Ladies and gentlemen, thank you for standing by, and welcome to The Cheesecake Factory First Quarter Fiscal 2020 Earnings Conference Call. I would now like to hand the conference over to your speaker today, Stacy Feit. Thank you. Please go ahead.

Thanks, Adarius. Good afternoon, and welcome to our first quarter fiscal 2020 earnings call. On the call today are David Overton, our Chairman and Chief Executive Officer; David Gordon, our President; and Matt Clark, our Executive Vice President and Chief Financial Officer. We are dialed in from a remote location, so we appreciate your understanding as we work through this call. Before we begin, let me quickly 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. Actual 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. 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, throughout this conference call, we will be presenting preliminary results on an adjusted basis. These preliminary financial results do not include impairments of the company's long-lived assets, goodwill and other intangible assets and the revaluation of contingent consideration associated with the acquisition of Fox Restaurant Concepts as well as corresponding tax effects as a result of the impact of COVID-19, all of which are currently being evaluated. While these items are noncash in nature, the impact on reported results is expected to be material. Filing of the company's quarterly report on Form 10-Q will be delayed due to this impairment analysis and revaluation. An explanation of our use of non-GAAP financial measures and reconciliations to the most directly comparable GAAP measures appear in our press release on our website as previously described. David Overton will begin today's call with some opening remarks, and David Gordon will provide an operational update. Matt will then briefly review our first quarter results and provide a current financial update. With that, I'll turn the call over to David Overton.

Thank you, Stacy, and everyone on the line for joining us this afternoon. We hope you and your families are staying healthy and safe during these trying times. It goes without saying that COVID-19 and the containment measures are having an unprecedented impact on the restaurant industry. This forced us to change the way we do business overnight. Our teams have done a tremendous job shifting to an off-premise-only operating model and executing in the face of significant adversity. We have seen these off-premise sales volumes accelerate, and I want to thank all of our staff members for their commitment to keeping our business running and continuing to serve our guests. I also want to extend our gratitude to our international partners as well as our vendors for ensuring that our restaurants are supplied with our key ingredients and the necessary items to keep our staff members and guests safe. We have implemented meaningful cost savings measures, none more difficult than the furloughing of a significant number of our staff members. We have also reduced Board, executive and corporate support staff compensation, eliminated nonessential spending and suspended new unit development for now. We have balanced these actions with planning for an eventual reopening of our restaurant dining rooms, although social distancing restrictions are expected to impact on-premise dining for some time. By maintaining our restaurant management teams, field leadership and adequate corporate support, we believe we are well positioned for a strong restart. With a number of states now reopening or communicating their plans to soon open, we have shifted to planning for the reopening of our dining rooms. We will execute our plans within the guidelines of local jurisdictions at a varying pace across the country and with an enhanced focus on social distancing and other appropriate health and safety precautions. The size of our restaurants and our flexible seating layouts will uniquely enable us to ensure ample levels of social distancing while maintaining sufficient seating capacity to generate what we believe could be meaningful sales volumes. Our teams have been nimble and innovative in the COVID-19 environment, and we believe their execution of our reopenings will be similar. Given the dynamic situation, we are constantly reevaluating our reopening schedule and currently plan to open several Cheesecake Factory restaurant dining rooms in multiple geographies as soon as next week. We will share key learnings and best practices across our system as additional relaunches are phased in. At the same time, we will continue to focus on generating the strong off-premise sales volumes that our restaurants have been producing. In the over 40 years since our founding, our tenured leadership team has weathered numerous economic downturns, including 9/11 and The Great Recession. While we have never experienced anything quite like this, I believe that our steadfast commitment to running this company with the long term in mind, coupled with our recently strengthened liquidity position, will enable us to continue to effectively manage through and ultimately emerge from this crisis even stronger, as we have proven in prior cycles. So with that, I'll now turn the call over to David Gordon.

