Good afternoon. My name is Devon, and I will be your conference operator today. At this time, I would like to welcome everyone to The Cheesecake Factory Incorporated Q4 2022 Earnings Conference Call. Thank you for your patience. I now turn the call over to Vice President of Investor Relations, Etienne Marcus. You may begin the conference.

Good afternoon, and welcome to our fourth quarter fiscal 2022 earnings call. On the call with me 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. Before we begin, let me quickly remind you that during this call, items will be discussed that are not based on historical facts and are considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. 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 statements. 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. David Overton will begin today's call with some opening remarks, and David Gordon will provide an operational update. Matt will then review our fourth quarter results and provide a financial update. Following that, we'll open the call to questions. With that, I'll turn the call over to David Overton.

Thank you, Etienne. We delivered another solid quarter sales across our portfolio of concepts, resulting in annual sales exceeding $3 billion for the first time in our company's history, with average unit volumes of over $12 million for domestic Cheesecake Factory restaurants. Additionally, North Italia's fourth quarter comparable sales increased an exceptional 26% over 2019 on a 14-week versus 14-week basis. Our strong top line performance continues to be driven by our strategy of differentiation through menu innovation, service hospitality, and operational excellence. To that end, our best-in-class operators remain intently focused on delivering delicious, memorable guest experiences and effectively managing their restaurants. While our operational performance has been solid, as I discussed last quarter, we have been in an exceptionally high inflationary environment, which has resulted in restaurant level margin compression as reflected in our fiscal 2022 results. Over the past year, we have endeavored to meet the dual mandate of protecting guest traffic for the long run while also recovering margins in the near to medium term. While our sales results reflect the positive momentum we have sustained out of the top line, I recognize that our profit margins have not kept pace given the rapidly escalating inflation. To address this shortfall, we rolled out an additional menu price increase at the start of December, with the objective of exiting the year with Cheesecake Factory restaurant level margins at seasonally adjusted 2019 levels. Based on our December results, we believe we have achieved our objective. We believe commodity inflation will improve as we move through the year and labor will further stabilize as that seems to keep better alignment between cost increases and menu pricing in 2023. Our goal is to also maintain our recent sales and guest traffic trends as both sales and margins are critical to driving shareholder value in the short and long term. Turning to unit growth. We successfully opened 8 new restaurants during the fourth quarter, including two Cheesecake Factories, two North Italias, two Flower Childs, and the FRC restaurants. On the international front, we opened a fifth Cheesecake Factory location in Mexico City under a licensing agreement. And subsequent to quarter end, we opened a Gilda’s in Nashville. I believe opening eight new restaurants last quarter demonstrates our ability to execute the acceleration of our unit growth plan. And while we continue to experience some delays in opening due to supply chain challenges and permit approval delays beyond our control, at this time, we expect to open as many as 20 to 22 new restaurants in fiscal year 2023, including 5 to 6 Cheesecake Factories, 5 to 6 North Italias and 10 FRC restaurants, including 3 to 4 Flower Child locations. Additionally, we expect 2 to 3 Cheesecake Factory restaurants to open internationally under licensing agreements. We remain deeply focused on driving menu innovation, maintaining and temporarily designed into core of our restaurants, and ensuring our guests receive excellent service. These pillars form the foundation of our 4.5 decades of success and will continue to pave the way for a bright future. With that, I'll now turn the call over to David Gordon to provide some additional details on our operations and marketing.

