Earnings Call Transcript - CAKE Q1 2026

Operator, Operator

Thank you for standing by. My name is Rebecca, and I will be your conference operator today. At this time, I would like to welcome everyone to The Cheesecake Factory, Inc. First Quarter 2026 Earnings Conference Call. I will now turn the call over to Etienne Marcus, Vice President of Finance and Investor Relations. Please go ahead.

Etienne Marcus, Vice President of Finance and Investor Relations

Good afternoon, and welcome to our first quarter fiscal 2026 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 exclude acquisition-related items, impairment of assets and lease termination expense and other items. Explanations 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 first quarter financial results and provide commentary on our financial outlook before opening the call up to questions. With that, I'll turn the call over to David Overton.

David Overton, Chairman and Chief Executive Officer

Thank you, Etienne. We delivered strong results in the first quarter, exceeding expectations across revenue, margins and adjusted diluted earnings per share. This performance reflects disciplined execution across our restaurants and continued demand for our differentiated high-quality concepts. First quarter comparable sales at The Cheesecake Factory restaurants increased 1.6%, outperforming the industry and reflecting the strong affinity for our namesake concept. Culinary innovation continues to be a core strength of our business. Our recent menu additions, including new bites and expanded bowl options have been well received by guests and highlight the broad appeal of our menu and the value we deliver to our guests. Importantly, these offerings keep the concept fresh and competitively positioned without relying on discounting. To this point, Cheesecake Factory average weekly sales reached a new all-time high during the quarter, bringing our industry-leading annualized unit volumes to nearly $12.8 million. Strong sales and exceptional execution drove further improvement in The Cheesecake Factory's restaurant-level profit margins, and we delivered double-digit growth in adjusted diluted earnings per share year-over-year. Turning to development. During the first quarter, we opened 3 restaurants, including a North Italia, a Henry and a Flower Child. In addition, 1 Cheesecake Factory restaurant opened in the first quarter in Mexico under a licensing agreement, the only international opening we expect this year. Subsequent to quarter end, we opened in North Italia, marking our 50th location for the concept. With these openings, we remain on track to meet our objective of opening as many as 26 new restaurants this year. In summary, we delivered a strong quarter. And as we look ahead, we will remain focused on delivering exceptional food, service and hospitality, the hallmarks of our success while continuing to execute our long-term growth strategy. Before I turn the call over, I am pleased to share we were once again recognized by Fortune as one of the 100 Best Companies to work for, marking our 13th consecutive year on the list. This recognition based on direct feedback from our staff reflects the strength of our culture and the engagement of our people. We believe this continues to be an important advantage in attracting and retaining talent in a highly competitive labor environment. With that, I will now hand the call to David Gordon to provide an operational update.

David Gordon, President

Thank you, David. Our performance this quarter reflects the strength of our operations teams and their ability to execute at a high level in our restaurants while leveraging sales growth to drive flow-through and profitability. Operators delivered improvements in labor productivity, food cost management and other controllable expenses while maintaining strong retention across both hourly staff and management teams and delivering strong guest satisfaction scores. As David mentioned, our recent menu additions at The Cheesecake Factory restaurants have been well received, which we believe has contributed to the sequential improvements in traffic and check mix. This has allowed us to moderate menu pricing without impacting restaurant level margins. Moving on to Cheesecake Rewards. The recent launch of our new mobile app has exceeded expectations with top-tier download rankings, including #3 overall and #1 in food and drink during the rollout week. And early guest feedback has been overwhelmingly positive, particularly around the app's ease of use for making reservations and browsing the menu to place orders, reordering favorites and accessing rewards all within the app. We are also seeing solid early traction with increasing adoption of the app for digital ordering, reflecting strong early engagement with the platform. At the same time, we continue to refine the program toward more targeted behavior-based personalized offers with an increased focus on life cycle management. So far this year, we've seen higher engagement, improved incrementality and greater offer efficiency. I'll now turn to additional concept performance details. The Cheesecake Factory's first quarter comparable sales outperformed the Black Box Casual Dining Index by 40 basis points and resulted in annualized AUVs of $12.8 million for the quarter. This performance was supported by an off-premise mix of 22%, in line with the prior quarter and prior year. Restaurant-level profit margins increased 10 basis points year-over-year to 17.5%. North Italia's first quarter annualized AUVs totaled $7.4 million with comparable sales declining 2%. Our focus remains on returning to positive sales growth, and we remain confident in the concept's competitive positioning and long-term opportunity. At the same time, we're seeing encouraging trends, including improved retention across both managers and hourly staff as well as strong early results at new restaurant openings with average weekly sales at recent openings meaningfully above the system average. In addition, we recently implemented at North Italia the guest feedback platform used at The Cheesecake Factory, which we believe will provide valuable insights into execution and support ongoing improvement. Our new menu currently being rolled out introduces a dedicated lunch section featuring lighter options, including refreshed salads and additional protein offerings aligned with current guest preferences and thoughtfully priced. We believe this will increase awareness of our lunch offering and strengthen our value proposition in the lunch daypart. Restaurant level profit margin for the adjusted mature North Italia locations was 14.8% for the quarter versus 16.6% for the prior year. The decline primarily reflects sales deleverage along with higher building expenses, including repairs and maintenance and utilities. Flower Child delivered another standout quarter, meaningfully outpacing the fast casual segment, underscoring the strong affinity for the concept as it continues to take market share. First quarter comparable sales increased 10% for a 2-year comparable sales increase of 15%. This strong performance translated into annualized AUVs of $4.9 million, a new quarterly high for the concept. Restaurant-level profit margin for the adjusted mature Flower Child locations was 19.6% in the first quarter, up 100 basis points from the prior year. This performance reflects the concept's highly differentiated positioning with a made-from-scratch menu that is both health-focused and craveable, delivering compelling value across a broad range of offerings, all within thoughtfully designed restaurants to provide a more elevated experiential dining experience. Combined with consistent strong execution by our restaurant teams, these strengths continue to drive momentum and strong sales trends. We remain focused on building strong teams to support the concept's continued growth, and we're increasingly confident in the opportunity ahead. And lastly, we expanded our FRC portfolio with the opening of a Henry in Phoenix, which opened to strong demand. Average weekly sales have exceeded $280,000 in the first 4 weeks for an annualized AUV of over $14 million. And with that, let me turn the call over to Matt for our financial review.

