Cheesecake Factory Inc Q2 FY2023 Earnings Call

Thank you for standing by. My name is Cindy and I will be your conference operator today. At this time, I would like to welcome everyone to the Cheesecake Factory 2023 Quarter Two Earnings Call. Thank you. I will now turn the call over to Etienne Marcus, Vice President of Finance and Investor Relations.

Good afternoon and welcome to our second quarter fiscal 2023 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 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 statements. In addition, during this conference call, when discussing comparable sales, we will be referring to comparable sales on an operating week basis, unless specifically stated otherwise. We will also 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 second 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. During the second quarter, we made measurable progress towards our stated objective of returning our profit margins back to pre-pandemic levels. Combined with our increased scale, we were able to deliver our highest adjusted net income dollars and adjusted earnings per share generated in any one quarter in the company's history. We believe this is indicative of the opportunity we have to enhance shareholder value through continued growth of both our top and bottom line. Despite a slightly softer sales environment, the Cheesecake Factory restaurants continue to generate industry-leading annualized unit volumes averaging $12.4 million for the quarter. Comparable sales for the second quarter increased 1.5% from the prior year, and 14.1% versus 2019. Comparable sales versus 2019 continued to outperform the Casual Dining segment, demonstrating the strength and resilience of our namesake brand. Our focus on menu innovation remains a key point of differentiation, contributing to our broad consumer appeal and high degree of relevancy. To that end, this past Sunday, we commemorated National Cheesecake Day by introducing our newest cheesecake flavor, Cookie Dough Lover's Cheesecake with Pecans, and are in the midst of rolling out our latest Cheesecake Factory menu across the country. Execution within the restaurant four walls was outstanding, with our operators delivering better than planned results across several key performance indicators, including labor productivity and wage management, driving solid flow-through for improved profitability. This combined with favorable input costs resulted in an adjusted net income margin of 5% for the quarter, exceeding our expectations. On the development front, we opened the Cheesecake Factory and two FRC restaurants during the second quarter while all of our sites in the pipeline remain active. We continue to experience some delays in opening dates due to various challenges primarily beyond our control, particularly construction and permit approval delays. As a result, the company now expects to open as many as 20 new restaurants in fiscal 2023, including as many as six Cheesecake Factories, five North Italias, and nine FRC restaurants, including three Flower Child locations. We continue to anticipate two to three Cheesecake Factory restaurants to open internationally under licensing agreements. As we look ahead, we remain intently focused on delivering exceptional food quality, service, and hospitality, the hallmarks of our success to drive long-term profitable sales growth. We will continue to leverage our competitive strengths, including the scale of our business, our differentiated brands, best-in-class operators, and balance sheet to drive shareholder value and market share gains. With that, I'll now turn the call over to David Gordon, to provide some additional details on operations and marketing.