Thank you, David. Our staffing levels remain solid. Staffing needs at the start of 2023, down more than 50% compared to the same period in the prior year. During the fourth quarter, we once again drove sequential year-over-year improvements in both manager and hourly staff retention. Our applicant flow continues to be strong. In 2022, we had over 1 million applications. And as of January, applicants available to hire were more than 3 times what they were a year ago, with approximately 57 applicants for every one need. We believe retention and staffing levels go hand-in-hand with delivering great guest experiences and ultimately, comp store sales performance. To that end, dine-in net promoter metrics improved sequentially and year-over-year, and our sales trends are off to a promising start in 2023. Through February 21st, quarter-to-date comparable sales for The Cheesecake Factory restaurants on an operating week basis are up 9.5% versus 2022 and up 17% versus 2019. As I shared previously, given the strength of our sales performance, we shifted our marketing for The Cheesecake Factory restaurants, primarily back to brand-based messaging to raise the profile and awareness of The Cheesecake Factory concept. However, we continue to support the off-premise channel with some on-brand promotional activity. For example, in celebration of our 45th anniversary, starting next Monday, guests ordering online or through DoorDash will receive a complimentary slice of cheesecake when they spend $45 or more. This promotion will run Monday through Friday, March 3rd, and is designed to drive sales during days of the week in which we have more available capacity. We continue to see stable guest purchasing behaviors. The Cheesecake Factory off-premise sales for the fourth quarter totaled 23% of sales for the second consecutive quarter. Additionally, we've not seen any material changes in on-premise incident rates over the past three quarters with incident rates remaining above 2019 levels. Now turning to North Italia. Fourth quarter comparable sales grew a solid 9% versus 2021 and 26% versus 2019, both on a 14-week versus 14-week basis. These positive sales trends have continued into the New Year. Through February 21st, quarter-to-date comparable sales on an operating week basis have increased approximately 13% year-over-year and 31% as compared to the same period in fiscal 2019. Overall margin for the adjusted mature North Italia locations improved to 13.3% for the fourth quarter, supported by a menu price increase implemented mid-fourth quarter. FRC also drove some strong results with annualized AUVs of $7.6 million, reinforcing our belief that the differentiated and emerging concepts FRC continues to develop will drive meaningful growth going forward. Before I wrap up, I want to thank our staff members and managers for their continued dedication to absolute guest satisfaction and maintaining our culture across our concepts while continuing to navigate the dynamic operating environment. And with that, I will now turn the call over to Matt for our financial review.

