provide for our guests.

Speaker Change: Operational performance within the four walls was once again excellent in the second quarter with our operators intensely focused on fostering an environment where delivering delicious memorable experiences

Speaker Change: for our guests is the top priority while effectively managing their restaurants.

Speaker Change: To this point, they drove year-over-year improvements in food efficiencies, labor productivity, overtime, and wage management, contributing to significantly enhanced restaurant-level profitability.

Speaker Change: In fact, the Cheesecake Factory restaurant's four wall margin was 17.7% for the quarter, the highest level in the past six years.

David M. Overton: To this point, they drove year-over-year improvements in food efficiencies, labor productivity, overtime, and wage management, contributing to significantly enhanced restaurant-level profitability. In fact, the Cheesecake Factory Restaurant's four-wall margin was 17.7% for the quarter, the highest level in the past six years. Moving on to development, we successfully opened five restaurants in the second quarter, including One Cheesecake Factory and One North Italia.

Speaker Change: Moving on to development, we successfully opened five restaurants in the second quarter, including one Cheesecake Factory, one North Italia, one FRC restaurant, and two Flower Child locations.

David M. Overton: One FRC restaurant and two Flower Child locations, all of which have opened to impressive demand, reinforcing our confidence in the strength of our experiential brands and their long-term growth potential. One Cheesecake Factory restaurant has also opened in Asia. Additionally, subsequent to Quarter End, we opened a Blanco in Southern California. With 11 restaurant openings so far this year, we're well positioned to meet our objective of opening as many as 22 new restaurants in 2024, including as many as three Cheesecake Factories, six to seven North Italia's, 6-7 Flower Childs, and 7-8 FRC Restaurants.

Speaker Change: All of which have opened to impressive demand, reinforcing our confidence in the strength of our experiential brands and their long-term growth potential.

Speaker Change: One Cheesecake Factory restaurant also opened in Asia. Additionally, subsequent to Quarter End, we opened a Blanco in Southern California.

Speaker Change: With 11 restaurant openings so far this year, we're well positioned to meet our objective of opening as many as 22 new restaurants in 2024, including as many as three Cheesecake Factories, six to seven North Italias,

Speaker Change: 6-7 Flower Child, and 7-8 FRC Restaurants.

David M. Overton: In closing, we delivered another quarter of consistent and competitively strong results, supporting our belief that our strategy of focusing on what we do best, delivering exceptional service, hospitality, and delicious memorable experiences for our valued guests, will continue to differentiate us in the industry and allow us to drive profitable sales growth over the long term. With that, I will now turn the call over to David Gordon to provide an operational update.

Speaker Change: In closing, we delivered another quarter of consistent and competitively strong results.

Speaker Change: supporting our belief and our strategy of focusing on what we do best.

Speaker Change: Delivering exceptional service, hospitality, and delicious memorable experiences for our valued guests will continue to differentiate us in the industry and allow us to drive profitable sales growth over the long term.

Speaker Change: With that, I will now turn the call over to David Gordon to provide an operational update.

David M. Gordon: to comparable traffic exceeding the Black Box Casual Dining Index by 280 basis points. These improvements are driven by our uncompromising commitment to operational excellence. And the ongoing investments we make in our managers and staff to drive strong staff engagement and retention. As we've said before, we believe our staffing success has been a key contributor to our operational execution. And in the second quarter, we continue to produce year-over-year improvements in both manager and hourly staff retention, and our already high staff engagement scores increased even further from a year ago. Now turning to the sales trip.

David: Thank you, David.

David M. Gordon: During the second quarter, our best-in-class operators not only drove significant profitability improvement, but just as important,

Speaker Change: continue to make incremental advances and get satisfaction.

Speaker Change: with virtually every key on-premise and off-premise net promoter score metric that we track for the Cheesecake Factory ending the quarter at an historic high.

Speaker Change: which we believe contributed to comparable traffic exceeding the black box casual dining index by 280 basis points.

Speaker Change: These improvements are driven by our uncompromising commitment to operational excellence and the ongoing investments we make in our managers and staff to drive strong staff engagement and retention.

Speaker Change: As we've said before, we believe our staffing success has been a key contributor to our operational execution.

Speaker Change: And in the second quarter, we continued to produce year-over-year improvements in both manager and hourly staff retention, and our already high staff engagement scores increased even further from a year ago.

David M. Gordon: Cheesecake Factory's off-premise sales remained relatively stable at 21% of sales for the second quarter, which equates to over $50,000 in off-premise average weekly sales, more than double the average of our next closest peer. North Italia's second quarter comparable sales increased 2% from the prior year, resulting in annualized AUVs of $7.9 million. Notably, our second quarter, new restaurant opening, and the Charlotte market, Valentine, opened to tremendous demand, with average weekly sales of over $188,000 for the first seven weeks. The restaurant level profit margin for the adjusted mature North Italia locations was 15.3% for the quarter.

Speaker Change: Now turning to sales trends.

Speaker Change: Cheesecake Factory's off-premise sales remained relatively stable at 21% of sales for the second quarter, which equates to over $50,000 in off-premise average weekly sales, more than double the average of our next closest peer.

Speaker Change: North Italia's second quarter comparable sales increased 2% from the prior year, resulting in annualized AUBs of $7.9 million.

Speaker Change: Notably, our second quarter new restaurant opening and the Charlotte Market Valentine opened to tremendous demand, with average weekly sales of over $188,000 for the first seven weeks.

Speaker Change: Restaurant level profit margin for the adjusted mature North Italia locations was 15.3% for the quarter.

David M. Gordon: In the second quarter, we also opened a culinary dropout in Dallas at two Flower Child locations, one in Ballantyne, across from the new North Italia, and the other in the St. Louis Market. Similar to the North Italia location, all three opened to higher than expected demand, bolstering our confidence in the developing concepts in our portfolio and their ability to meaningfully contribute to our overall growth going forward. Other Fox restaurant concepts had annualized AUVs of $7 million.

Speaker Change: In the second quarter, we also opened a culinary dropout in Dallas at two Flower Child locations, one in Ballantyne across from the New North Italia, and the other in the St. Louis Market.

Speaker Change: Similar to the new North Italia location, all three open to higher than expected demand, bolstering our confidence in the developing concepts in our portfolio and their ability to meaningfully contribute to our overall growth going forward.

Speaker Change: Other Fox restaurant concepts, annualized AUVs, were $7 million.

David M. Gordon: And lastly, we just eclipsed the one-year anniversary of the launch of the Cheesecake Rewards Program, and we remain very pleased with the program's performance. Acquisitions continue to exceed our internal expectations, and we remain encouraged by the level of member activity and engagement that we are seeing. This year, in celebration of National Cheesecake Day, rewards members were able to enjoy any slice for half price on any dine-in visit on both Monday, July 29th, and Tuesday, July 30th.

Speaker Change: And lastly, we just eclipsed the one-year anniversary of the launch of the Cheesecake Rewards Program, and we remain very pleased with the program's performance.

Speaker Change: Acquisitions continue to exceed our internal expectations, and we remain encouraged by the level of member activity and engagement that we are seeing.

Speaker Change: This year, in celebration of National Cheesecake Day, rewards members were able to enjoy any slice or half price on any dine-in visit on both Monday, July 29th, and Tuesday, July 30th.

David M. Gordon: This is an example of a marketable moment with rewards members receiving an exclusive benefit to drive member engagement and ultimately incremental traffic for our business over the long term. And with that, I will turn the call over to Matt for our financial... Thank you, David.

Matt: This is an example of a marketable moment with rewards members receiving an exclusive benefit to drive member engagement and, ultimately, incremental traffic for our business over the long term. And with that, let me turn the call over to Matt for our financial review.

Matt: Let me first provide a high-level recap of our second quarter results versus our expectations I outlined last quarter. Total revenues of $904 million finished towards the higher end of the range we provided. Adjusted net income margin of 5.9 percent well exceeded the high end of the guidance we provided. And we returned $17.7 million to our shareholders in the form of dividends and stock repurchase.

Matt: Thank you, David. Let me first provide a high-level recap of our second quarter results versus our expectations I outlined last quarter.

Matt: Total revenues of $904 million finished towards the higher end of the range we provided.

Matt: Adjusted net income margin of 5.9%, well exceeded the high end of the guidance we provided.

Speaker Change: And we returned $17.7 million to our shareholders in the form of dividends and stock repurchases.

Matt: Now turning to some more specific details about the quarter. Second quarter total sales at the Cheesecake Factory restaurants were $677 million, up 4% from the prior year. Comparable sales increased 1.4% versus the prior year. Total sales for North Italia were $75.5 million, up 15% from the prior year period.

Speaker Change: Now turning to some more specific details around the quarter.

Speaker Change: Second quarter total sales at the Cheesecake Factory restaurants were $677 million, up 4% from the prior year.

Speaker Change: Comparable sales increased 1.4% versus the prior year.

Speaker Change: Total sales for North Italia were $75.5 million, up 15% from the prior year period.

Matt: Other FRC sales totaled $73.6 million, up 12% from the prior year, and sales for an operating week were $134,100. Flower Child sales totaled $35.7 million, up 7% from the prior year, and sales per operating week were $85,900, and external bakery sales were $13.6 million, down 12% from the prior year. Now moving to year-over-year expense variance commentary. In the second quarter, we continued to realize improvement across several key line items in the P&L.