Thank you, David. First, I'd like to echo David's gratitude for our teams and everything they are doing to continue to live our purpose of nurturing bodies, minds, hearts and spirits during this difficult time. Our restaurant management teams mobilized to adapt to changes that we never could have fathomed before. Their loyalty to our guests, communities and their fellow staff members has been second to none. As David mentioned, we are currently operating an off-premise model. Pre-COVID, we had a very established and strong business in the off-premise channel, generating sales volumes the size of many stand-alone restaurants. For the first quarter of fiscal 2020, off-premise sales accounted for approximately 22% of Cheesecake Factory sales, reflecting the acceleration that began from the social distancing and shelter-in-place orders. Since then, we have seen sales volumes accelerate, with average weekly sales nearly doubling from first quarter off-premise levels, including a solid lift to average check as well. On an annualized basis, recent weekly Cheesecake Factory off-premise sales would equate to nearly $4 million per unit on average, and we are seeing this strength across both the lunch and dinner dayparts. Digital currently represents approximately 80% of sales, and our own online ordering platform eclipsed delivery for the first time since its launch in 2018. As a reminder, this is our most profitable sales channel. We've enhanced our curbside pickup process in place at most of our restaurants. Our operators have found a good rhythm with it, and our guests seem to love it as it provides an even safer way for them to enjoy their Cheesecake Factory experience at home. With regard to delivery, as most of you are aware, late last year, we renegotiated and extended our exclusive delivery agreement with DoorDash, which further improved the economics of the delivery business for us while maintaining our marketing support, including our preferential positioning on the DoorDash app. Maintaining our top-of-app placement within the delivery radius of our restaurants has been incredibly important and differentiating during COVID-19, and we continue to believe that we are competitively well positioned in the delivery channel. In fact, over one-third of our delivery orders are coming from new guests, and we have roughly doubled our weekly new delivery guests since February. We believe these statistics, coupled with even higher dessert incident rates, are strong indicators of how differentiated The Cheesecake Factory offering is in the delivery channel. We have also seen sales accelerate in North Italia and the FRC concepts. Both have done a tremendous job with their marketing, including innovative family meal offerings like North Italia's fresh pasta kits, which speak to the handcrafted nature of the brand and enable guests to maintain that experience at home, complemented by a great assortment of crafted cocktails for takeout where allowed. FRC has seen similar success. Each of their preordered family meal programs have sold out, and they've also seen great guest response to their creative add-on cocktail options. Currently, 32 locations across our concepts, including 3 Cheesecake Factory restaurants, are temporarily closed. And before I turn it over to Matt, I'd like to share some pre-COVID-19 business highlights as our first quarter was off to a very strong start before the onset of the virus. Cheesecake Factory comparable store sales growth was both ahead of plan and outperforming the broader casual dining industry, which drove solid restaurant-level margin results through February. Our operations were hitting on all cylinders, with some sales lift from our national rollout of reservations and some other marketing initiatives as well as strong labor productivity, retention and food efficiency performance. We were also honored to have The Cheesecake Factory again recognized as the 2020 Harris Poll EquiTrend Casual Dining Brand of the Year, underscoring the strong guest affinity for the brand. While there is still uncertainty with respect to the duration of the COVID-19 pandemic, when and under what conditions all of our dining rooms will be able to reopen, and ultimately, how COVID-19 may impact guest behavior and the economy longer term, what we do know is that we have an incredibly strong team, culture and brands that our guests love and can't wait to come back to. We look forward to the day when our business returns to normal. The tenure of our teams provides us with a distinct competitive advantage, and we look forward to the reopening of our dining rooms. We believe our best-in-class operational execution, coupled with the fact that a majority of our operators saw the company through the last recession, positions us well to recapture unit volumes post-COVID. And with that, I'll now turn the call over to Matt for our financial review.