Thank you, David. Let me begin by reviewing our progress against the primary financial objectives I outlined last quarter for fiscal 2022. Total revenue was $3.3 billion for the year. The Cheesecake Factory AUVs exceeded $12 million. Following the latest menu price increase, Cheesecake Factory four-wall margins for December exceeded December 2019 margins. For the year, G&A, depreciation, and preopening expenses combined were 60 basis points lower than the prior year. Finally, we returned over $105 million to our shareholders in the form of dividends and stock repurchases. Now, turning to some more specific details around the quarter. Total revenues at The Cheesecake Factory Incorporated for the fourth quarter of 2022, which as a reminder, included an additional operating week, were $892.8 million. The additional week contributed approximately $78.4 million of sales. Fourth quarter comparable sales at The Cheesecake Factory restaurants increased 4% versus the prior year and 11.4% versus 2019, both on a 14-week versus 14-week basis. Revenue contribution from North Italia and FRC totaled $161.4 million. Sales per operating week at FRC, including Flower Child, were approximately $109,000. And external bakery sales were $21.5 million during the fourth quarter of fiscal 2022. Now moving to expenses. Cost of sales increased 170 basis points versus Q4 of the prior year, principally driven by significantly higher commodity inflation than menu pricing. Labor decreased 140 basis points over 2022, primarily driven by lower medical insurance expenses and pricing leverage. Other operating expenses decreased 40 basis points, largely driven by lower restaurant-level incentive payout and sales leverage. G&A as a percentage of sales increased 20 basis points mostly driven by higher legal fees. Preopening costs were $7.8 million in the quarter compared to $3.9 million in the prior year period. We opened 8 restaurants during the fourth quarter versus 4 openings in the fourth quarter of 2021. And in the fourth quarter, we recorded a pretax charge of $41.5 million related to asset impairments and FRC acquisition-related items. Fourth quarter GAAP diluted net loss per common share was $0.07. Adjusted net income per share was $0.56. Now turning to our balance sheet and capital allocation. The Company ended the quarter with total available liquidity of approximately $354 million, including a cash balance of about $115 million and approximately $239 million available on our revolving credit facility. Total debt outstanding was unchanged at $475 million in principal. CapEx totaled approximately $34 million during the fourth quarter for new unit development and maintenance. And we completed approximately $22 million in share repurchases and returned just under $14 million to shareholders via our dividend during the quarter. While we will not be providing specific comparable sales and earnings guidance, given the operating environment continues to be very dynamic, we will provide our updated thoughts on our underlying assumptions for the first quarter and full year 2023 for revenue and net income margin. For Q1, based on our quarter-to-date performance, the most recent trends and assuming no material operating or consumer disruptions, we anticipate total revenues to be between $850 million and $880 million. This includes a menu price increase of approximately 3.5% we are deploying at The Cheesecake Factory restaurants during the middle of the quarter. This menu price increase is replacing the 3.25% menu price increase we took in the first quarter of last year. Next, at this time, we expect effective commodity inflation of about 10% to 12% for Q1. We are modeling net total labor inflation of about 6% when factoring in the latest trends in wage rates, channel mix as well as other components of labor. We anticipate net income margin of approximately 3% to 3.5% for the first quarter of fiscal 2023 based on the revenue range I previously outlined and the elevated year-over-year commodities. Now for the full year, based on our year-to-date performance, most recent trends and assuming no material operating or consumer disruptions, we anticipate total revenues for fiscal 2023 to be between approximately $3.5 billion to $3.6 billion. We currently estimate total inflation across our commodity baskets, total labor, and other operating expenses to be in the mid-single-digit range, moderating throughout the year. And given our unit growth expectations, we are estimating preopening expenses to be approximately $24 million. As we have said earlier, our goal is to effectively offset inflation with menu pricing to support our margin objectives. Assuming we do so, when consumer trends remain consistent and there are no other material exogenous factors, we expect full year net income margin of approximately 4% at the midpoint of the revenue range I provided. With regard to development, as David Overton highlighted earlier, we plan to open as many as 20 to 22 new restaurants this year across our portfolio of concepts with approximately 80% of openings occurring in the second half of the year. And we would anticipate approximately $165 million to $175 million in CapEx to support this year's and some of next year's unit development as well as required maintenance on our restaurants. In closing, we remain pleased with the top line results across our portfolio of concepts. However, 2022 was undeniably an extremely challenging year with respect to our margin performance. And clearly, the cost environment remains heightened relative to historical standards, and there can be no guarantees it will abate in 2023. That said, in December, our pricing actions appear to have caught up with our costs, and while some degree of volatility and uncertainty should still be expected quarter-to-quarter, it is our goal to keep a tighter correlation between pricing and the inflation we experience going forward. As we continue to work to recapture restaurant level margins and to further leverage our G&A and depreciation expenses, our objective is to unlock the earnings and cash flow potential that our strong sales results and continued momentum have provided. Combined with our reaccelerated unit growth and capital returns programs, this would provide for a meaningful shareholder value creation platform going forward. With that said, we'll take your questions.

Our first question comes from Joshua Long with Stephens.

Great. Thank you for taking my questions. I was curious if you can share how consumer trends were across the system, maybe by daypart, geography, channel mix? And then, as we think about the pricing decisions that we've been talking about for the last quarter or two, can you sort of feedback, read-through in terms of how those have been handling? It seems like they've been accepted well. But just curious what you're seeing at the restaurant level from the consumer as we continue in the current environment?

Sure. Josh, this is Matt. Thanks for the question. I think typical to historical Cheesecake performance, it's been extremely consistent. The geographies have been consistent. I was literally, just before the call, looking at our stat pack for the quarter, the dinner daypart, the lunch daypart, extremely consistent to historical performance, both pre and post pricing actions, whether that was the summer or the most recent one. We've seen the on-premise dining incident rates be almost the same as they've always been. So, we've really been pleased that the consistency of the brand has held up. And I think part of that is while we have been taking the incremental pricing to recapture margins, just remind everybody that at least when we look at the data food away from home versus our menu pricing, since 2019, we're still 4 percentage points below what the rest of the market has been. So, the value proposition for Cheesecake is still there, and I think that the guests are using it the way that they always have been.