Speaker Change: Other FRC sales totaled $73.6 million, up 12% from the prior year, and sales per operating week were $134,100.

Speaker Change: Flower Child sales totaled $35.7 million, up 7% from the prior year, and sales per operating week were $85,900.

Speaker Change: And external bakery sales were $13.6 million, down 12% from the prior year.

Speaker Change: Now moving to year-over-year expense variance commentary.

Matt: Specifically, cost of sales decreased 90 basis points, primarily driven by higher menu pricing than commodity inflation. Labor as a percent of sales decreased 20 basis points, primarily driven by higher menu pricing than labor inflation and labor productivity improvement, partially offset by higher management labor due to our improved staffing position as a result of increased retention. Other operating expenses increased 20 basis points. GNA decreased 40 basis points, mostly driven by lower legal fees.

Speaker Change: In the second quarter, we continued to realize improvement across several key line items in the P&L.

Speaker Change: Specifically, cost of sales decreased 90 basis points, primarily driven by higher menu pricing than commodity inflation.

Speaker Change: Labor as a percent of sales decreased 20 basis points, primarily driven by higher menu pricing than labor inflation and labor productivity improvements.

Speaker Change: Partially offset by higher management labor due to our improved staffing position as a result of increased retention.

Speaker Change: Other operating expenses increased 20 basis points.

Speaker Change: G&A decreased 40 basis points, mostly driven by lower legal fees, and depreciation increased 10 basis points as a percent of sales.

Speaker Change: Pre-opening costs were $7 million in the quarter, compared to $6 million from the prior year period.

Matt: And depreciation increased 10 basis points as a percent of sales. Pre-opening costs were $7 million in the quarter, compared to $6 million in the prior year period. We opened five restaurants during the second quarter versus three restaurants in the second quarter of 2023. And in the second quarter, we reported a pre-tax net expense of $1 million primarily related to FRC acquisition-related expenses and impairment of assets and lease termination income. Second quarter GAAP diluted net income per share was $1.08. Adjusted diluted net income per share was $1.09.

Speaker Change: We opened five restaurants during the second quarter versus three restaurants in the second quarter of 2023.

Speaker Change: And in the second quarter, we reported a pre-tax net expense of $1 million, primarily related to FRC acquisition-related expenses and impairment of assets and lease terminations income.

Speaker Change: Second quarter GAAP, diluted net income per share, was $1.08.

Speaker Change: Adjusted diluted net income per share was $1.09.

Matt: Now turning to our balance sheet and capital allocation. The company ended the quarter with total available liquidity of approximately $277 million, including a cash balance of about $41 million and approximately $237 million available on a revolving credit facility. Total debt outstanding was unchanged at $475 million in principal.

Speaker Change: Now turning to our balance sheet and capital allocation.

Speaker Change: The company ended the quarter with total available liquidity of approximately $277 million, including a cash balance of about $41 million and approximately $237 million available on a revolving credit facility.

Speaker Change: Total debt outstanding was unchanged at $475,000,000 in principal.

Matt: Capital expenditures totaled approximately $29 million during the second quarter for new unit development and maintenance. During the quarter, we completed approximately $3.9 million in share repurchases and returned $13.9 million to shareholders via our dividend. Now, let me turn to our outlook.

Speaker Change: CAVX totaled approximately $29 million during the second quarter for new unit development and maintenance.

Speaker Change: During the quarter, we completed approximately $3.9 million in share repurchases and returned $13.9 million to shareholders via our dividend.

Matt: While we will not be providing specific comparable sales and earnings guidance, we will provide our updated thoughts on our underlying assumptions for Q3 and full year 2024. The assumptions factor in everything we know as of today, which includes net restaurant counts, quarter-to-date trim, what we think will happen in the weeks ahead, and the effect of any impacts associated with the holiday, and it assumes no material operating or consumer disruption. For Q3, we anticipate total revenues to be between $855 million and $870 million, which represents year-over-year growth similar to Q2.

Speaker Change: While we will not be providing specific comparable sales and earnings guidance, we will provide our updated thoughts on our underlying assumptions for Q3 and full year 2024.

Matt: Next, at this time, we expect effective commodity inflation of low single digits for Q3, as our broad market basket remains very stable. We are modeling net total labor inflation of mid-single digits when factoring in the latest trends in wage rates and minimum wage increases as well as other components of labor. GMA is estimated to be about $57 million, and depreciation is estimated to be approximately $25 million. Based on these assumptions, we would anticipate net income margin to be about 2.6% to 3% based on the sales range provided. Now for the full year. Based on similar assumptions... we would anticipate total revenues for fiscal 2024 to be approximately $3.58 billion. For sensitivity purposes, we are using a range of plus or minus 50 basis points.

Speaker Change: We are modeling net total labor inflation of mid-single digits when factoring in the latest trends in wage rates and minimum wage increases, as well as other components of labor.

Speaker Change: GMA is estimated to be about $57 million.

Speaker Change: Depreciation is estimated to be approximately $25 million.

Speaker Change: Based on these assumptions, we would anticipate net income margin to be about 2.6% to 3% based on the sales range provided.

Matt: We currently estimate total inflation across our commodity baskets, labor, and other operating expenses to be in the low to mid-single-digit range and fairly consistent across the quarter. We are estimating G&A to be about 10 basis points higher year over year as a percent of sales, and depreciation to be about 101 million dollars for the year. And given our unit growth expectations... We are estimating pre-opening expenses to be approximately $28 million, which includes support for some early 2025 openings.

Speaker Change: We are estimating G&A to be about 10 basis points higher year over year as a percent of sales, and depreciation to be about $101 million for the year.

Speaker Change: And given our unit growth expectations, we are estimating pre-opening expenses to be approximately $28 million, which includes support for some early 2025 openings.

Matt: Based on these assumptions, we would expect full-year net income margin to be approximately 4.3 to 4.4 percent based on the sales range provided. Now, let me provide some additional context to the underlying assumptions that I just outlined.

Speaker Change: Based on these assumptions, we would expect full year net income margin to be approximately 4.3 to 4.4 percent based on the sales range provided.

Speaker Change: Now, let me provide some additional context for underlying assumptions that I just outlined.

Matt: First, we incorporated two Cheesecake Factory restaurant closures, one of which closed mid-July related to a leased exit, and the other expected to close mid-August related to the condemnation of the center our location is in. We adjusted expectations for our bakery external sales to be more in line with our performance in the first half of the year. And we updated sales projections for some of our lesser established concepts, which are performing more in line with broader casual dining sales trends in the first half of 2024.

Speaker Change: One of which closed mid-July, related to a leased exit.

Speaker Change: And the other expected to close mid-August, related to condemnation of the center our location is in.

Speaker Change: We adjusted expectations for our bakery external sales to be more in line with our performance in the first half of the year.

Speaker Change: And we updated sales projections for some of our lesser-established concepts, which are performing more in line with broader casual dining sales trends during the first half of 2024.

Matt: Importantly, our core and growth concepts, The Cheesecake Factory, North Italia, and Flour Chow, have outperformed the industry, and this has contributed to our overall sales stability and enhanced profitability relative to our expectations and last year's results. As such, we are increasing our net income margin projections for the full year 2024. In total, we believe we remain on track for both the top line and bottom line, as well as new unit openings, relative to our range of expectations at the beginning of the year.

Speaker Change: Importantly, our core and growth concepts.

Speaker Change: The Cheesecake Factory, North Italia, and Flour Child have outperformed the industry.

Speaker Change: And this has contributed to our overall sales stability and enhanced profitability relative to our expectations and last year's results.

Speaker Change: As such, we are increasing our net income margin projections for the full year 2024.

Speaker Change: In total, we believe we remain on track for both the top line and bottom line, as well as new unit openings, relative to our range of expectations at the beginning of the year.

Matt: Specifically, with regard to development, as David Overton highlighted earlier, we still plan to open as many as 22 new restaurants this year across our portfolio of concepts, with four to five openings in the third quarter and the remainder in the fourth quarter, continuing our balanced cadence of new restaurant openings for the year. And we would anticipate approximately $180 million to $200 million in CapEx to support this year's and some of next year's unit development, as well as required maintenance on our restaurant.

Speaker Change: Specifically, with regard to development, as David Overton highlighted earlier, we still plan to open as many as 22 new restaurants this year across our portfolio of concepts.

David M. Overton: With four to five openings in the third quarter, and the remainder in the fourth quarter, continuing our balanced cadence of new restaurant openings for the year.

Speaker Change: And we would anticipate approximately $180 million to $200 million in CapEx to support this year's and some of next year's unit development, as well as required maintenance on our restaurants.

Matt: In closing, we are leveraging the Cheesecake Factory's broad consumer appeal and high degree of relevance to drive sales. Our operators continue executing at an exceptionally high level to drive NPS and profitability, and our development pipeline remains intact. We have now delivered three consecutive quarters of strong results, including stable sales and significant profitability growth. We believe we are well-positioned to continue generating our historically consistent operational and financial results and making progress towards our longer-term goal of shareholder value creation. And with that said, we'll take your questions.

Speaker Change: In closing, we are leveraging the Cheesecake Factory's broad consumer appeal and high degree of relevance to drive sales.

Speaker Change: Our operators continue executing at an exceptionally high level to drive NPS and profitability.

Speaker Change: And, our development pipeline remains intact.