Thank you, David. Since first quarter financial results are truly in the rearview at this point, I will just provide a brief recap and spend the balance of our time on our COVID-19 financial update. First quarter comparable sales at The Cheesecake Factory restaurants declined 12.9%, reflecting approximately 3% sales growth through February, offset by a 46% decline in March with the onset of COVID-19. Revenue contribution from North Italia and FRC totaled $84.1 million. North Italia comparable sales growth was 5% through February, but was offset by a 48% decline in March with the onset of COVID-19, which drove a first quarter comparable sales decline of 12%. Sales per operating week at FRC were approximately $85,400. And including $13.8 million in external bakery sales, total revenues were $615.1 million during the first quarter of fiscal 2020. Cost of sales increased 20 basis points, driven primarily by produce inflation and a slight change in mix associated with the acquisition of North Italia and FRC. Labor increased 250 basis points, which is primarily attributable to costs associated with maintaining our full restaurant management team in a reduced sales environment as well as higher group medical insurance costs, reflecting both higher large claims activity and the costs associated with health care benefits for our furloughed staff members. Other operating expenses increased 170 basis points due primarily to sales deleverage, partially offset by a lower restaurant variable compensation accrual. And G&A increased 60 basis points, also reflecting sales deleverage, partially offset by a reduction in the corporate variable compensation accrual. Preopening costs were approximately $3.1 million associated with the opening of one North Italia and one Flower Child prior to COVID-19. Finally, during the first quarter, we reported $4 million in COVID-19-related expenses, primarily related to health care and meal benefits for our furloughed staff members captured in the labor and other operating expense lines on the income statement. GAAP diluted net loss per share was $0.09. Excluding the COVID-related charges as well as other special items, which included $324,000 in lease termination expense associated with two restaurants closed late last year, $1.2 million in acquisition-related costs and $1.9 million in acquisition-related contingent consideration, compensation and amortization, adjusted diluted net income per share for the first quarter of 2020 was $0.04. Now turning to our balance sheet and cash flow. We ended the first quarter with $81 million in cash and $380 million in debt. This reflects cash used in operating activities of approximately $33 million from the working capital impact related to COVID-19, CapEx of just under $16 million, payment of the dividend declared prior to COVID-19 of approximately $16 million and the $90 million revolver draw. As we announced last month, we meaningfully enhanced our liquidity and financial flexibility with a $200 million convertible preferred investment from Roark. As of April 30, our cash balance was approximately $260 million. In addition, we entered into an amendment on the revolver that provides for leverage and interest and rent coverage ratio covenant relief through the first quarter of fiscal 2021. For the next 15 months, we anticipate an average interest rate of approximately 3.25%. And we have optimized our working capital with the support of our vendors. To date, we haven't encountered any material supply disruptions and our supply chain remains intact. On average, our open Cheesecake Factory restaurants are cash flow breakeven at the $4 million level under the off-premise model. With respect to rent, this assumes payment of our common area maintenance fees and property taxes, which together are approximately $1 million per week and an equivalent percent of sales rent multiplier with our pre-COVID levels. While this assumption is not equivalent to our full base rent, it takes into account a variety of rent deferral structures for the second quarter that we have negotiated or are currently in discussions with our landlords on. When taking into account the fixed costs associated with our closed restaurants, our reduced G&A level and assumption for necessary maintenance CapEx and interest expense, our current cash burn rate is approximately $3.25 million per week. This does include continuing to carry all of our restaurant management teams. However, it does not reflect an additional $1 million per week associated with health insurance and daily meals that we are providing to our furloughed staff, which we anticipate continuing through June. While we will not be providing guidance, given the level of uncertainty associated with the virus and the reopening of the economy, we want to provide you with some of our thinking around how the reopening of our dining rooms may look. Our base case assumes that once dining rooms reopen, we will be operating under capacity restrictions for some time as social distancing protocols remain in place. In this phase, we would anticipate off-premise mix to remain elevated as in-store volumes begin to rebuild, consistent with what we have seen in China's ongoing recovery to date. We believe over time, off-premise volumes will moderate somewhat as consumers become more comfortable going out again and on-premise sales continue to build. While the extent and duration of the impacts of COVID-19 on our industry and the economy are unknown, we are cautiously optimistic that the environment could normalize about a year from now and enable us to recapture 2019 unit volumes in that time frame, likely with some degree of a permanent increase in off-premise sales. However, if the reopening does not follow that type of trajectory, we believe that we have additional levers to pull to further reduce our cash burn. With the additional capital we raised, plus a currently anticipated $40 million cash inflow in fiscal 2021 from the NOL carryback provision in The CARES Act, we believe we would have sufficient liquidity to endure an off-premise-only operating model for the next 18 to 24 months, should that be necessary due to ongoing COVID-related business disruption. With regard to capital allocation, to preserve liquidity and in conjunction with the terms of the credit facility amendment, the Board has suspended the quarterly dividend on our common stock as well as share repurchases. As David discussed, we have also suspended new unit development until more clarity on the restaurant industry operating environment emerges. We anticipate approximately $5 million of necessary maintenance CapEx per quarter, and this is incorporated in the estimated cash burn that I discussed. In closing, the durability of our business has been proven in both strong and challenging times. While The Great Recession isn't a perfect proxy for COVID-19, our sales trends recovered one year earlier than the broader casual dining industry at that time and turned up for meaningful outperformance the following few years. At the same time, we effectively managed costs and preserved cash during the last downturn, enabling the business to generate significant free cash flow in both 2008 and 2009. While COVID-19 has caused a much more rapid and deep sales decline, we believe we are making the right business decisions to drive a similar market share trajectory and margin, earnings and cash flow recovery once we emerge on the other side of this pandemic. With that said, we'll take your questions. Operator?