Great. That's helpful. When considering the guidance and the visibility into the fourth quarter trends from our third quarter discussions, could you share the factors influencing the fourth quarter revenues? Was it related to pricing timing? Were there other aspects within the portfolio that contributed to the $893 million in total revenues for the fourth quarter?

Sure. The end of the year showed remarkable strength, with our best performance occurring in the final weeks. While there have been fluctuations in the marketplace, consumer resilience during the holiday season certainly contributed to that. As David Gordon noted, we have also experienced a strong start to this year. There are two factors I would highlight regarding any changes we observed. First, weather impacted our performance, likely costing us about 0.5% or 40 to 50 basis points. Second, November's results were slightly below our internal estimates, which I attribute to last November being exceptionally strong. This serves as a reminder that year-over-year comparisons are just one metric. It’s important to reference where we stood in 2019 because of the ups and downs we experience. There was a small gap in November when comparing the results from 2021 to 2022.

That's helpful. And maybe last one for me and then I'll hop back in the queue. When we think about some of the margin goals that you've outlined over the last couple of quarters. I think in your prepared comments, you also talked about how the December margin, once all of the pricing was in place, were above 2019 levels. Any sort of additional commentary or color you can share there in terms of what December four-wall margins were back in 2019, just so we can kind of level set this progression in terms of getting back to pre-COVID levels?

Sure. We don't actually report on monthly margin levels, right, because there are differences based on seasonality and things. I'm not sure that that specific metric would be helpful. I mean, I think our goal was to be above 2019 when we accomplished that in December. So, I think that's the positive. There was a little pressure, again, kind of just explaining the quarter in our four-wall margins really driven by the sales that we talked about, right? So, absent that, the overall four-wall, it was the best, most consistent performance that we've had all year. We hit core costs, labor and commodities came in on plan or better, right? So, I think that the momentum on the margin side has been achieved. There is a little bit of noise below the four-wall level, had a little pressure in G&A, right? And so overall, that combined for the total results. But I think that we set ourselves up to move forward appropriately. The thing that we want to make sure, too, that is clear is that the first quarter, and I've heard some other companies talk about this, right? You come into the year and you've kind of from the past year, but on January 1st or whatever that time is minimum wage sets in, and you do have some of your new contracts for commodities rolling over. So, in the first quarter, we've got to catch up again a little bit, right? That would normally be the case. We just see outsized seasonality given the environment, right? So, we talk about the 10% to 12% commodity inflation for the first quarter moderating really being more like 4% in the back half, right? And so that's just an important distinction in terms of the cadence of the margin recovery and sustainability, particularly at the four-wall margin level.

That's helpful. And understood on the December margin comment specifically, that makes sense. When we think about that comment holistically that would exclude any sort of benefit from the extra week, which we would typically think would be accretive.

Our next question comes from Brian Vaccaro with Raymond James.

I would like to revisit the margin recovery targets you previously mentioned regarding reaching mid-teens margins. Can you clarify if that refers specifically to Cheesecake? I'm asking because North Italia is still operating around the 10% to 11% range. I understand there are inefficiencies with new units affecting this, but I would assume that this might continue due to the brand's new unit growth. Any insights on this would be appreciated.

Brian, this is Matt. Yes, that's great. Thank you for asking that specific question, again, trying to provide as much clarity. So that is a specific Cheesecake objective. And I think what we've talked about is there could be, depending on the stage, the quarter, all the other seasonalities, but in terms of the growth brands, another 25 to 50 basis-point overall company waiting on that, right? So the Cheesecake goal is the mid-15s, and then that would put the Company goal around 15 based on all of the growth factors.

Can you provide the Cheesecake Factory traffic price and mix for the fourth quarter?