Speaker Change: We have now delivered three consecutive quarters of strong results, including stable sales and significant profitability growth.

Speaker Change: We believe we are well positioned to continue generating our historically consistent operational and financial results and making progress towards our longer term goal of shareholder value creation.

Speaker Change: And with that said, we'll take your questions.

Operator: Thank you. We will now open the line for questions. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. To withdraw your question, simply press star 1 again. We request that you limit yourself to one question and one follow-up. If you would like to ask additional questions, please rejoin the queue. Our first question comes from the line David Tarantino with Baird. Please go ahead.

Speaker Change: Thank you. We will now open the line for questions. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. To withdraw your question, simply press star 1 again.

Speaker Change: We request that you limit yourself to one question and one follow-up. If you would like to ask additional questions, please rejoin the queue.

Speaker Change: Our first question comes from the line of David Tarantino with Baird. Please go ahead.

David E. Tarantino: Hi, good afternoon. Matt, I guess my first question is on the guidance for the year, the revenue guidance. You know, it seems like you may have tweaked that lower. I think last time you said $3.6 billion, and now it's $3.58. And I know $3.58 rounds to $3.6, but it does, I guess your comments made it sound like that was lowered, and you called out a few factors, so I guess my question is, first, have you changed your outlook at all for the core brands, the Cheesecake Factory brands, or North Italia and that guidance?

David E. Tarantino: Hi, good afternoon. Matt, I guess my question, you know, my first question is on the guidance for the year, the revenue guidance. You know, it seems like you may have tweaked that lower. I think last time you said 3.5.

Speaker Change: 6 billion and now it's 3.58 and I know 3.58 rounds to 3.6 but it does I guess your comments made it sound like that was

Speaker Change: Lowered, and you called out a few factors. So I guess my question is, you know, first, have you changed your outlook at all for the core brands, the Cheesecake Factory brands, or North Italia and that guidance?

Matt: Yeah, David, this is Matt. That's a great question to lead off with. No. The core outlook for Cheesecake North and Flower Child remains intact. And, you know, we have a couple of, I won't call them random events because stuff happens in business all the time, but maybe more ancillary impacts on that aggregate top-line business. You know, we noted the two Cheesecake closures. That's about $10 million right there, so that's like half of it.

Speaker Change: Yeah, David, this is Matt. That's a super question to lead off with. No.

Speaker Change: The core outlook for Cheesecake North and Flower Child remains intact.

Speaker Change: And, you know, we have a couple of, I won't call them random events, because stuff happens in business all the time, but maybe more ancillary impacts to that aggregate top line business. You know, we noted the two...

Speaker Change: Cheesecake Closers. That's about 10 million right there, so that's like half of it. And then we've seen a little bit of softness in the retail segment. So those are really the biggest drivers. And it is, like you said, it rounds to it, but we just wanted to provide some context.

Matt: And then we've seen a little bit of softness in the retail segment, so those are really the biggest drivers. And, you know, it is, like you said, it rounds to it, but we just wanted to provide some context for sort of tweaking or, you know, refining that number for everybody.

Speaker Change: For sort of tweaking or, you know, refining that number for everybody.

David E. Tarantino: Great, great. That's helpful. And then, I think on the last Caller, you mentioned that you're running kind of flattest traffic at the Cheesecake Factory. Can you... Just give an update on where you ended the second quarter on that metric and what you're assuming for the rest of the year.

Speaker Change: Great, great, that's helpful. And then I think on the last...

Speaker Change: Carl, you mentioned that you're running kind of flattest traffic at the Cheesecake Factory. Can you just give an update on where you ended the second quarter on that metric and what you're assuming for the rest of the year?

Matt: Sure, so we ended the week with a negative 0.2% on traffic, and frankly, the Sunday before the 4th of July week, we were still slightly positive. I think everybody knows that week in the industry kind of bookended some negative news on either side of it. So I would say, to be totally fair, we were right on track for that slavish number, as we expected to be. And our expectations for the year have remained the same to run in that ballpark for the full year as well.

Carl: Sure, so we ended a negative 0.2%...

Carl: on traffic and frankly

David E. Tarantino: Great, thank you very much.

Speaker Change: The Sunday before the 4th of July week, we were still slightly positive. I think everybody knows that week.

Speaker Change: in the industry kind of bookended some negative news on either side of it. So, I would say, to be totally fair, we were right on track for that slavish number as we expected to be. And our expectations for the year have remained the same to run in that ballpark for the full year as well.

Speaker Change: Great. Thank you very much.

Andrew Marc Barish: Our next question comes from the line of Andy Barish with Jeffreys. Please go ahead.

Speaker Change: Our next question comes from the line of Andy Barish with Jeffreys. Please go ahead.

Andrew Marc Barish: Hey guys, the 17.7% cheesecake margins are really impressive, but when you look at the kind of gap to the enterprise margin that was reported, it looks like it's, you know, a little bit wider than what I recall, you know, about 150, 160 basis points. Is there something else going on here with increased growth in new concepts, or how should we think about sort of the early openings and maybe, you know, just the drag that some of those newer concepts create?

Andrew Marc Barish: Hey, guys.

Speaker Change: The 17.7% cheesecake margins, really impressive, but when you look at kind of the gap to the enterprise margin that was reported,

Andrew Marc Barish: It looks like it's, you know, a little bit wider than what I recall, you know, about 150, 160 basis points. Is there something else going on there with increased growth in the new concepts, or how should we think about...

Speaker Change: Sort of the early openings and maybe, you know, just the drag that some of those newer concepts create.

Matt: Yeah, Andy, this is Matt. It's a good question. We were really pleased with the 17.7 for Cheesecake Factory, for sure, as you noted, and we've made a ton of progress there. We've always talked about a one to two percent range from the core concept to the consolidated metric, and it ebbs and flows depending upon how many new restaurants are opening and all of the other concepts. And certainly, if you think about our outlook and where we're opening and how many of each concept, it was disproportionately newer concepts in the first half of the year, right?

Speaker Change: Yeah, it's a good question, and we were really pleased with the 17.7 for Cheesecake Factory for sure, as you noted, and we've made a ton of progress there. We've always talked about a 1 to 2 percent range.

Speaker Change: from the core concept to the consolidated metric. And it ebbs and flows depending upon how many new restaurants are opening and all of the other concepts. And certainly if you think about our outlook and where we're opening and how many of each concept, it was disproportionately newer concepts in the first half of the year, right? It was really just Orem of the Cheesecake Factory and that was just the very last.

Matt: It was really just Orem at the Cheesecake Factory, and that was just the very last week of the quarter. So, all of those other new concepts opened up, you know, which we had 10 openings in the first half of the year, which is, I think, really incredible for us too. So, that's really the difference between why. You might have seen a one percent sometimes. It could be 1.6 or something, as you said, and it's really the growth of those new concepts for that period of time.

Speaker Change: week of the quarter. So all of those other new concepts opened up, you know, which we had 10 openings in the first half of the year, which is

Speaker Change: I think really incredible for us too, so that's really the difference of why you might have seen a 1% sometimes, it could be 1.6% or something is what you said, and it's really the growth of those new concepts for that period of time.

Andrew Marc Barish: Gotcha. And then just the comps at North slowed down, obviously still really high unit volumes there, and it sounds like new stores are opening well. But anything with, you know, that you would point out, I know it's a relatively small comp base in the 2% number you reported for the GQ. Yeah.

Speaker Change: Gotcha, and then just the comps at North slowed down, obviously still really high unit volumes there, and it sounds like new stores are opening well, but anything that you would point out? I know it's a relatively small comp base in the 2% number you reported for the 2Q.

Matt: Yeah, and I would also just echo what I talked about the whole 4th of July. I think it literally rounded to 3% that Sunday, so it was just fractionally different than expectations, nothing more than that.

Speaker Change: Yeah, and I would also just echo what I talked about the whole 4th of July , I think it literally rounded to 3% that Sunday, so it was just a fractionally different than expectations. I had nothing more than that.

Jon Michael Tower: Okay, thank you very much.

Matthew Eliot Clark: and Matthew Clark.

Speaker Change: Okay, thank you very much.

Jon Michael Tower: Our next question comes from the line of John Tower with Citi. Please go ahead.

Speaker Change: Our next question comes from the line of John Tower with Citi. Please go ahead.

Jon Michael Tower: Great, thanks for taking the questions. Maybe just from a high level, kind of going back to the margin piece, it's impressive to hear Cheesecake, you know, close to 18% this quarter.

Jon Michael Tower: piece, it's impressive to hear Cheesecake, you know, close to 18% this quarter. And I'm just curious, when kind of zooming out and looking at the company over time, obviously, you've made some pretty good progress from where you were on store level margins, but trying to think about the brands or the enterprise over the longer term. Do you see a path to reaching, you know, say, above pre-pandemic levels when it comes to consolidated store level margins? So, you know, closer to that 16, 17% that you had, you know, in the 18, 19 timeframe?

Speaker Change: And I'm just curious, when kind of zooming out and looking at the company over time, obviously you've made some pretty good progress from where you were on store-level margins, but...

Speaker Change: I'm trying to think about the brands or the enterprise.

Speaker Change: Over the longer term, do you see a path to reaching, you know, say above pre-pandemic levels when it comes to consolidated store-level margins? So, you know, closer to that 16, 17 percent that you had, you know, 18, 19 timeframe?