Thank you, David. Our people are our greatest resource and enable us to deliver excellent service and hospitality and delicious memorable dining experiences for our guests. We believe we are uniquely well positioned to attract, train, and retain high quality staff members and our best-in-class operators. And we remain sharply focused on maintaining our competitive edge by investing in our people to support ongoing improvements across all three facets of staffing. Last October, we resumed our in-person Restaurant Management Development program held at our Southern California corporate support center. Over the last 10 months, we have hosted over nine training conferences attended by over 800 managers, and our training investments are paying off. With our second quarter guest satisfaction scores at the Cheesecake Factory improving both sequentially and year-on-year. In fact, all key dine-in and takeout guest satisfaction metrics have surpassed the second quarter 2019 levels. We also had another quarter of strong staff retention, with restaurant management and hourly staff attrition rates effectively returning back to our industry-leading pre-pandemic levels. And lastly on the staff recruitment front. Following our recent recognition for having made Fortune Magazine's 100 Best Companies to Work For list for the 10th consecutive year, we were also just named to Fortune's best workplaces for Millennials list for 2023. We believe these accolades support our position as an employer of choice in the restaurant industry. And our relentless focus on staffing will drive improvements in service to guest experiences, and ultimately, overall restaurant performance. Moving to sales trends, comparable sales across our portfolio of concepts remain positive, with predominantly stable guest purchasing behaviors. Cheesecake Factory off-premise sales for the second quarter totaled 22% of sales, just below first quarter levels. Additionally, on-premise incident rates remained above 2019 levels, with no material change to daypart mix. North Italia second quarter comparable sales increased to a solid 8% from the prior year, and 30% versus 2019, resulting in annualized AUVs of $8 million. Four-wall margin for the adjusted matured North Italia locations improved to 15.4% in the quarter from 13% in the first quarter, with planned actions for further improvement. Other Fox Restaurant Concepts also continued to drive strong results with annualized AUVs of $7.4 million. Turning into marketing, as David mentioned, on Sunday, we celebrated National Cheesecake Day and our marketing team generated a significant amount of publicity and social media attention surrounding the exciting new flavor announcements. Today.com broke the news, which was followed by more than 90 media placements, totaling 2.5 billion PR impressions, including notable features on parade.com, match the daily meal, and msn.com to name a few. Building on this PR momentum, last Friday, our Founder David Overton was featured on The Today Show in recognition of our 45th anniversary and National Cheesecake Day. These are prime examples of our marketing strategy to tie our creative marketing campaigns to on-brand events to generate publicity and increase consumer engagement to raise the Cheesecake Factory brand's awareness and drive sales. On June 1, we launched our cheesecake rewards program nationally. And while we're in the very early stages, the program is off to a promising start with member enrollments surpassing our expectations. In celebration of National Cheesecake Day and as an exclusive offer for our cheesecake reward members, we offered a special any slice half-price promotion for our dining guests on July 31 and August 1. And as a reminder, our overarching objective is to leverage data analytics and insights to engage more effectively with our guests and drive incremental sales while maintaining our restaurant-level margins. And with that, I will now turn the call over to Matt for our financial review.

Thank you, David. Let me first provide a high-level recap of our second quarter results versus our expectations I outlined last quarter. Total revenues of $866.2 million were just under the low end of the range, although the sequential improvement on a year-on-year basis throughout the quarter. Adjusted net income margin of 5% was above our expectations relative to our sales. G&A and depreciation combined as a percent of sales were in line with expectations. And we returned $23.1 million to our shareholders in the form of dividends and stock repurchases. Now turning to some more specific details around the quarter. Second quarter sales at the Cheesecake Factory restaurants totaled $652.5 million. Comparable sales increased 1.5% versus the prior year and 14.1% versus 2019. Sales for North Italia were $65.9 million, a 17% increase over the prior year supported by comparable sales growth of 8% versus the prior year. Comparable sales versus 2019 increased 30%. FRC, including Flower Child, average weekly sales were $114,700. Other FRC sales totaled $65.7 million, up 10% from the prior year, and sales per operating week were $142,300. And external bakery sales were $15.4 million during the second quarter of fiscal 2023. Now moving to year-on-year expense variance commentary. As we have seen our cumulative pricing catch up with inflation, we realized measurable year-on-year improvement across several key line items in the P&L. Specifically, cost of sales decreased 130 basis points driven by higher menu pricing and commodity inflation despite lapping favorable dairy contracts in the second quarter of 2022. Labor decreased 130 basis points predominantly driven by pricing leverage, partially offset by higher management labor driven by higher staffing levels. Other operating expenses decreased 10 basis points, mostly driven by pricing leverage, partially offset by marketing costs related to launching the rewards program. G&A increased 40 basis points, mostly related to higher staffing levels. Depreciation, as a percent of sales remained flat to the prior year. Preopening costs were $6 million in the quarter compared to $2.9 million in the prior year period. We opened three restaurants during the second quarter versus two restaurants in the second quarter of 2022. Delays in opening dates contributed to higher than expected preopening costs for the quarter. And in the second quarter, we recorded a net expense of $0.6 million related to impairment of assets and lease termination income and FRC acquisition-related expenses. Second quarter GAAP diluted net income per share was $0.87. Adjusted net income per share was $0.88. Now turning to our balance sheet and capital allocation. The company ended the quarter with total available liquidity of approximately $330.1 million, including a cash balance of about $91.6 million and approximately $238.5 million available in a revolving credit facility. Total debt outstanding was unchanged at $475 million in principal. CapEx totaled approximately $25 million during the second quarter for new unit development and maintenance. During the quarter, we completed approximately $9.3 million in share repurchases and returned just over $13.8 million to shareholders via our dividend. 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 Q3 and full year 2023 revenue and net income margin. For Q3, based on our quarter-to-date performance and most recent trends, and assuming no material operating or consumer disruptions, we anticipate total revenues to be between $835 million and $855 million. This essentially assumes a continuation of the trends from the second half of Q2, which on a year-on-year basis sequentially improved as we lapped more favorable comparisons. Next, at this time, we expect effective commodity inflation of low single digits for Q3 as our broad market basket continues to stabilize. We are modeling net total labor inflation of about mid-single digits when factoring in the latest trends in wage rates, which, similar to our commodities, continue to normalize, as well as channel mix and other components of labor. Based on these assumptions, we anticipate net income margin of approximately 2.75% for Q3 at the midpoint of the revenue range I previously outlined, which also reflects planned higher than average G&A of about $2 million, mostly related to our annual general manager conference, which takes place in September, and the preopening expense we expect of approximately $9 million in the quarter. Now for the full year, based on a year-to-date performance, more recent trends, and assuming no material operating or consumer disruptions, we are now anticipating total revenues for fiscal 2023 to be approximately $3.5 billion. This reflects our second quarter results, our perspective on seasonality post-pandemic, as well as the impact related to timing delays in new restaurant opening dates, and any impact from the launch of the rewards program. For the back half of the year, we now estimate year-on-year inflation for commodities to be in the low single-digit range and labor in the mid-single-digit range. Given our unit growth expectations, we are estimating preopening expenses to be approximately $26 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, and consumer trends remain consistent, and there are no other material exogenous factors, we continue to expect full year net income margin of approximately 4% at the revenue level I provided. With regard to development, as David Overton highlighted earlier, we plan to open as many as 20 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. And we now anticipate approximately $160 million to $170 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, as David stated earlier, in the second quarter, we took another step towards recovering our four-wall and enterprise-wide operating profit margins. While comparisons continued to be inconclusive due to lapping of various stages of the pandemic and the environment remains somewhat uncertain due to potential shifts in consumer sentiment and behavior, we are pleased with the stability and predictability of our overall financial performance so far this year. As we have previously noted, our key objectives this year are to rebuild our profitability and to ensure we have the appropriate levers in place to drive future sales growth. As we look ahead, with cost inputs normalizing and the macro environment starting to stabilize, we believe we are well positioned to once again generate our historically consistent operational and financial results. And with that said, we'll take your questions.