Sure. And you did not miss it. Pricing was 8.5%. Traffic was a positive 0.3%. And the mix was a negative 4.8%.And of the mix, just as a reminder, the vast preponderance of that is associated just with the off-premise channel and the way we count it in the purchasing behaviors of the off-premise. The on-premise, as I answered in a previous question, the incident rate and the check capture was virtually on par with pricing.

Okay. Great. And then lastly, if I could just fit this in. Regarding the other operating costs, I understand there are many moving parts and volatility in that area, which has made it challenging to provide guidance and manage through 2022. In the fourth quarter, what specific factors negatively impacted you? I believe you had initially guided towards the mid-25s if my notes are accurate. Any insights on that would be appreciated.

The main issue compared to our expectations was that utilities continued to exert significant pressure, particularly with natural gas, where the timing of its impact on energy costs came in higher than we had predicted. While we try to rely on the forecasts provided by the Department of Energy, they can only do so much to ensure accuracy. This affected us somewhat. In October and November, we also saw continued higher maintenance and repairs costs, which posed a challenge. Additionally, we faced some pressure with insurance costs. However, we accounted for all these factors when planning for December. Early indications this year suggest that while these higher costs persist, they are not worsening.

Okay. Understood. And is there any light at the end of the tunnel or green shoots as it relates to some of these inflationary pressures, whether it be utilities, R&M or other things that have been pressuring you in '22 in that line abating and any way to ballpark kind of what inflation level you might see in that other OpEx line in 2023?

Yes. I mean it definitely, like I said, I think we look at December even in January, we haven't seen it escalate higher. So it definitely has stabilized. Some of the contractual components of that are more in the normal 3% to 4% range that you would have seen. And eventually, the capitulation in the natural gas market, I mean, it's trading in the low 2s today. During the summer, it hit 9. So that will ripple through. It will be different by geography and then timing. And so I think there will be some relief in that period. But I think, generally speaking, when we think about the P&L, other OpEx probably remains somewhat high relative to our goals, but below where we were in 2022 going forward because the inflation should be less than our pricing for the year.

Our next question comes from Dennis Geiger with UBS.

Focusing on the margin is clearly a key priority for the year, particularly regarding margin recovery. I would like to understand Matt or the team's perspective on pricing if the macro environment becomes more challenging, especially if competitors increase promotions. Could you elaborate on how you plan to balance price and margin under those circumstances?

Sure, Dennis. It’s important to remember that in a slowing economy, the cost side is typically affected. When demand decreases, we often see commodity prices drop and labor stabilize, which can reduce the need for price increases. In the past, during significant downturns, we've explored menu innovation and introduced appealing price points for guests. I don’t believe we would ever return to traditional discounting, as that’s not something we’ve done. Restaurants usually don’t reduce prices either. It’s crucial that our guests perceive value. Additionally, we’re currently positioned well, being four points below the industry average over the past couple of years. We aim to maintain a defensive stance.

Great. And a quick follow-up. I know you guys touched on staffing levels, and I might have missed the exact comment, but as it relates to staffing relative to where you want to be, can you just quickly touch on that given the demand that's out there right now, where you are staffing versus where you want to be? If you could just highlight that.

Sure, Dennis. This is David Gordon. Our staffing levels are basically where they were in 2019. So we're happy that they've recovered to the extent that they have. We have roughly 60 applicants for every hiring need that we have out there today. The other positive is that the quality of applicants continues to get better. We're able to hire people with more experience than we were 12 months ago. So only positives on the staffing front, and we continue to not have any issues where a challenge with staffing might be limiting operations at all or style in sales. So we feel really good about where we are. We continue to be an employer of choice and continue to have industry-leading retention at the staff and manager level which will also help us as we continue on throughout the year.

Our next question comes from Jon Tower with Citi.

Great. Regarding the net interest margin guidance for the first quarter of the year, could you provide the implied tax rate for both the quarter and the year?

Yes. It's low teens, Jon, in that ballpark.