Your first question comes from Nicole Miller of Piper Sandler.

That is one of the better layouts, if I may say, for understanding the phased approach and what things might look like in the near term and the long term. What I was wondering is the states have varying phases or mandates, so will you run each store individually around those, let's call them, state-level mandates? Or would you revert to maybe the most strict standards in the initial phase to better align that portfolio in terms of process and procedures?

Thank you, Nicole. Our strategy is going to be that as the local or state mandate is enacted, we will take a look at what requirements are within that particular jurisdiction. At the same time, we're hoping to have what we consider to be consistent operating procedures across all of the restaurants, with the safety of our guests and staff being first and foremost. So although a particular jurisdiction might not mandate, for example, masks on staff members, our stance will be that, at least in the near term, we will have masks on all of our staff members so they can feel safe across the country. So our approach will be to learn as we open in each one of those markets. As David Overton mentioned, we'll have a few restaurants open next week. We'll learn from those, see how guests and staff are responding, and we'd like to have consistent operations across all of the restaurants nationally.

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

I hope everyone is doing well. I guess my first question is, Matt, I just want to clarify the implications for your same-store sales or comps quarter-to-date. I know you mentioned the $4 million or approaching $4 million on off-premise sales. But could you quantify what that means for same-store sales so that we're all on the same page on what that means and how that's developed as the quarter has moved on here?

Sure. It relates to about a negative 65% or so. It is, I think, consistent with the broader industry and improved over the quarter. We're running sort of mid-70s in terms of average weekly sales at this point in time. Does that give you enough color, David?

Yes. That's good. I guess, at the low point at the end of March, what was the number, just so that we can gauge how much improvement you've had over the last four or five weeks?

Yes. When we put out the initial press release, we were running an AUV sort of average of about $3 million, and that was a negative 75%, give or take.

Got it. Okay. Perfect. And then, I guess, my question on this off-premise surge that you've seen — I think you mentioned that you're optimistic you can hold on to maybe a higher mix of off-premise on the other side of this. I just wonder what you're seeing inside the data that would give you confidence you could do that? And then secondly, what types of adjustments to the operating model or to the menu or the overall approach might you need to make to support a higher off-premise business longer term as dine-in comes back?

Thanks, David. Some of what would lead us to believe that we could sustain, if not largely sustain, some of the off-premise business is that, as I mentioned in my opening remarks, we've seen growth in new guests from DoorDash. So we're reaching some guests that we hadn't previously, and we're pleased with the reorder rates we've seen from those guests. So we would anticipate that will continue to happen. As far as the menu goes, we'll continue to leverage the full Cheesecake Factory menu. That's one of the things that guests appreciate about being able to order, whether it's online or through DoorDash, whether they're picking it up — the majority of the menu is available. So once the restaurant is open, they'll reopen with their full menu. Operationally for off-premise, our teams have been doing everything from moving to a texting model where possible, so guests can stay in their car and we text them telling them we're about to bring it out to make it easier for them, everything we can do to make it as contact-free as possible, including having open parking lots which make that easier. Some guests even choose to open their trunk, and we put the food right in their trunk. So some of those learnings have been great. Where we can, we'll adapt those even once the restaurant is fully open, whether that's at a 50% capacity or whatever is mandated by the jurisdiction.

And then, David, do you think it ever makes sense economically or operationally to do your own delivery at these types of volumes? What are your thoughts on that?