Your first question comes from the line of Brian Mullan from Piper Sandler.

Hi, thank you. Just a question on the same-store sales results at the core cheesecake brand. Could you just take us through the traffic, the menu price and the mix please for the quarter? And then on the menu price piece, how do you expect the rest of the year to progress? You know, strategically, you're going to continue to solve for margin recapture or conversely, some of the industry traffic trends maybe give you any pause about taking more price? Just any thoughts would be great?

Sure, Brian. This is Matt, it's a good question. Probably top of mind for most investors, just on the actual data, the pricing was about 10.5%, roughly for the quarter. The mix was a negative 5.4% and then the traffic was a negative 3.7%. As we talk about before the mix has some to do with the change year-on-year in the off-premise while being very stable, still a little bit heightened in Q2 of last year. And the way that we count guests causes some of that negative mix impact. And the other part really was the higher purchasing behavior in Q2 of 2022. We're still running above pre-pandemic levels of what we call into the race was how much alcohol, dessert, or appetizers guests are buying. But obviously last year, the so-called revenge buying was in place and we saw heightened levels. For the remainder of the year, we're contemplating lapping our summer menu pricing with a 2% level versus the 4.25% we had. So, we'll see it diminish from the 10.5%, I think it'll go to, you know, I don't know at 10.9ish in the third quarter, and then 7.5% or so weighted in the fourth quarter because remember, we did the catch-up at the beginning of December. So, the balance of that will go into next year with more like 5%, because we'll lap over some of that catch-up pricing that we had in the fourth quarter and exit. I think though importantly, to your question, Brian, and maybe this is the most pertinent part of it, and how we're thinking about it. Certainly, there was just a very difficult optical lap in the second quarter for cheesecake. And we had exceptional sales volumes in the second quarter of last year driven by some of that post-COVID surge. As we look at the quarter, kind of how we came out versus our expectations. Really, May was a little bit softer, maybe a couple of percent in terms of the timing and trying to figure out that seasonality of the new normal. And then we had a couple of delayed openings, obviously that contributed to it. But really, June looks good. As we think about how we performed, we exited the quarter closer to mid-single digit comps most of the difference there being in traffic. So, we actually think our traffic is in pretty good shape going forward. And that's what we're expecting to see as we go through the third and fourth quarters. So, we are taking less pricing than we have been. And I think that will support it. But I think the underlying business trends going into the third quarter are very strong. And we're pleased with that we're going to keep doing what we're doing.