Okay. Great. And then just, I guess, on the unit growth side, I think today, you took down the number slightly relative to where you originally anticipated it for 2023. Now it's 20 to 22 versus 21 to 24. So can you just explain what's going on there. Are you still seeing issues with securing whether it's equipment or permitting? I'm just curious if you could add some color there.

Sure, Jon. This is David Gordon again. Certainly, things are much better than they were last year. We feel really good about that 20 to 22 number. There still may be parts of the country where permitting is moving a little bit slower or as an example, we have a location where we're still waiting for the power company to show up and give us all the power that we need. So we have just some one-off situations that we want to make sure that we understand fully why we pulled down the number a tiny bit, but it doesn't take us off of our overall plan of that continued 7% unit growth. Most of the openings this year will be happening in the second half of the year, but we feel very confident about that 20 to 22.

Got it. And then just lastly, on delivery. Can you just talk about how that mixed in during the quarter? You've seen any softness in that piece of the business at all? And certainly, starting 2023, it seems like there's quite a bit of lift in demand on the on-premise channel across the industry. Curious if you're seeing similar type of lift in your business or a shift away from off-premise towards on-premise?

Thanks, Jon. This is David again. Our total off-premise was in line with Q3 at 23%, which is where we finished the quarter. And that mix is very, very stable. It remains about 40% of it being delivery. 35% is still phone or guests were walking up and then about 25% are guests who are using our online ordering platform. So I think from the beginning, we've said that we feel that our offering really continues to work well in the off-premise channel, whether that's the menu variety and the variety of price points, along with the quality that our ops team has been able to continue to deliver. So we don't think that, that is going to change as we move into the new year. We've seen it be very stable in the new year and feel great about the off-premise business.

Our next question comes from Brian Harbour with Morgan Stanley.

Can you comment on the performance of some of the other FRC brands from a sales perspective, and which ones you think could potentially grow larger over time?

Sure. Well, I think as we stated before, our plans for North Italia continue to be about a 20% unit growth. And North continues, as you can see from the sales that we reported to be very, very strong. Consumer demand is great as we moved into new geographies. It continues to be accepted by those guests very, very well. So we feel great about the continued growth at North. Flower Child was now up to 30 restaurants across the country and moving into some new geographies as well and having that same success on the sales side. So we'd anticipate the Flower Child is going to be the next concept that we will bring under our umbrella a little more closely and help continue to launch nationally. We're excited to get that going this year. There'll be three to four Flower Child this year and the total number of 10 restaurants that FRC will be opening. And then past that, there are some other concepts like culinary dropouts that we're very, very excited about. Blanco is a Mexican concept that we like a lot. We'll continue to evaluate the other FRC concepts to make sure we feel like they can have a national presence and make sure that they're hitting the margin profile that we need before we decided that we would scale them up and try and grow them the way that we are for North and for Flower Child.

Okay. What were the asset impairments related to? Or I guess, how much of that was lease impairment, how much of it was other types of impairment? What was that from?

Yes, Brian, this is Matt. It's predominantly lease impairment. And essentially, we hit the COVID pandemic and there were several urban locations that while we continue to operate and are recovering haven't fully recovered, right? And so this is just an accounting exercise that you have to go through. And the real driver today, which is just weird compared to five years ago. If you can remember back when the lease accounting changed, right? And so we actually have to gross up the balance sheet with the right-of-use assets. So that number, I mean, over 50% of it is just the lease side of it, not even the investments that were made.

Our next question comes from Nick Setyan with Wedbush Securities.

This is actually Michael on for Nick. Just wondering what labor expense and other OpEx would have been as a percent of sales if you guys were to back out that extra week?

Well, Michael, it's Matt, would be pretty darn much the same because those are fully accrued, and we contract the hours worked by week. And so those actually go hand-in-hand with the weeks that we operate in. So shouldn't have been too much different a little bit is probably slightly better just because it was a bigger week relative to the rest of the quarter, but it wasn't meaningful.

Our next question comes from Lauren Silberman with Credit Suisse.