David, I don't think so. We're very happy with DoorDash; they're best-in-class. That's a completely different business, and I think it takes your focus off of being great restaurateurs. You lose something in that friction between operating two different businesses.

Your next question comes from the line of Jon Tower with Wells Fargo.

Great. I was just curious if you could talk about perhaps the competitive landscape in the malls themselves. I think a fairly significant headwind to your traffic over time has been competitive encroachment within the malls. Obviously, right now, many malls are not open. But maybe you can discuss how you expect the competitive set within those malls to look once the economies reopen? Is there a good mix of independents in those malls? And then I have a few other questions, if I may.

John, that's a really interesting question. I think partly we'll just have to wait and see. It could be very different by location. In some instances, you have very strong national players that are in there that we believe will bring critical mass back to those malls, and that will be a good thing. In other instances, as you noted, you have some one-off chef-driven restaurants that may not make it through this cycle, and we'll see where that goes. One of the important things on the mall side for us that has proven to be a real advantage in this cycle is we have fantastic parking and great access, which has enabled us to operate frictionless delivery and pickup. With our own doors and operating hours, I think maintaining that connection to the guests has been super-important. We essentially operate just like any high street location, even though we happen to be in those malls. I think we'll see what the competitive landscape is, but it would be good to have as many reopenings as possible to bring that traffic back to the malls. We hope that everybody in the restaurant industry has a positive experience coming out of this.

Okay. And then just on the rent relief side from the landlords, how long should we expect this to run through? Is it a certain sales level that you're expecting per box when you can go back to prior rental agreements? Or have you negotiated new terms? It sounds like that's something that's going on across the industry right now with different operators and landlords. I'm just curious to see what you guys are doing.

Yes, it's pretty dynamic. I don't think anybody really knows because we can't project what this cycle will do and how quickly sales will come back. I think it's premature to predict new types of arrangements. Rather, we're mostly talking to landlords about temporary relief in this environment and making sure that we are good partners so we all come out on the other side. As we noted, the volumes we're doing are covering the CAM and tax and a good percentage, if not all, of the percentage rent. I think at 50% occupancy-type situations, we can come pretty close to covering our base rent in many cases.

Okay. And then just last one on this. David Gordon, you had mentioned earlier the idea of seeing good reorder rates through the delivery channel. I'm curious to know how you expect to keep that going once we move out of this COVID landscape. Specifically, is there anything you're doing to incent people to come back to The Cheesecake Factory brand? Are you gathering emails that you didn't have before and therefore can contact them more regularly?

I think our strategy will be to continue to partner with DoorDash on the delivery side around some of the marketing we've done that may be a bit more unique to drive off-premise. Over the past few weeks, we've done specific lunch promotions to target lunch business, and we've seen good spend from that. We'll continue to partner with DoorDash for ways to do that. We've been building our email database for a while and we'll continue to market as appropriate, not just to drive off-premise but also to make sure guests are aware of in-restaurant dining when we open and that the full menu will be available. As I stated in my opening remarks, we had just started taking some limited reservations before all this hit. We think that will be a great advantage to guests as they feel more comfortable coming back into the restaurants through reservations. As we do that, we'll be getting guest information and be able to reach out to them from a marketing perspective.

Yes, I used the reservations; they were great. So I look forward to using it again when the restaurants open up again.

Thank you. We look forward to it too.

Your next question comes from the line of John Glass with Morgan Stanley.

You made some hard decisions about furloughing a bunch of staff going into this. How do you think about the start-up cost of going back to a dine-in operation? One, do you think staff is still available? Two, do you have to bring them on in advance? Or can you sort of phase in staff according to volume, so you don't really see a deleveraging or increase in cash burn rate? I've got one follow-up after that.

John, our teams have done a terrific job of staying in communication with staff throughout the past six weeks. Having the daily meal program in place in the restaurant has allowed staff to come in, if they like, every day and get a meal and reconnect with the management team. Continuing benefits for staff has been powerful as well. We're not anticipating having a struggle to get the restaurants open at a 50% capacity level. We've heard from staff that a lot of people want to get back to work and are excited to return to a more social environment as long as they know it's safe. As I stated in my opening remarks, safety is job one, and that will be very important to make staff feel comfortable to come back.