Okay. Thank you for it. And all very helpful. And then just follow-up on the development outlook; your release mentions some construction challenges, some permit approval delays. I know that's not unique to, but I'm just wondering, is one of those two dynamics a bigger factor versus the other or one might expect? Would you expect one of them to improve more quickly than the other? I'm kind of seeing the context of understanding this year has been impacted? Do you want investors thinking that next year, you could potentially get to that 6% to 7% net growth in 2024, or will these issues be with you a bit longer?

Hi Brian. This is David Gordon. Great question. And as David Overton mentioned, the up to 20 for this year puts us I think, at about 6.3% to 6.5% unit growth for this year. So, we still feel confident in that 7% number for next year when we look at our pipeline for next year. Most of the delays are not really on the construction sites for us, a little bit more in the permitting, whether that's a local permit in a city, or something more broad. And as far as equipment, as we've stated on the path, I think we've done a terrific job of ensuring that we have what we need for the openings again for the pipeline nex year. So, it's more about cities being a little bit slower, more new people in jobs than previous and then just being a little less quick to be able to do what we need, but over time, we'd continue to hope that that's only going to get better. And there's nothing internally that will keep us from hitting those targets.

Thank you.

Hi, good afternoon guys. Just looking at the restaurant margins by banner. It looks like Cheesecake nearly outperformed in terms of the recovery this quarter. I guess, what's kind of driving outsize growth? And can you kind of help us think about how much North Italia and other FRC are kind of being dragged down by the growth that they're seeing?

Sure, yes, we were pleased, really pleased with the Cheesecake Factory margin recovery. If you think about the timing of the pricing versus inflation, we took that extra 3% at the end of last year. And we're seeing that flowed through. I think year-on-year, cake was up 330 basis points. So pretty much 100% flow through on the pricing. So, I think that's great to see. Part of the difference between the concepts is growth. As you noted, usually, that's about a 2% or so delta, depending on how many openings, but that's a good sort of rule of thumb. I think the other component of that for North was that we did some of the catch-up pricing actually in the second quarter. So we didn't even get the full benefit of that yet. So there's even another probably 1% lag, I think just on the pricing front. So, we think all of our concepts are really well positioned on the recovery front. We're still building on that, it's not like we're declaring victory because we want to continue to increase it. But we think that we're making the right decisions, and we've made a lot of progress.

Okay. Can you just remind us what pricing was at North Italia this quarter?

I think what we'll do about 4%.

Great. Thank you. First question, if I could, wanted to ask a little bit about delivery and sort of what you've seen there, from a mix perspective, how that's changed at any change with demand, and any other opportunities that you've identified within that channel?

Thanks, Dennis. It's David Gordon. We continue to see very stable activity. Now the off-premise at 22% in Q2, just a percent below where we were in Q1. Deliveries still make up about 9% to 10% of that mix. 7% of it is phone or walk up, and then the remainder is made up of online ordering. So as we said, I think we may have said last quarter, we need to extend our exclusive agreement with DoorDash, which continues to give us a really preferential marketing position as well as a very strong commission rate. That means that all of our off-premise sales, including the DoorDash sales, are not in any way margin dilutive. So, we feel good about the fact that they will hold on to those sales and we continue to see that remain. This summer tends to be the slowest time for delivery sales overall. So that 1% down from where we were last quarter is the same type of behavior we've seen last year. But we feel really good about the ongoing partnership. And also, the integration we have with DoorDash on the rewards side, which has allowed guests to go ahead and use the incentives, the rewards also on DoorDash.

Appreciate that, David. Just one more if I may. Now just wanted to follow-up on the mid-single June exit that you spoke to. Definitely a solid number, and it seems like that's maybe a good run rate that you're thinking about going forward. Just as you talked about some seasonality in earlier months. Just curious, I guess maybe on a multiyear basis if you guys still think about that anymore, just how to think about that over the coming months, and it's just kind of that June exit, on a one-year basis is a good way to think about the go forward as we think about those trends? Thank you.