Just on comps, obviously, really strong trends quarter-to-date. What's your sense of what's driving the underlying acceleration broadly? And looking versus '19, are you seeing relative consistency week to week over the quarter to period?

Lauren, it's Matt. Yes, I think that's a good metric. We like to balance it between 2019 and year-over-year. It has been very stable against 2019. I believe we are witnessing a return to more normal seasonality patterns. There was some positive talk about the weather in January. The strength we observed in the first week or two was partly due to the omicron comparison year-over-year, but that does not explain the 2019 data, which is why we find it important to consider. Generally, we are seeing a normalization of consumer trends, and our brands are resonating well. Therefore, the utilization is similar to what we might have expected before the pandemic.

Great. And then just another follow-up on consumer behavior. You mentioned that there's no real sign in sort of tech management or attachment rates also doing, I think, it's the 45th anniversary weekday promotion. Is this in any response to what you're seeing? Just trying to understand if there's any type of shift that is discernible.

No, we do the marketing and types of offers mainly for off-premise purposes, which we implement occasionally. In fact, it would seem the opposite is true because we’re experiencing strong trends, suggesting we might not need these offers. However, we prefer to maintain a consistent approach to keep our brand in the minds of our guests. It's particularly important in off-premise channels to stay visible given the competitive promotional landscape, regardless of our current strong trends.

And certainly celebrating with anniversary garners us additional PR. We've always had very strong concept, PR and there's just another way for people to celebrate the anniversary with us.

Our next question comes from Jeffrey Bernstein with Barclays.

Great. Thank you very much. Two things. First, just as we think about the 2023 margin, I think you said the restaurant margin should be at that 15% level for the overall corporate. But I know in the past, you had talked about operating margins. I think you had said you were looking back to '19 and you wanted to get them back to that 5.2% range seemingly G&A being the big driver between the restaurant and the operating margins. So I'm just wondering how we should think about that operating margin whether on G&A, whether you look at it on dollar spend or growth relative to revenues, how should we think about that in '23? And then one follow up.

Sure. Jeff, this is Matt. I think generally, all that still holds, right? I mean, when I look at sort of what's out there in terms of the estimates and expectations, it pretty much surrounds that general approach. I mean our goal with G&A is to continue to move it equal or better as a percentage of sales every year, right? Until we get to that 6% level. I think the other piece is kind of below the four-wall level. Depreciation will probably be pretty similar year-over-year. Preopening will be up a little bit year-over-year. So I think those are kind of where things would shake out.

Got it. And then just on the value scores, I think you mentioned that your pricing is 400 basis points below food away from home. And I know you often not being better insulated because presumably you target a slightly higher income consumer, at least at your core brands. I know there are some that are concerned that maybe the higher income might be more vulnerable based on the current factors at play here. I'm just wondering how you measure your value scores and determine price above and beyond kind of the government data. Is there testament that you do or survey work? Just trying to get a measure for your confidence that your value scores hold up in the event of a slowing macro.

Yes. A couple of things just on the pricing, right? It's a little bit art albeit science. I think in addition to the government data, we track our peer set, right? I mean, I've said this many times, but it's true. We look at different markets, 2 dozen national competitors, and we try to assess whether or not we're either at or slightly below the midpoint there. So from an alternative approach for consumers to be looking at, we're taking no more, if not less pricing than the competitors, which I guess goes hand in hand with the government data, right, because these are the biggest change. I think we look at price elasticity, so we do our own internal analytical evaluation, and we evaluate whether we're seeing trade-off and market basket or not and check attachment. And I think as we said so far, we're seeing very consistent patterns there as well. And we do research, qualitative research. So we're constantly monitoring what our guests are saying about our value and making sure that that score is consistent. I think the last thing I would say is that if the top end of consumers really does feel pressure, we're likely to actually benefit some from that because they typically move down off of the steakhouses and the expensive independents, the one-offs in The Cheesecake Factory and into our brands because we're still very, very accessible. So I don't think that, that type of economic slowdown would be material for us.