John, on the ramp-up, we're going to be very careful to maintain a safe environment. I don't think because it is happening relatively quickly there's a lot of retraining to do, but there is some thought that needs to go into the phasing. Predicting sales levels and aligning appropriately will be tricky, and getting in front of the supply chain to make sure you can get all the right product there including appropriate PPE will be something we'll pay attention to. But I don't think there's a significant ramp-up cost. It's about aligning to sales levels and doing the best we can as it ramps back up.

And Matt, could you just — high level — what are the basic tenets of the preferred offering? I presume it's a payment in kind and not a cash payment. What's the conversion point, the dilution? Maybe just high level, what are the things we should understand about the preferred offering and the impact to earnings?

Sure. The dividend is 9.5%. It's cash or PIK at the election of the company. As we noted with respect to the amendment, we'll clearly be on the PIK side of that for at least a period of time. The conversion price is $22.23. At the offering, it was around 16.5% to 17% of the outstanding. The company has a conversion right at three years out at 200%. Those are some of the key pieces. I'd be happy to go through more specifics off-line if you'd like.

Your next question comes from the line of Jeff Farmer with Gordon Haskett.

You touched on it, but can you share what you expect to see with U.S. mall reopenings in coming weeks and how that impacts your decision to reopen some of your restaurants?

Jeff, our decisions will be based first on the jurisdictions — local or state level. Then we'll assess whatever that date is and probably look to open seven to fourteen days past that date. For the most part thus far, malls are very much in line with that same legislation. I don't think we'll find ourselves in a situation where we want to do something different than the mall. But if we did, that would be fine as well. As Matt said, we have our own entrances, parking, and if we decided we want to open in a particular location even if the mall wasn't open yet, we could do that.

Unrelated, Matt, you mentioned it briefly, but how big were your sales in international licensing revenues impacted by the virus over the last few months? Any insight there in terms of how we should think about that moving forward into the back half of calendar 2020?

Let me give you a framework. You can anticipate our licensee restaurants have been impacted similarly to the U.S. The good news is that in the Far East, our partner Maxim's is starting to see green shoots, and we hope that trajectory carries through. They seem to be maintaining a good amount of off-premise sales and generally operating at 50% capacity restrictions, which gets them to a good potential sales level. I would think for the back half of the year, they would be ahead of us, perhaps the Middle East would be similar to the U.S., and Mexico a little behind. For this quarter, there's not a significant amount of revenue from that, but it would track to our performance for the back half of the year. The bakery is doing very well; they've managed this exceptionally well, and external demand continues to be similar to the first quarter. There's been a little movement among channels — food service down a bit, retail up a bit — which we expect could continue into the back half.

Your next question comes from the line of Gregory Francfort with Bank of America.

Can you talk a little bit how the consumer is using the business from an off-premise perspective in terms of alcohol mixes or beverage attach? Or even if you're seeing big shifts in terms of dayparts or days of the week, that would be helpful.

Generally, it's pretty consistent. The whole menu gets used. One thing a little different right now is that dessert is even stronger, so dessert attach rates are exceptionally strong, which shows guest affinity. We are piloting alcohol sales where allowed; it isn't a big driver historically, but it's growing. Another notable item is the average check on our digital platforms has increased meaningfully and is more in the $45 to $50 range at this point, which points to value and families ordering meals for dinner. From a meal replacement perspective, The Cheesecake Factory performs very well as a value and family-feeding option. We're seeing that reflected in the data and the strong return rates.

I'd add that it's great to see online ordering increase the way it has. We've been encouraging guests to move to online ordering to remove friction like waiting on hold. To see those numbers at nearly 40% is great, and I anticipate that will continue and make it faster and easier for guests to order off-premise.

Our next question comes from the line of Dennis Geiger with UBS.

Great. Just wondering if you could highlight the improvement you've seen from that March end trough through the last week. Specifically, what's driving the acceleration and momentum in recent weeks that you highlighted? How much is coming from initiatives you've put in place as well as greater awareness of the brand's off-premise availability? And how much is coming from stimulus checks or similar benefits?