Yes. This is Matt. Yes - as I said, in the prepared remarks, I mean, it is still a little bit inconclusive, right with any one data point. And so, I think that reinforces the need to be agile, and the great job that our operators did, managing with their forecasting of sales and driving flows through was exceptional. I think that the beginning of the stability started last year, kind of in the August, September timeframe, if I remember correctly. And so, we feel like, you know, that mid-single digit run rate is appropriate, that’s what we've been seeing. And that's what I think our outlook kind of encompasses, if you will.

Great, thank you for taking my question. Curious, if we go back to your comments, Matt, on the predictability of the financial performance, it sounds like as you kind of get away from maybe some choppier periods, whether that was really in the quarter, or maybe 4th of July, as some of your peers have talked about the traffic sounds to be relatively falling in line with your expectations. And then, to your point, even though you might have had some one-time items in there that maybe lowered the absolute revenue, it feels like the actual store-level performance is kind of falling in line. Is that, am I understanding that point right, in terms of just how you're thinking about the predictability of the model?

I think that's right. I mean, again, there continues to be some potential abnormalities and lapping numbers, right. So, I think that exists. But in the absolute terms, I think the last quarter was the most predictable that we've seen in the cake business in three and a half years. And that goes for both, I think the top and the bottom line. The input costs are not as volatile as they have been, thinking particularly about the COGS and the labor inflation, and the moderation that we've seen. And the fact that that gives us some confidence that continued improvement in core costs, with the stability of the top line is very achievable. So, I think that that variability has narrowed dramatically over the course of the last six months. And I think that's a real testament, again, to our teams benefiting from the environment. And we're just hopeful that that continues.

That's helpful. Thank you. When we think about trends by geography, daypart, or kind of maybe from a mix basis, it sounds like those are also pretty consistent as well. Anything to call out there that either surprising or maybe that you've noticed, within the context of the overall results?

Yes, I mean, when we look at things like daypart mix, it's within like 0.1%, each of them versus 2019, for example, right. So it's really close. We continue to see sort of that movement back to consistent historical trends. I don't know, it's possible that some of the heat has been a negative in some areas. And I've heard some other commentary around that that's kind of unique and challenging. Obviously, there's no value of usage in about half the country right now. So given our results, and those factors, I think we feel even better.

Hi, thanks. And good evening. I just wanted to circle back on the Cheesecake Factory comps. And I think you said you saw a little softness in May, curious what you'd attribute that to. And then I appreciate the mid-single digit comp comment exiting the quarter. I'm curious what that looks like on a comp versus '19 basis. Is that an improvement versus the 14% versus what you saw in the first half of the year?

Yes, so I think Brian. This is Matt. The first point really, in May, it was around our expectations. I mean, trying to sort of model like we were saying, year-on-year, there was a certain cadence last year, there was a certain cadence year before, and they've all been different. So, I think mostly that was around our internal expectations about how do, you figure out this new second quarter pattern. I don't know that on absolute terms, it was better or worse, because that's just hard to say. But I think versus our expectations, we improved as we went through the quarter. And I think, roughly the sort of 14% to 15% versus 2019 is kind of our thinking still, right. I mean, I think it's the stability of that is sort of back in line. And, and I think it just represents mid-single digits as compared to the prior year.

All right, thank you. That's helpful. And then, on the margin front, you expressed confidence in recovering sort of your and recapturing pre-COVID margins. And certainly good to see some of the improvement in North Italia. But, and I hope my quick math is right on this, but it looks like Cheesecake segment margins may still be down about 90 basis points versus '19. I guess the question is, what are some of the key drivers from here that would allow Cheesecake segment margins to fully recapture pre-COVID levels in your view?

Well, Brian, first of all, I think your math is correct, right. So that I think that is true in the second quarter. I think there are a couple of areas that we believe will help us continue to close the gap, maybe not as fast as we've seen in the last quarter or two with that level of incremental pricing. But as we continue to carry, I mean, taking 2% in the summer is probably a little bit more than we might have historically, there might have been one and a half, where we're seeing also wage inflation rates that are below pre-pandemic levels. So again, I think we see the opportunity to be able to really leverage a little bit in the labor and the COGS line items as we move forward. The other comparison piece here is in the marketing and rewards. There is a little bit of expense there associated with the launch that we incurred, both it incurred in the second quarter. And we anticipate that will also be the case in the third and fourth. I think longer term as David Gordon mentioned, we believe that it will be margin neutral, but obviously, the initiation and the customer acquisition costs, and that's probably in the 30, 35 basis point range for the second quarter on the back half of the year.