Matt: John, this is Matt. Yeah, we do. I mean, we think that the business should operate between 16 and 18 percent. That's sort of like economics when we're supplying the man with meat in casual dining. It certainly will depend on the rate of growth in any given period of time. So if you think about pre-pandemic times, also, we just didn't have as much growth. And that does weigh on the enterprise margin for that period of time.

Matt: John , this is Matt. Yeah, we do. I mean, we think that...

Matt: The business should operate between 16% and 18%. That's sort of like.

Speaker Change: Speak on when we're supplying the man meat in casual dining. It certainly will depend.

Speaker Change: on the rate of growth in any given period of time. So if you think about pre-pandemic, also, we just didn't have as much growth. And that does weigh on the enterprise margin for that period of time, right? So I think that is going to be a piece of it. I mean, that being said, the more progress we make in Cheesecake, the more we'll absorb that growth. And I think, you know, getting in over 16% is still our goal. And given the progress that we've made over the past 18 months, it's definitely in our sights.

Matt: So I think that is going to be a piece of it. I mean, that being said, the more progress we make in cheesecake, the more we'll absorb that growth. And I think getting in over 16 percent is still our goal. And given the progress that we've made over the past 18 months, it's definitely in our sights.

Jon Michael Tower: Okay, and in terms of thinking about that timeline, are you thinking, you know, this is something achievable over the next five years? Or do you think that's, you know, more beyond that, because your system needs to continue to grow to reach that?

Speaker Change: Okay and in terms of thinking about that timeline are you thinking you know this is something achievable over the next five years or do you think that's you know more beyond that because your system needs to continue to grow to reach that?

Matt: I would say it's been less than five years. I mean, I think, you know, the trajectory that we're on is positive. The underlying fundamentals of the business are stable. When you look at things like wage growth and commodities being, you know, relatively benign, it gives us an opportunity to rebuild. You know, much like we did when we came out of the financial crisis, right? I think there's a real parallel at this point in time. So, you know, I don't know about a specific time, but certainly, you know, well in advance of five years, for sure.

Speaker Change: I would say it's less than five years. I mean, I think...

Speaker Change: You know, the trajectory that we're on is positive.

Speaker Change: The underlying fundamentals of the business are stable. When you look at things like wage growth and commodities being...

Speaker Change: [inaudible]

Jon Michael Tower: Got it. And then just one clarification on the bakery comments that you made earlier, the growth going forward. Are you expecting the percentage growth to stay the same or grow by dollars in terms of the back half of the year relative to what we saw in the first half? Uh, per se, really the...

Speaker Change: Got it. And then just one clarification on the bakery comments that you made earlier, the growth going forward. Are you expecting the percentage growth to stay the same or dollars in terms of the back half of the year relative to what we saw in the first half?

Jon Michael Tower: percent really the percentage, so it's just a little bit of pressure on the you know branded retail. I mean, I think you've seen that from other big CPG companies so

Speaker Change: percent really the percentage so it's just a little bit of pressure on the you know branded retail I mean I think you've seen that from other big CPG companies so

Brian Hugh Mullan: Our next question comes from the line of Brian Mullan with Piper Sandler. Please go ahead.

Speaker Change: Got it. Thank you.

Speaker Change: Our next question comes from the line of Brian Mullan with Piper Sandler. Please go ahead.

David M. Gordon: Hey, thank you. I just wanted to ask about California, just given your exposure there, I wanted to ask what you're seeing from that consumer over the last few months. Are the trends much different than the rest of the system? Has anything surprised you one way or the other in terms of consumer response to some of the changes on the non-full service, any color would be great.

Brian Hugh Mullan: Hey, thank you. I just wanted to ask on California, just given your exposure there, I wanted to ask what you're seeing from that consumer over the last few months. Are the trends much different than the rest of the system? Has anything surprised you one way or the other in terms of...

Speaker Change: Consumer response to some of the changes on the non-full service. Any color would be great.

Brian Hugh Mullan: Hi Brian, this is David Gordon. Thanks for the question. We're seeing pretty consistent trends across all geographies, really no additional pressure in California. I know that has been reported recently, probably a little bit more in the QSR world, but we're not seeing that certainly. We're also not really seeing any impact yet on wages at all from the FAST Act, which are two positive signs for us. So really, no change.

David M. Gordon: Hi Brian , this is David Gordon. Thanks for the question. We're seeing pretty consistent trends across all geographies. Really no additional pressure in California. I know that has been reported recently, probably a little bit more in the QSR.

Speaker Change: We're also not really seeing any impact yet on wages at all from the FAST Act, which are two positive signs for us. So really, no change.

Matt: Okay, thanks. And then just some of the comments where the core brands are outperforming the industry, and then maybe some of the FRC brands are more in line with the industry. You know, when you're seeing that in what is a pretty tough industry environment, does that make you evaluate or rethink how many non-core brand units you would want to open in the years ahead? Or, you know, the flip side of that is maybe not because those units could, one of those could turn into the next core brand, but I'd just be curious to hear your thinking and if you evaluate that from time to time. Right?

Speaker Change: Okay, thanks. And then just some of the comments where the core brands are outperforming the industry and then maybe some of the FRC brands are more in line with the industry. You know, when you're seeing that in what is a pretty tough industry environment,

Speaker Change: Does that make you evaluate or rethink, you know, how many non-core brand units you'd want to open in the years ahead or, you know, I know the flip side of that is maybe not because those units could, one of those could turn into the next core brand, but I'd just be curious to get your thinking and if you evaluate that from time to time.

Brian Hugh Mullan: Brian, this is Matt. We, of course, look at that. I mean, we have tremendous faith in all of those concepts. We view the environment as being relatively tough and transitory, notwithstanding the outperformance of some of our concepts. I think we've seen a little bit of alcohol trade decline, which has resulted in that. But the unit economics across the FRC concepts are tremendously strong still and, you know, worthy of growth. So we're going to continue to invest, as we always have, for the long term and not for one quarter or the next.

Speaker Change: Brian , this is Matt. We, of course, look at that. I mean, we...

Speaker Change: [inaudible]

Speaker Change: Tremendous faith in all of those concepts. We view the environment as being...

Speaker Change: Relatively tough and transitory, notwithstanding the outperformance in some of our concepts.

Speaker Change: I think we've seen a little bit of alcohol trade down, which has resulted in that, but the unit economics across the FRC concepts are tremendously strong still and, you know, worthy of growth. So we're going to continue to invest.

Speaker Change: As we always have for the long term and not for one quarter or the next.

Katherine Anne Griffin: Our next question comes from the line of Katherine Griffin with Bank of America. Please go ahead.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Katherine Griffin with Bank of America. Please go ahead.

Matt: Hi, thank you. First, I wanted to ask for clarification on the unit growth outlook. It looked to me like you raised the guidance for some of the, for the Fox restaurant concepts, which I believe doesn't include Flower Child. So I think the Flower Child guidance is intact, but you raised the guidance for some of the other concepts. But I'm trying to square that, I guess, with some of your comments about the outperformance of North Italia and Flower Child relative to your expectations. And I guess, yes, but what's essentially behind that increase in the unit growth outlook that we should be considering?

Katherine Anne Griffin: Hi, thank you. First, I wanted to ask a clarification on the unit growth outlook. It looked to me like you raised the guidance for some of the, for the Fox restaurant concepts, which I believe doesn't include Flower Child. So I think the Flower Child guidance is intact, but you raised the guidance for some of the other concepts.

Speaker Change: But I'm trying to square that, I guess, with some of your comments about the outperformance of North Italia and Flower Child relative to your expectations, and I guess, yes, what's essentially behind that increase in the unigrowth outlook that we should be considering?

Katherine Anne Griffin: So Katherine, this is Matt. I would think about it as a fungible pool over time. Now one of those locations that we've been targeting for opening will not go unopened over time. It just may be in the fourth quarter; it could be in the first quarter of next year. So frankly, I just wouldn't read anything into the specific movement of one or another in a given year. It's really about the timing and when that makes the most sense from a construction standpoint and our resources for our new opening teams. We are completely bullish on our pipeline. We think we're in really great shape for this year and, frankly, for next.

Speaker Change: So Katherine, this is Matt. I would think about it as a fungible pool over time.

Katherine Anne Griffin: Now, one of those locations that we've been targeting opening

Katherine: will not go unopened over time. It just may be in the fourth quarter, it could be in the first quarter of next year. So frankly, I just wouldn't read anything into the specific movement of one or another in a given year. It's really about the optimizing of the timing and when that makes the most sense from a construction standpoint and a resources for our new opening teams. We were completely bullish on our pipeline. We think we're in really great shape for this year and frankly for next.

Katherine Anne Griffin: Great, thank you. And then the second question is just if you're seeing anything as far as quarter-to-date trends as far as, you know, changes in seasonality, I know you spoke about seeing some pretty resilient comps up until July 4. But I'm just curious if you're seeing any differences, whether that's impacts from hybrid work or extended, you know, summer vacations that are embedded in your 3Q top line expectations.

Speaker Change: Great, thank you. And then the second question is just if you're seeing anything as far as quarter-to-date trends that, you know, as far as like changes in seasonality. I know you spoke to seeing some like pretty resilient comps up until July 4th, but I'm just curious if you're seeing any differences whether that's, you know, impacts from hybrid work or extended, you know, summer vacations that are embedded in your 3Q top line expectations.