I think it's a combination of factors — our marketing, the Cheesecake brand, DoorDash positioning, increased order rates, and stimulus checks for some customers. Easter was particularly strong; we sold a lot of whole cheesecakes for that holiday. It's hard to attribute the improvement precisely to one cause; it's the combination of marketing, brand affinity, expanded reach, and some stimulus-related demand.

Your next question comes from the line of Andy Barish with Jefferies.

A quick clarification and then just a numbers question. On the $4 million average weekly sales, you were breakeven at the restaurant-level contribution? Is that what you were discussing?

Exactly, assuming the percentage rent on those sales.

Okay. And then can you give us a sense of run-rate G&A at this point?

We've taken a meaningful amount out through salary reductions and furloughs. We believe we've taken actions necessary to align the business to a 50% occupancy plus off-premise sales level. On a weekly burn rate, it's around $2 million to $2.5 million.

Okay. And then on the 32 temporarily closed locations, what are the circumstances behind that? Is that more regulatory or more your own economic decision?

Predominantly, we evaluated the ability to generate appropriate off-premise sales to support the location. That was the biggest factor in the decision.

As a reminder, only three of those are Cheesecake Factory restaurants.

Your next question comes from the line of Matthew DiFrisco with Guggenheim Securities.

With respect to the reopening process and your success with getting people over to digital, is there a potential to do something a little out of the box and look toward preordering with the reservation optionality now, but also advanced ordering or enticing people to use that more as a labor savings? Also, when you reopen, you envision perhaps doing a slimmer menu if you're only going to have 25% capacity in the dining room. Does it make it harder to make available the full menu of over 200 items in a kitchen when you really can't reach full capacity in the dining room?

Great questions. We plan to offer the full menu because that's the power of the brand and what guests expect. We plan to open at 50% capacity, not 25%, which helps execution. We're offering just about the full menu now in off-premise at the $4 million volume, so it is not much different from what we're currently doing. As for ordering ahead, that's not in our current road map. We'll continue to leverage technology on the payment side to make things faster, easier and more contact-free for guests, but we don't anticipate implementing advanced preordering at this time.

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

Two questions. First, Matt, in terms of restaurant margin, for the first quarter it was just shy of 12%, but with comps down 13%. Could you maybe share margin specific to March, where comps were down 46%, or some color on April margin with comps down 65%? Or if not monthly, maybe a sensitivity framework to think about margin and ultimately earnings as we think about comp recovery?

Jeff, think of the $4 million AUV level as essentially breakeven assuming percentage rent, which gives you a starting point. The first two months of the year were ahead of plan and margins were slightly ahead of prior year. March's impact can be seen as a weighted average against those months. Cost of sales should be relatively in line, with small amounts of deleverage possible. Labor in the medium term is roughly 25% fixed and 75% variable. Aside from maintaining management teams, much of the labor is variable, and those are the pieces that would move up and down depending on sales recovery.

Got it. And then my other question was broader: given independents and larger-box restaurants in malls, do you think this leads to better real estate opportunities following closures, and might this be a market share opportunity for you and your portfolio of brands?

We hope all restaurateurs weather the storm, but we know some may not. If that leads to a change in market share, we feel poised to take it because of who we are and our experiential dining. From a real estate perspective, if opportunities come about, landlords would likely welcome our brands, North Italia or FRC brands, to continue generating sales. We'll remain site-based in decisions about future growth once it becomes appropriate.

Your next question comes from the line of Katherine Fogertey with Goldman Sachs.

My question is around talks with mall operators: how are they thinking about enacting social distancing, and are there any nuances we should expect once malls reopen that might impact the way your stores are running? Also, a clarification: I appreciate only three of the 32 restaurants closed are Cheesecake Factory. Could you give us a glimpse about the others, which brands they are, and whether they're in locations that might take longer to come back for modeling purposes?

They are not in particular locations that would take longer to come back. Thirteen are Grand Lux restaurants, and the rest are sprinkled across FRC concepts, some larger-footprint culinary dropout concepts where people gather. When a jurisdiction can open, we'll use the same methodology for those brands. Thus far, malls have been consistent with social distancing plans: offering hand sanitizer, limiting capacity, not allowing big groups, and removing some seating in gathering areas. That hasn't had an adverse impact for us. Malls have been cooperative and helpful with off-premise operations and allowing excess parking. As they reopen, we anticipate continued cooperation.