Our final question comes from Drew North with Baird.

Great. I had a quick follow-up on the commodity outlook and then 1 on development. What percent of your basket do you currently have locked for 2023 at this point? Just trying to get a sense of the visibility you have on the mid-single-digit guidance there?

Sure, Drew, this is Matt. We're about 60%, which is pretty close. I mean this time of year, we might want to be closer to 65% or so. The category that is still a little bit tricky, obviously, is ground beef, harder to get a long-term contract there. And then there's a couple of categories that we're kind of watching where we booked the first half, but we think that there's an opportunity still in the second half, but pretty close to where we would normally be at this time.

Great. That's helpful. And then I was hoping you could provide an update on the investment costs you are anticipating for each of your major brands from a development standpoint. Elevated construction cost has clearly been a theme across the industry in 2022. But are you seeing any green shoots there as you look ahead? And maybe just an update on the performance of new openings and the unit level returns you achieved for your recent openings relative to your internal expectations?

Sure. There's a lot of variability in the marketplace today. Depending on the marketplace, you're seeing either moderate or significant inflation. South Florida is particularly challenging right now due to high demand, and the hurricane last year didn't help. On a positive note, while we are experiencing increases in our capital expenditures, they aren't significantly outpacing our sales volumes, partly due to our pricing strategy. For example, a mature North Italia location may have seen capital expenditures rise from $3.5 million to $4 million, but sales there are around $8 million, allowing us to maintain a 2:1 sales to capital expenditure ratio. I believe our margin profiles haven't changed significantly, as long as we can return to our target margins, which is crucial for our returns. We've seen impressive sales performance from new locations and improvements in staffing, which is also vital for execution. We wouldn't commit to opening 20 to 22 locations if we weren't confident in achieving the expected returns. Thus, we are optimistic about recovering our margins, and we expect our sales to capital expenditure ratio to remain consistent with historical performance.

Step back from a very high level. Is there any thought process of like increasing the focus or intensity on the core Cheesecake business to improve margins to the fullest potential of the business for the macro we are currently dealing with or not like boxing ourselves within, like, say, like comparing to 2019 margins or anything. Is there like any further opportunity here beyond like the things that have already been done. Just curious from your seat, like what other things can be done, maybe like pivoting a little more focus away from like the smaller concepts, but again, I understand like something like Fox has more or less independently operated. So just curious, on your thoughts here going into this year?

Sure. This is Matt. Look, I think that it's a multistep thought, right? Certainly, we're not going to be done or we're not going to only look for a recovery to, say, to 2019, that was just a benchmark. The volatility that we've obviously seen with pretty much two black swan events in three years between the pandemic and then the war in Europe that caused the inflation. I think we're just trying to provide some benchmarks and really say what's a reasonable starting point. Then when we see stability in the market, I think it will be a little bit more timely to talk about next steps, right? I mean, we need to see stability in staffing. We need to see stability in supply chain, really before you're talking about unlocking material additional margin opportunities core costs and restaurants make up about 60% anyway. So I hear you, I think that, that is top of mind. But I think for us, let's get to a starting point, let's see the environment stabilize a little bit and then let's pull some levers and not having sort of a knee-jerk reaction, if you will.

Our final question comes from Brian Vaccaro with Raymond James.

Matt, I was just going to ask, in terms of your high-level margin guidance, the comments you made around 2023, and I apologize if you said this, but does that assume you take additional pricing moving through the year? Or does that assume no more from here, this 3.5% you're taking, I guess, in February? I wasn't clear on that.

No, Brian, this is Matt. I do think that we're hopeful to return to kind of a normal pricing cadence in the summertime. We'll be looking at what the trends are between now and then. I think the key for us is we're going to try to keep up with inflation. Hopefully, we see inflation at down, and we don't have to take as much, but we would anticipate there's something. At this point in time, we don't have a definitive number to give you, but it will depend on the environment really.

There are no further questions at this time. With that said, concludes today's conference. Thank you for attending today's presentation. You may now disconnect.