Matt: Yeah, Katherine, I do think the one thing to call out, which has been noted by many others, you know, as hot as it has been in so many parts of the country, it can impact patio utilization. And so I think that that just can ebb and flow depending on, I don't know if it's a permanent change in seasonality, or sometimes it's more in June and July than it is in August and September.

Speaker Change: Yeah, Katherine, it's Matt. I do think the one thing to call out, which I think has been noted in many others,

Speaker Change: You know, as hot as it has been in so many parts of the country, it can impact patio utilization.

Speaker Change: Right. And so I think that just can ebb and flow depending on, I don't know if it's a permanent change in seasonality, or sometimes it's more in June and July than it is in August and September . But all of that's factored into our expectations. Otherwise, you know, we do believe that

Matt: But all of that's factored into our expectations. Otherwise, we do believe that things are slightly different than 10 years ago, but that started really before COVID too. So I think it's just returning to what a normal seasonal pattern would be post-pandemic.

Speaker Change: Things are slightly different than, you know, 10 years ago, but that had started really before COVID, too, so I think it's just returning to what a normal seasonal pattern would be, you know, post-pandemic.

Brian Michael Vaccaro: Our next question comes from the line of Brian Vaccaro with Raymond James. Please go ahead.

Katherine: Thank you.

Katherine: Our next question comes from the line of Brian Vaccaro with Raymond James. Please go ahead.

Brian Michael Vaccaro: Hi, thanks, and good evening. Matt, on Cheesecake Factory's comps, could you please comment kind of specifically on the cadence that you saw through the quarter and any color on what you're seeing in July? It seems like the casual dining segment data has softened up. Curious if you're seeing that. Any changes in consumer behavior or one-off items you think are worth highlighting?

Brian Michael Vaccaro: Hi, thanks and good evening. Matt, on Cheesecake Factory's comps, could you comment kind of specifically on the cadence that you saw through the quarter and any color on what you're seeing in July ? It seems like

Speaker Change: The casual dining segment data has softened up. Curious if you're seeing that. Any changes in consumer behavior or one-off items you think are worth highlighting?

Matt: We've obviously been paying a lot of attention to that and doing a lot of analytics. The year has been very consistent for us, and Cheesecake Factory, particularly. Whether you're looking at a one-year stack, a two-year stack, or a five-year stack, it just hasn't moved that much. And I'm talking about plus or minus or percent over months, not a very, very big variance. So we feel pretty good about the predictability and the stability of that concept and are weathering the storm well.

Speaker Change: We've obviously been paying a lot of attention to that and doing a lot of analytics.

Speaker Change: I, the year has been.

Matt: Very consistent.

Matt: for us, and Cheesecake Factory particularly. You know, whether you're looking at a one-year stack, a two-year stack, or a five-year stack, it just hasn't moved that much. And I'm talking about, you know, plus or minus or percent over months is not a very, very big variance. And so we feel pretty good about the predictability and the stability of that concept and weathering the storm wall. I think, as I noted to Katherine, in July , the one thing I would call out is weather. I mean, that was tremendously hot in parts of the Northeast, all across the country, really. I think that did impact the patio usage, which we're able to.

Matt: I think, as I noted to Katherine, in July, the one thing I would call out is weather. I mean, it was tremendously hot in parts of the Northeast, all across the country, really. I think that did impact patio usage, which we're able to accurately assess and sort of understand. But otherwise, I feel like our trends for the past six, seven months have been in a very tight range.

Matt: accurately assess and sort of understand. But otherwise, I feel like our trends for the past six, seven months have been in a very tight range.

Brian Michael Vaccaro: Okay, and can you remind us about Cheesecake's patio business? What percent of sales this time of year come from the patio or overall?

Speaker Change: Okay and can you remind us on on Cheesecake's patio business what percent of sales this time of year come from the patio or seats overall or patio at Cheesecake?

Matt: Yeah, I think it's around. I'll double check where we can get you something specific. I'll make a comment off the top of my head, but Etienne and the team will make sure it's right.

Speaker Change: Yeah, I think it's around... I'll double check while we can get you something specific. I'll comment off the top of my head, but Etienne and the team will make sure it's right. I think it's around 15%.

Brian Michael Vaccaro: I think it's around 15%. But certainly peak summer is less than that. That's more like an annualized number. So it could be 10 in peak summer. Spring and fall have the highest for obvious reasons, you know, but winter is then strong in Arizona and Florida. So it kind of depends. So we'll get a specific number for you. Okay.

Speaker Change: But certainly, peak summer is less than that. That's more like an annualized number, so it could be 10 in peak summer. You know, spring and fall have highest for obvious reasons.

Speaker Change: But winter is then strong in Arizona and Florida, so it kind of depends, so we'll get a specific number for you. Okay, okay, thank you. And sorry if I missed it earlier, but could you just run through the components for both Cheesecake and North?

Brian Michael Vaccaro: Okay, okay, thank you. And sorry if I missed it earlier, but could you just run through the comp components for both Cheesecake and North?

Matt: Yes, for Cheesecake, like I said, the traffic was a negative 0.2, the pricing was 4.5, and the mix was a negative 2.9. So I think all of those factors came in pretty much right in line with where we expected them to.

Speaker Change: IGS for Cheesecake

Speaker Change: Okay, so the traffic was a negative .2...

Etienne: The pricing was 4.5 and the mix was a negative 2.9, so I think all of those factors came in pretty much right in line with where we expected them to. Etienne, do you have the north ones in front of you? I do. Okay, great. So north traffic was negative 1, price was 6%, and mix was negative 3%.

Etienne Marcus: Etienne, do you have the north ones in front of you? I do. Okay, great. So north traffic was negative 0.2.

Etienne Marcus: So north traffic was a negative one. Price was 6%, and mix was negative 3%.

Brian Michael Vaccaro: Okay, great. And then just last one, if I could, on the GNA, you said that the second quarter came in quite a bit more favorable. I think you mentioned legal costs, but maybe you could just flesh that out a little bit for us. But I think you also raised your GNA guide for the year a little bit. Any color on that would be helpful. Thank you. Uh, sure.

Speaker Change: Okay, great. And then just last one, if I could, on the G&A, you said that the second quarter came in quite a bit more favorable. I think you mentioned legal costs, but maybe you could just flesh that out a little bit for us. But I think you also raised your G&A guide for the year a little bit. Any color on that would be helpful. Thank you.

Matt: Sure, I think that we said in the last quarter that we'd be up 10 basis points, which was a slight increase over Q1. So, we're maintaining that same perspective. Kind of like I said on the last call, DNA can be a little bit lumpy.

Speaker Change: Uh, sure. I think that we, in the last quarter, said...

Speaker Change: We'd be up 10 basis points.

Speaker Change: which that now was a slight increase over Q1. So, but we're maintaining that same perspective. Kind of like I said in the last call, DNA can be a little bit lumpy.

Matt: Not everything is 100% controllable quarter to quarter. We did have one or two particularly large settlements last year. And we've just seen some favorable management in the legal area that contributed to some savings. So you know, honestly, too, given the environment, we're just buckling down, and everybody's watching every penny, right? So we're just trying to make sure that we're in line with sales and driving profitability.

Speaker Change: Not everything is 100% controllable, quarter-to-quarter.

Speaker Change: We did have one or two particularly large settlements.

Speaker Change: , and I'm going to hand it over to Matt. Matt, thank you so much for your time. We've seen a lot of great work last year, and we've just seen some favorable management in the legal area that contributed to some savings. Honestly, too, given the environment, we're just buckling down, and everybody's watching every penny.

Matt: Sales and Driving Profitability.

Brian James Harbour: Our next question comes from the line of Brian Harbour with Morgan Stanley. Please go ahead.

Matt: Alright, thank you.

Speaker Change: Our next question comes from the line of Brian Harbour with Morgan Stanley . Please go ahead.

Brian James Harbour: Yeah, thank you. Good afternoon.

Brian James Harbour: Yeah, thank you. Good afternoon. Matt, maybe just another small cost question, but you're seeing kind of favorability in the labor and food lines. There's still a little bit of pressure on the other OPEX line. Could you comment on, you know, what's driving that? Do you think that still kind of continues in the supply chain?

Matt: Um, Matt, maybe just another small cost question, but what you're seeing kind of favorability in the labor and food lines, there's still a little bit of pressure on the other OPEX line. Could you comment on, you know, what's driving that? Do you think that still kind of continues in the

Speaker Change: Second half.

Speaker Change: Yeah, I mean, as we've talked about, there are multiple factors, but we obviously are spending more on marketing because of the rewards program.

Matt: Yeah, I mean, as we've talked about, there are multiple factors, but we obviously are spending more on marketing because of the rewards program. So I think we should point that out that we're still lapping that in the second quarter. So absent that, it's pretty much in line. We didn't see any... There was like a 10th here, but a positive 10th there. There was nothing material outside of it. So again, for the balance of the year, we would expect to be similar to last year as a percent of sales. Yeah, pretty flattish as a percent of sales, particularly for the third quarter and maybe a little bit of benefit in the fourth quarter. But that's pretty much what we're thinking at this point.

Speaker Change: So I think we called that out that we're still lapping that in the second quarter.

Speaker Change: So, absent that, it's pretty much in line, you know, we didn't see any, there was like a 10th year, but a positive 10th there, there was nothing material outside of it, so, again, for the balance of the year, we would expect to be similar to last year as a percent of sales? Yeah, pretty flattish as a percent of sales.