Great. As a quick follow-up, have there been talks about delaying the reopening of food courts given it's trickier to social distance there?

What we've seen is that even in open food courts, only a subset of vendors are operating. They have generally removed tables in food court areas so people come, get what they want and keep moving rather than milling around. So far, that has mitigated some of the social distancing concerns.

Our next question comes from the line of Patrice Chen with JPMorgan.

Great. On the commodity side, I know you guys have a pretty wide range of items in the basket. We've seen some volatility in spot pricing, whether it be chicken or beef. Can you tell us how that might flow through your COGS going into next year? And can you remind us what percentage of your basket is locked in at this point?

Patrice, we're pretty much contracted. Since we were previously mostly contracted with the lower volumes, we still maintain that high level. We have had a resilient supply chain and great vendor relationships, and we haven't seen the same ups and downs that others may have seen. It's a little early to prognosticate pricing impact; there could be some favorability if demand remains low, but we don't know for sure. Those conversations usually start in the summertime. We continue to believe the long-term outlook for the U.S. agricultural complex is benign.

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

Back to the pace of reopening: you said you expect to open a few units. Based on what's been announced, how many or what percentage of the system do you think you could reopen by the end of May or the end of the second quarter? Any ballpark?

It's very dynamic, but as we look at it right now, it could be 10% to 15% of the total capacity online by the end of May. We take an extra week or two once the jurisdiction opens, and our hope is a steady cadence of reopenings through June, but maybe about 15% by the end of May.

And on the labor model, can you share more about kitchen and front-of-house staffing at a $4 million AUV? Have you increased pay levels for hourly employees? Perhaps a ballpark labor cost as a percent of sales in this environment?

It depends on the restaurant layout and demand variability. We're utilizing our full management teams. Staffing varies by unit, but in aggregate, we have a target labor percentage in the low 40% to 42% range. That will vary by jurisdiction and specific restaurant.

Back to that bookkeeping question: of the $4 million of COVID-related costs, what's the allocation between labor and OpEx?

Three-quarters of that is in labor, one-quarter in OpEx.

Your next question comes from the line of Brian Bittner with Oppenheimer & Co.

Matt, as we think about the off-premise business, can you help us understand contribution margins on that business as it builds incrementally, inclusive of the delivery build? As you've seen that build from, say, $3 million to $4 million, what's the incremental contribution margin as extra dollars come on?

Brian, it's a really interesting question. I don't think we're thinking about it that way yet until we're more in a steady state. There are too many dynamics right now about staffing and the movement between delivery, online ordering and phone-in. Online ordering margin is slightly better than delivery, and dine-in guest is in the middle in a steady state. Incrementality will be more relevant once dining rooms are back open and we're in a more stable blended environment.

Lastly, how does this environment change thinking about unit growth for FRC and North Italia? In the near term you're cautious and handcuffed, but looking out over the next couple years, should we revert to prior targets once this is over?

If the world returns to some degree of prior levels, then we would have the same commitments to growth of all our brands. In the short term we're cautious and in cash preservation mode, but if things recover, we'd have the same commitment as before.

Your last question comes from the line of Peter Saleh with BTIG.

Can you remind us what percentage of your square footage is typically used for patios and if that percentage will be included in the 50% capacity you intend to open?

Patios are included in the 50% capacity. Even when capacity restrictions aren't in place, most jurisdictions thus far have a six-foot social distancing restriction that applies to patios as well. Patios would generally have every other table used to maintain six feet, with a bit more flexibility because you can move tables more easily than in dining rooms.

They represent about 15% of our productive square feet in total.

Very helpful. In terms of new customers from DoorDash, can you give us a sense of the profile of those new customers and how they may differ from your current customer profile?

We haven't yet done a deep analysis on those new guests. We're happy to have them and pleased with the reorder rates. We plan to learn more about what is unique about them so we can market to more similar guests. We've done promotions in the past like offering a slice of cheesecake to first-time orders; we'll continue to test what works. As we reopen restaurants, we'll maintain off-premise levels through strategic marketing.

There are no further questions at this time. I would like to turn it back to our speakers for any closing remarks.

I just want to thank everybody, and hope everybody stays safe. Thanks for your time today.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.