All right. That's great color. And then Matt, I just wanted to ask about the labor line specifically and sales were a little light. But Labor sort of came in line and looks like it was quite a bit below versus the first quarter. Are there any one-time items or non-recurring adjustments that are worth highlighting? And just more color kind of fundamentally on what drove that favorability? Are you seeing guessing you're seeing improvements and overtime improvements and hiring, you know, hiring costs and training costs, et cetera? But any color you could provide there would be great? Thanks very much.

Well, Ryan, first of all, you did a better job selling it than we possibly could, because it's all of those improvements that you noted. But really the predictability of the sales component, the stability of that. We did have better productivity year-on-year, one of the things we've been really focused on upgrading wise is on the forecasting and templating of labor. And the team has done an exceptional job improving upon that in this environment. And so, we've seen a lot of efficiencies. I can tell you there are no one-time benefits that we have in there. Our group medical was basically on plan. All items were pretty much normal. I think that we were just in an opportunity to take advantage of the better staffing and execution that David Gordon talked about.

Yes. Hi, Brian, this is David Gordon. Our continued improvement in retention is certainly part of that, that's paying off. So we look at Q2 of 2023 versus last year, we continue to have improvements. And we're really back to sort of our pre-pandemic best-in-class at staff. And most importantly, I think it's a management level. That leads only to better operations over time, which leads to improved productivity. And our applicant flow continues to get better quarter-after-quarter. I think last reporting period, we had about 29 applicants for every hiring need. That's up to about 34 for every hiring need today. And the quality of applicants continues to be people that have previously been in the industry, versus at this time last year when we were probably still hiring people who didn't have experience. So, the longer those staff stay with us gives us the ability to continue to cross-train them, make them more productive in the restaurants. And you take that combined with the more predictive sales environment and allows our operators to really maximize productivity and maximize labor and as you pointed out, reduce overtime.

Hi, good afternoon, I wanted to circle back to the rewards program. And I know it's early. But can you kind of give us your game plan on how you expect that to evolve over this year? And clearly, I'm assuming the goal is to incent frequency mean, given others experience with other kinds of programs, when do you think that would start to become manifest?

Sure, Sharon. Hi, it's David Gordon. As you probably recall, that the program's design is really around published offers, unpublished offers, and then marketable offers. And our longer term goal is to be able to leverage the data and the insights to engage with guests and really drive incremental sales while maintaining those restaurant level margins. And since we only launched the full program in June, I would say that we're taking time now to really analyze that data. And we'll be doing that all throughout Q3. And then we'll look at where we might want to start some pinpointed marketing to drive some incremental visits in the fourth quarter. But more than likely, it's really next year that we would start leveraging it completely, and have enough data that we think it would be very meaningful to be able to drive the right type of offers into the right channels at the right time to drive some incrementality, whether that's a part occasion, or incident occasions. So, we're looking forward to being able to do that fully next year.

And is there kind of an omni-channel model where somebody can get recognized if they order through DoorDash or is it just if they come in or get to go and the brick and mortar?

No, it's also through DoorDash. That was one of the early things that we put together with DoorDash with the ability for somebody to be able to participate and drive value through DoorDash. So it's omni-channel in any way guests want to use it.

Hi, thanks for the question. Wondering if you could walk through for North Italia the breakout between traffic and check? And what type of price do you expect to carry through into the back half of 2023?

The traffic was positive 2%. Price was 8%, and the mix was negative 2%. And I think we would expect probably to carry about 8% pricing throughout the rest of the year.

Right. Any feedback on any change in alcohol mix that you'd want to call out indication that the consumer might be trading down?

No, we really haven't seen that any of the concepts, Cheesecake or North or the other FRC concepts that have a heavier bar mix to begin with. We haven't really seen any trade down law.

Well, that's a very broad question because it can be very different. So I think, Cheesecake historically is around that 13-ish range, but it can run all the way up. A culinary dropout might be in the low 30s or so. So it runs the gamut. I would say probably Flower Child is the lowest, that's in the low single digits because it's really just something and you know, things like that. So it all depends on the concept, Jim.

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