Speaker Change: Particularly for the third quarter, and maybe a little bit of benefit in the fourth quarter, but that's pretty much what we're thinking at this point in time.

Brian James Harbour: Okay, got it. Makes sense. North Italia comps you. You said it was kind of in line with your expectations. I guess, you know, are some of the older stores consistent with that number, are they drastically different, you know, what do you think kind of could drive North Italia comps over time if perhaps they were to pick up?

Speaker Change: Okay, got it. Makes sense.

Speaker Change: North Italia Comps, you...

Speaker Change: You know, you said it was kind of in line with your expectations. I guess, you know, are some of the older stores consistent with that number? Are they drastically different? You know, what do you think kind of can drive North Italia comps over time if perhaps they were to pick up?

Matt: I think it's pretty consistent. You know, it's a small base, Brian. So there's always going to be one restaurant here or there that's slightly different from the others.

Speaker Change: I think it's pretty consistent, you know, there's always, it's a small base, Brian , so there's always going to be...

Speaker Change: One restaurant here or there that's slightly different than the others. You know, we're pretty happy. I think in the long term we target about 3% so we're right in the ballpark for that. You know, I think if you think about Cheesecake Factory managing through a little bit of the negative mix component there, and they have a little bit too on the alcohol side, but we feel like it's pretty stable. And so we're not concerned. We feel like it's right on track, as David Gordon mentioned.

Brian James Harbour: You know, we're pretty happy. I think in the long term, we target about 3%. So we're right in the ballpark for that. You know, I think if you think about Cheesecake Factory managing through a little bit of the negative mix component there, and they have a little bit too much on the alcohol side, but we feel like it's pretty stable. And so we're not concerned. We feel like it's right on track. As David Gordon mentioned, our newest opening was one of the best we've ever had, so we know it's responding. But I think there's just a little bit of recalibration on the mix that I think will stabilize in the course of the next 6 to 12 months.

Speaker Change: Our newest opening was one of the best we've ever had, so we know it's resonating, but I think there's just a little bit of recalibration on the mix that I think stabilizes in the course of the next 6-12 months.

Dennis Geiger: Our next question comes from the line of Dennis Geiger with UBS. Please go ahead.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Dennis Geiger with UBS. Please go ahead.

Dennis Geiger: Great, thank you. Matt, you might have just touched on some of this just there, but as it relates to that mixed breakdown, I think you've given some good detail in the

Dennis Geiger: in prior quarters and thinking about alcohol, you know, sides, group order. Can you do that a little more, provide some more specific color there? And I think you kind of talked about the mixed outlook a little bit there, but can you go into that a little more? Can we still maybe get to a flat-ish by the end of the year, or maybe not quite yet? Thank you.

Matt: Sure, it does. I think, you know, honestly, we feel really good about the...

Speaker Change: Sure, Dennis. I think, you know, honestly, we feel really good about the predictability and trajectory there because it's come in now three-quarters in a row, kind of right where we would thought, you know.

Speaker Change: The big picture is when we lapped around some of the...

Speaker Change: The social, not just restrictions, but how people felt, you know, we got more big parties back in, the big parties.

Speaker Change: per capita by a little bit less than a two-top or four-top.

Speaker Change: But what we've seen really is very consistent spend per person, by party size. The Cheesecake Factory has 46 years or so of experience, right, in such a broad menu. And so it's not a big surprise that it will return to the norm. And we definitely believe that you're going to see, give or take, another 1% improvement in Q3 and a 1% in Q4. And sort of our expectations generally for mix is plus or minus 1%. So I think we'll get back to a normal range, whether it's exactly flat, you know, that we'll see. Right, that's still six months to go, but it should be fast approaching it over that time.

Dennis Geiger: helpful and maybe one other just on price from here as it relates to I think you spoke previously about what we should expect for price over the coming quarters. What does that look like in the absence of additional price and anything to share kind of on

Speaker Change: helpful and maybe one other just on on a price from here as it relates to I think you spoke previously about what we what we should expect for price over the coming quarters what does that look like in the absence of additional price and anything to share kind of on on the the next round of price thank you

Matt: Yeah, we think we're going to be a little just a hair over 4% for the back half of the year. And then, we feel like, in this environment, we should be able to get back next year to kind of that normal two and a half to 3%, you know, knock on wood, all things being equal. So we believe we've done a good job and not seen pressure as evidenced by the flat traffic over the last three quarters, absent, you know, the January weather.

Speaker Change: Yeah, we think we're going to be a little just a hair over 4% for the back half of the year and then we feel like in this environment we should be able to get back next year to kind of that normal.

Speaker Change: evidenced by the flat traffic over the last three quarters absent, you know, the January weather.

Matt: So we feel like that's been a balance that we've been able to maintain. And, at the same time, we'd like to bring it back down to normal levels. You know, we've talked a lot about over the years that we kind of managed to average out. I'm pretty sure when I saw the latest US inflation data, it was, you know, restaurant pricing was up 4.2%. And so we're right in the middle, and we're right in the middle of the group.

Speaker Change: So we feel like that's been a balance that we've been able to maintain, but at the same time we'd like to add back down to normal levels.

Speaker Change: You know, we've talked a lot about, over the years, that we kind of managed to the average. I'm pretty sure when I saw the latest U.S. inflation data, it was, you know, restaurant pricing was up 4.2 percent. And so we're right in the middle, and we're right in the middle of the groups that we track. And so, you know, we're maintaining our value proposition well.

James Ronald Salera: Our next question comes from the line of Jim Salera with Stevens Inc. Please go ahead.

Matt: Great, thanks Matt.

Speaker Change: Our next question comes from the line of Jim Salera with Stevens Inc. Please go ahead.

James Ronald Salera: Hi guys, thanks for taking our question. I wanted to drill down a little bit on the rewards program. I think historically, you guys mentioned one of the value propositions there is that it helps alleviate some of the wait times and improves the overall guest experience. Can you just match that up with the better than industry trends that you're seeing in traffic? And does that help support traffic at Cheesecake and support acquisition as kind of an added value proposition?

James Ronald Salera: Hi guys, thanks for taking our question.

James Ronald Salera: I wanted to drill down a little bit on the rewards program. I think historically, you guys mentioned one of the value propositions there is that it helps alleviate some of the wait times and improves the overall guest experience.

James Ronald Salera: Can you just match that up with the better-than-industry trends that you're seeing on traffic, and does that help support traffic at Cheesecake and support acquisition as kind of an added value profit?

David M. Gordon: Sure. Hi Jim. This is David Gordon.

James Ronald Salera: Sure. Hi Jim, this is David Gordon. I think what you're referring to really is one of the published offers as part of the program, which is exclusive access to reservations for reward members.

Speaker Change: and we are seeing reservations.

David M. Gordon: I think what you're referring to is really one of the published offers as part of the program, which is exclusive access to reservations for a reward member. And we are seeing reservations activation being very, very solid. We know the guests, when we ask them before the program what they would really appreciate about a rewards program is to not have to wait at Cheesecake Factory. So certainly, convenience and people being pressed for time today are important as ever.

Speaker Change: Activation being very, very solid.

Speaker Change: We know the guests, when we ask them before the program what they would really appreciate about a rewards program, is to not have to wait at Cheesecake Factory.

Speaker Change: So, certainly convenience and people being pressed for time today is as important as ever, and knowing that you can get into Cheesecake Factory and perhaps not have to wait as you have historically on every single visit is a real big benefit of the program.

David M. Gordon: And knowing that you can get into the Cheesecake Factory and perhaps not have to wait as you have historically on every single visit is a real big benefit of the program, with the other published rewards being a complimentary slice of cheesecake on your birthday. We're seeing strong utilization there as well, and overall acquisition continues to be very, very strong. Our increased membership enrollment is very, very strong. People are very engaged in the program.

Speaker Change: The other published rewards being a complimentary slice of cheesecake on your birthday. We're seeing strong utilization there as well.

Speaker Change: And just overall, acquisition continues to be very, very strong. Our increased membership enrollment is very, very strong. People are very engaged in the program.

David M. Gordon: So I think, along with reservations, all aspects of the program seem to be resonating with Cheesecake Rewards guests so far. And just pointing back to National Cheesecake Day, which I mentioned earlier, and we just completed National Cheesecake Day on Monday and Tuesday of this week.

Speaker Change: I think along with reservations.

Speaker Change: All aspects of the program seem to be resonating with

Speaker Change: Cheesecake Rewards guests so far and just pointing back to National Cheesecake Day which I mentioned earlier and we just completed National Cheesecake Day Monday and Tuesday of this week and as we compare to last year's NCD which was on the same days

James Ronald Salera: And as we compare to last year's NCD, which was on the same days, you know, our comps were up mid-single digit. We had twice the enrollment that we had last year. And we had four times more member redemptions versus last year. So the increased numbers have been effective. People are really engaged in the program. We'll continue to. I know we keep saying it's early, but we are only a year in. So we're going to continue to test and learn, analyze the information, and make sure that our unpublished offers, which are an important part of the program as well, where we're taking an individualized approach to drive incrementality, continue to be meaningful and get us really strong returns without any additional cost.

Speaker Change: You know, our comps were up mid-single-digit, we had twice the enrollment that we had last year.

Speaker Change: And we had four times the member redemptions versus last year, so the increased numbers have been effective.

Speaker Change: People are really engaged in the program. We'll continue to, I know we keep saying it's early, but we are only a year in.

Speaker Change: So we're going to continue to test and learn, analyze the information and make sure that our unpublished offers, which are an important part of the program as well, where we're taking an individualized approach to drive incrementality, continue to be meaningful and get us really strong returns.

David M. Gordon: Okay, that's super helpful. And maybe keeping that same train of thought, but thinking about North Italy, I know, historically, the Italian space has a lot of mom and pop competition that probably don't have any digital or very limited digital offerings. Is there anything you can do, taking your learnings from that, and maybe bridge it to North Italy? Or is it just not a big enough concept yet to kind of warrant, you know, a full-fledged program alongside the

Speaker Change: without any additional cost.

Speaker Change #118: Okay, that's super helpful. And maybe keeping that same train of thought, but thinking about North Italia, I know, historically, the Italian space has a lot of mom and pop competition that probably don't have any digital or very limited digital offerings.

Speaker Change: Is there anything you can do, taking your learnings from that, and maybe bridge it to North Italia, or is it just not big enough of a concept yet to kind of warrant, you know, a full-fledged program alongside the offering there?

James Ronald Salera: Certainly, down the road, as we continue to learn what resonates with guests as part of the program or any offerings, whatever might make sense for North Italia or fit down the line would be something we can look at. North has historically taken reservations, and that's a meaningful part of how guests utilize North today. We haven't changed that program, and don't really have any intention of changing it, so I would say down the road, we can talk about that a little bit more. Right now, because of the size of the concept and the continued growth, I wouldn't anticipate anything in the near term, any type of loyalty or reward program.

Speaker Change: Well, certainly down the road, as we continue to learn what resonates with guests as part of the program or any offerings, whatever might make sense for North Italia or fit.

Speaker Change #103: Down the line would be something we can look at. North has historically taken reservations, and it's a meaningful part of how guests utilize North today. We haven't changed that program, don't really have any intention of changing it. So I would say down in the future, we can talk about that a little bit more. Right now.

Speaker Change: Because of the size of the concept and the continued growth, I wouldn't anticipate anything in the near term, any type of loyalty reward program.

David M. Gordon: Okay, great. Thanks to all of you guys. I'll hop back into the Q&A. Our next question comes from the line of Matt Curtis with William Blair. Please go ahead. Hi, good afternoon.

Speaker Change #101: Okay, great. Thanks for calling, guys. I'll hop back in the queue.

Matthew Eliot Clark: Our next question comes from the line of Matt Curtis with William Blair. Please go ahead. Hi, good afternoon.

Speaker Change: Our next question comes from the line of Matt Curtis with William Blair. Please go ahead.

Matthew Eliot Clark: Hi, good afternoon. We've heard some other casual dining brands talk about keeping up marketing spend in the second half of the year. So I was just wondering if you'd talk about what your plans are at the Cheesecake Factory to remain top of mind in what looks like it's becoming a more promotional and ad-heavy environment.

David M. Gordon: Matt, this is David Gordon again. I think I would just lean back into the rewards program. I don't think that we need to take a look at a spend that's additional to what we've already talked about, since the rewards program is already built into our plan for the year. And since we do have a higher than anticipated membership rate thus far, we're going to continue to communicate with those guests and try and drive incrementality, whether that's trying to drive them to a specific day of the week or a specific day part or introduce them to new and different products that perhaps they haven't ordered before off the menu.

Matthew Eliot Clark: Matt, this is David Gordon again. I think I would just lean back into the rewards program.

Speaker Change #104: I don't think that we need to...

Matthew Eliot Clark: take a look at a span that's additional to what we've already talked about.

Speaker Change #110: being that the rewards program is already built into our plan for the year.

Speaker Change #100: And since we do have a higher than anticipated

Speaker Change #100: Membership right thus far we're going to continue to communicate to those guests and try and drive incrementality whether that's

Speaker Change #100: trying to drive them to a specific day of the week or a specific day part or introduce them to new and different products that perhaps they haven't ordered before off the menu.

David M. Gordon: It gives us, I think, leverage that we haven't historically had, and we know that it works because we've seen it so far this year. And that's how we'll continue to do marketing in a way that works for cheesecake.

Speaker Change #100: It gives us, I think, leverage that we haven't historically had, and we know that it works.

Speaker Change: because we've seen it so far this year and that's how we'll continue to do marketing in a way that works for cheesecake.

Speaker Change #107: Okay, great. Thanks very much.

James Jon Sanderson: Our next question comes from the line of Jim Sanderson with North Coast Research. Please go ahead.

Speaker Change #107: Our next question comes from the line of Jim Sanderson with North Coast Research. Please go ahead.

James Jon Sanderson: Thanks for the question. Just following up on the discussion of the loyalty program, is there a plan in the back half of the year to increase the number of events similar to the free cheesecake giveaway that Yale did mid-single-digit comps? Just wondering if the plan is to increase the number of events that would be incremental in the back half.

James Jon Sanderson: Thanks for the question. Just following up on the discussion of the loyalty program.

James Jon Sanderson: Is there a plan in the back half of the year to increase the number of events similar to the free cheesecake giveaway that...

James Jon Sanderson: Neil did mid-signal digit comps. Just wondering if the plan is to increase the number of events that would be incremental in the back half.

David M. Gordon: Well, unpublished offers are happening all the time. So how we utilize those unpublished offers or what they're going to be, obviously, we haven't talked about that yet. But we'll continue to understand guests and how they're using us, and we certainly know that that's a powerful tool. We've tested numerous different offers over the past six months, not just half off a complimentary half slice of cheesecake but a lot of different offers. So we'll continue to do that. And we know what's most effective, and we want to continue to do it in a way that protects margins at the same time.

Speaker Change: Well, unpublished offers are happening all the time.

Speaker Change #109: So, how we utilize those unpublished offers or what they're going to be, obviously we haven't talked about yet.

Speaker Change #109: but we'll continue to understand guests and how they're utilizing us and we certainly know that that's a powerful tool. We've tested numerous different offers over the past six months.

Speaker Change: Not just half off of a slice of cheesecake, but a lot of different offers. So we'll continue to do that, and we know what's most effective, and we want to continue to do it in a way that protects margins at the same time.

James Jon Sanderson: And then a follow-up question on store closures. Are there any other expectations that you'll see units potentially at risk of having to be closed based on some of the leasing issues or other issues in the next two to four quarters?

Speaker Change #116: Understood, understood. And then a follow-up question on store closures.

Speaker Change #108: Is there any other expectations that you'll see units...

Speaker Change: potentially at risk of having to be closed based on some of the leasing issues or other issues in the next two to four quarters.

Matt: Um, you know, I would always say there could be one or two, right? The leasing environment continues to be pretty dynamic. I think we've built a great pipeline of openings, but we're always looking at the portfolio. We have almost 350 restaurants. Many of them come up for lease on an annual basis, and we've had a great amount of success when we've moved trade areas. So we're always going to evaluate if a site comes up for its lease, then we'll look and see if there's a better location and if that makes sense. So I would say there's always a probability of one to two in that kind of time.

Speaker Change #112: You know, I would always say there could be one or two, right? It's the leasing environment continues to be pretty dynamic.

Speaker Change #111: I think we've built a great pipeline of openings, but we're always looking at the portfolio. We have almost 350 restaurants.

Speaker Change: Many of them come up on lease on an annual basis.

Speaker Change: And we've had a great amount of success when we've moved trade areas, so we're always going to evaluate. If a site comes up for its lease, then we'll look and see if there's a better location and if that makes sense. So I would say there's always a probability of one to two in that kind of time frame.

James Jon Sanderson: All right, thank you very much.

Jeffrey Andrew Bernstein: Our next question comes from the line of Jeffrey Bernstein with Barclays. Please go ahead.

Speaker Change: Our next question comes from the line of Jeffrey Bernstein with Barclays. Please go ahead.

David M. Gordon: Clearly, we've seen some aggressive discounting from other casual diners. I know that's not a strategy you guys typically pursue, but would you say there's any noticeable impact on you or the broader industry, or maybe changing your value scores, or maybe you're seeing your own consumer shift to more value-oriented items while still coming, but maybe shifting down to more less costly items? Any thoughts there? And then add a follow-up.

Jeffrey Andrew Bernstein: Two questions. The first one, just on the competitive environment, clearly we've seen some aggressive discounting from other casual diners. I know that's not a strategy you guys typically pursue, but...

Jeffrey Andrew Bernstein: Would you say there's any noticeable impact on you or the broader industry, or maybe changing your value scores, or maybe you're seeing your own consumer shift to more value-oriented items while still coming, but maybe shifting down to more less costly items? Any thoughts there? And then add a follow-up.

Jeffrey Andrew Bernstein: Hi Jeff, it's David Gordon again. This isn't the first time that we've seen marketing out there in casual dining ramp up. It's happened historically over 45 plus years, and generally, we don't see it have an impact on us and our guests or value perception from our guests because others are offering a lot of different types of value. So we wouldn't anticipate in this cycle that we would see it have any sort of negative impact on our long term and short term plans, and we haven't seen that in the recent activity that's probably picked up in the past few months.

Speaker Change: Hi Jeff, it's David Gordon again. This isn't the first time that we've seen...

Speaker Change #127: Marketing, Out There, and Casual Dining, Ramp Up.

Speaker Change #114: It's happened historically over our 45 plus years and generally we don't see it have an impact to us and our guests or value perception from our guests because others are offering

Speaker Change #114: A lot of different type of value, so we wouldn't anticipate in this cycle that we would see it have any sort of negative impact to our long-term and short-term plan, and we haven't seen that in the recent activity that's probably picked up in the past few months.

Jeff: And then my follow-up question is the comment you made about the lesser known brands. I think you said it's comping more similar to broader casual dining. So below, perhaps your core brands. I'm wondering whether there are any initiatives you have to reaccelerate that traffic or whether those brands actually take a more aggressive approach to drive traffic or whether you're okay with them kind of lagging your core brands because you're not in the game of, you know, trying to drive short-term traffic, just trying to get a feel for some of those other brands relative to your core. Thank you. We're always looking to improve

Speaker Change: Understood. And then my follow-up is the comment you made about the lesser-known brands. I think you said it's comping more similar to broader casual dining, so below perhaps your core brands. Wondering whether there are any initiatives you have to reaccelerate.

Speaker Change #113: that traffic or whether those brands actually take a more aggressive approach to drive traffic or whether you're okay with them kind of lagging your core brands because you're not in the game of you know trying to drive short-term traffic just trying to get a feel for some of those other brands relative to your core. Thank you.

Matthew: Sure. Jeff, it's Matthew.

Speaker Change: Sir, yes, it's Matt. We're always looking to drive traffic.

Speaker Change #122: So that never...

Speaker Change #119: The gas pedal is always on, and like I said, I think some of it is transitory, I think some of it is mixed on alcohol, right, which is not necessarily related to the gas traffic side of things, and so those are two different equations. We're not necessarily, in this environment, looking to push a check.

Matthew: We're always looking to drive traffic. So, that never, the gas pedal is always on, and like I said, I think some of it is transitory. I think some of it is mixed with alcohol, right, which is not necessarily related to the guest traffic side of things. And so, those are two different equations.

Speaker Change #102: I don't think that that's a wise strategy, so, if our guest traffic is relatively stable, but we have a little bit less incident rate, that's one trajectory, that's where we think we're at right now, and we're always going to be, in every one of our concepts, looking for ways, whether it's through more unique advertising, menu items, or operational initiatives,

Matthew: We're not necessarily, in this environment, looking to push it, check, right? I don't think that that's a wise strategy. So, if our guest traffic is relatively stable, but we have a little bit lower incident rate, that's one trajectory. That's where we think we're at right now. And we're always going to be, in every one of our concepts, looking for ways, whether it's through more unique advertising, menu items, or operational initiatives to drive that. So, no, nobody's just watching that happen. We're aggressively attacking on all fronts.

Jeffrey Daniel Farmer: Our next question comes from the line of Jeff Farmer with Gordon Haskett. Please go ahead.

David M. Gordon: Thank you. You called out delivering improvements in food efficiencies, labor productivity, I think overtime, wage management, a long list of things in Q2 at the restaurant level. My question is, what is the opportunity to drive further efficiencies or improvements as we get into Q3 and Q4?

Speaker Change #105: My question is, what is the opportunity to drive further efficiencies or improvements as we get into Q3 and Q4?

Jeffrey Daniel Farmer: Chef, this is David Gordon again. I think we're always looking to improve upon our previous performance. One thing we haven't touched much on is just the stable staffing and retention of the restaurants. And I think that, again, I was just looking at the month that just ended, and we're seeing best in class retention at the staff level and at the management level, which is why we're seeing increased efficiencies. Lower overtime, better wage management, and higher MPS scores.

Speaker Change #105: Jeff, this is David Gordon again. I think we're always looking to improve upon previous performance.

Speaker Change #126: One thing we haven't touched much on is just the stable staffing and retention of the restaurants. And I think that, again, just looking at the month that just ended, and we're seeing best-in-class retention at the staff level and at the management level, which is why we're seeing increased efficiencies.

Speaker Change #105: Lower overtime, better wage management, and higher MPS scores. And I would anticipate that to happen.

Jeffrey Daniel Farmer: And I would anticipate that to happen this coming quarter as well and into the fourth quarter because of the stability we have in each one of those locations where you have staff members that are more comfortable doing their job. We're able to continue to cross-train them, which increases productivity. So the more time we have that stability, the more we would anticipate that each one of those metrics, when it comes to labor or food efficiency or food waste, will continue to improve quarter over quarter.

Speaker Change #105: This coming quarter as well, and into the fourth quarter, because of the stability we have in each one of those locations, where you have staff members that are more comfortable doing their job, we're able to continue to cross-train them, which increases productivity. So the more time we have that stability, the more we would anticipate that each one of those metrics, when it comes to labor, or food efficiency, or food waste, will continue to improve quarter over quarter.

Matt: Alright, thank you for that, and just one quick question. Matt, you might have talked about it, I might have missed it, but did you share the commodity and wage inflation numbers for Q2?

Speaker Change #130: Alright, thank you for that and just one quick bookkeeping. Matt, you might have talked about it, I might have missed it, but did you share the commodity and wage inflation numbers in Q2?

Matt: Q2, the commodity was about 1%, and wage inflation has kind of dipped into about 4-ish percent, and continues to improve, so those are both, you know, very solid based on historical kind of references, if you will.

Matthew Eliot Clark: Q2, the commodity is about 1% and wage inflation has kind of dipped into about 4-ish percent, continues to improve, so those are both, you know, very solid based on historical kind of references, if you will.

John William Ivankoe: Our next question comes from the line of John Ivankoe with J.P. Morgan. Please go ahead.

Speaker Change #123: Thank you.

Speaker Change #129: Our next question comes from the line of John Ivankoe with J.P. Morgan. Please go ahead.

John William Ivankoe: Hi, thank you. You know, years ago, and hopefully it's still the case now, the industry...

John William Ivankoe: measured, you know, the perceived price and its price service value, you know, from a food perspective that they were giving their guests through prime costs. And, you know, your prime costs are actually relatively low for casual dining at around 57%. And that's obviously anchored by cogs that are getting down, you know, to, you know, the low 22% range. So, you know, when you do think about longer-term margin expansion across your portfolio, can those prime costs go even lower? Could or should those cogs go even lower? Or when you think about the longer term, you know, the ability to expand your margin, should we expect it to be more volume driven on the fixed cost side?

Speaker Change #125: You know, measure, you know, the perceived price and it's...

Speaker Change #117: Price, service, value, you know, from a food perspective that they were giving their guests.

John William Ivankoe: Thank you.

Speaker Change #124: through prime costs. And you know, your prime costs are actually relatively low for casual dining, you know, at around 57%. And that's obviously anchored by cogs that are getting down, you know, to, you know, to the low 22% range. So, you know, when you do think about longer term margin expansion across your portfolio, you can those prime costs go even lower, could or should those cogs go even lower? Or when you think about longer term, you know, the ability to expand your margin, should we expect it to be more volume driven through the fixed cost side? Thank you.

Matt: Yeah, John, this is Matt. That's a good question. It's an interesting dynamic, for sure. You know, one thing that I like to remind our investors is that we tend to have slightly higher labor costs and slightly lower commodity costs because we make everything from scratch in the restaurant every single day. And many of our competitors, you know, frankly, don't do that and have a commissary. And so the mix of those two, you know, can be a little bit misleading.

Speaker Change #117: Yeah, John , this is Matt. That's a good question. It's an interesting dynamic for sure.

Matthew Eliot Clark: You know, one thing that I like to remind our investors is that we tend to have slightly higher labor and slightly lower commodity costs because we make everything from scratch in the restaurant every single day. And many of our competitors, you know, frankly, don't do that and have a commissary. And so the mix of those two, you know, can be a little bit misleading. You know, I think 57% is a strong number, but it's probably right in line historically with where we've been. You know, keep in mind, too, that we benefit from the vertical integration of the Cheesecake Factory bakeries. So I think that that skews a little bit.

Matt: You know, I think 57% is a strong number, but it's probably right in line historically with where we've been. You know, keep in mind, too, that we benefit from the vertical integration of the Cheesecake Factory bakeries. So I think that that skews a little bit. You know, from the efficiencies David Gordon talked about relative to retention, there still is an opportunity without taking anything away from the guests and keeping our huge portions and, you know, great food and great service to get a little bit better.

Matthew Eliot Clark: You know, I think from the efficiencies David Gordon talked about relative to retention...

David M. Gordon: There still is an opportunity, without taking anything away from the guests and keeping our huge portions and, you know, great food and great service, to get a little bit better, right? So if we can keep even more of our people, it...

Matt: Right. So if we can keep even more of our people, it makes the training and everything he talked about a little bit better. So we're always going to try for that. At the same time, I would also like to see volume pick up and have a little bit of leverage. I mean, the ideal state is to get a little bit above.

Speaker Change #128: Matthew Clark, David Overton, Matthew Clark, David Gordon

John William Ivankoe: That's great, understood. Thank you.

Speaker Change #121: That's great, understood, thank you.

Operator: There are no further questions at this time. This will conclude today's conference call. Thank you all for your participation. You may now disconnect.

Speaker Change #120: There are no further questions at this time. This will conclude today's conference call. Thank you all for your participation. You may now disconnect.