Matthew Clark, Executive Vice President and Chief Financial Officer

Thank you, David. Let me first provide a high-level recap of our first quarter results versus our expectations I outlined last quarter. Total revenues were $978.8 million, meaningfully above the high end of the range we provided. Adjusted net income margin was 5.2% and adjusted diluted earnings per share was $1.05, both finishing above our expectations. And we returned $32.6 million to our shareholders in the form of dividends and stock repurchases. Now turning to some more specific details around the quarter. First quarter total sales at The Cheesecake Factory restaurants were $690.5 million, up 3% from the prior year. Total sales for North Italia were $89.5 million, up 7% from the prior year period. Other FRC sales totaled $104.5 million, up 20% from the prior year, and sales per operating week were $145,200. Flower Child sales totaled $52.6 million, up 21% from the prior year, and sales per operating week were $94,500. And external bakery sales were $13.9 million. Now moving to year-over-year expense variance commentary. Specifically, cost of sales decreased 10 basis points, primarily driven by favorable dairy costs, partially offset by higher beef and seafood costs. Labor as a percent of sales declined 20 basis points, primarily driven by labor productivity gains, partially offset by higher group medical. Other operating expenses increased 40 basis points, primarily driven by higher utility and bakery overhead costs. G&A remained relatively flat as a percent of sales and depreciation increased 10 basis points from the prior year. Preopening costs for the quarter, including some expenses related to early second quarter openings totaled $5.5 million compared to $8.1 million in the prior year period. We opened 3 restaurants during the first quarter versus 8 restaurants in the first quarter of 2025. And in the first quarter, we recorded a pretax net expense of $2 million, primarily related to impairment of assets and lease termination expenses and FRC acquisition-related items. First quarter GAAP diluted net income per share was $1.02. Adjusted diluted net income per share was $1.05. Now turning to our balance sheet and capital allocation. The company ended the quarter with total available liquidity of $601.6 million, including a cash balance of $235.1 million and $366.5 million available on our revolving credit facility. Total principal amount of debt outstanding was $644 million, including $69 million in principal amount of 0.375% convertible senior notes due 2026 and $575 million in principal amount of 2% convertible senior notes due 2030. CapEx totaled approximately $43 million during the first quarter for new unit development and maintenance. During the quarter, we completed approximately $18.4 million in share repurchases and returned $14.2 million to shareholders via our dividend. Now let me turn to our outlook. While we will not be providing specific comparable sales and earnings guidance, we will provide our updated thoughts on our underlying assumptions for Q2 and full year 2026. Our assumptions factor in everything we know as of today, including net restaurant counts, quarter-to-date trends, our expectations for the weeks ahead, anticipated impacts associated with holiday shifts and the recent softness in industry sales trends and the current consumer environment. Specifically for Q2, we anticipate total revenues to be between $990 million and $1 billion. Next, at this time, we expect effective commodity inflation of low to mid-single digits for Q2 as our broad market basket remains stable. We are modeling net total labor inflation of low to mid-single digits when factoring in the latest trends in wage rates and minimum wage increases as well as other components of labor. Other operating expenses are estimated to be approximately 20 basis points higher than prior year, reflecting higher marketing spend to support the launch of our rewards app. G&A is estimated to be approximately $63 million to $64 million. Depreciation is estimated to be approximately $28 million to $29 million. We are estimating preopening expenses to be approximately $7 million. Based on these assumptions, we would anticipate adjusted net income margin to be about 5.5% at the midpoint of the sales range provided. For modeling purposes, we are assuming a tax rate of approximately 13% and weighted average shares outstanding of approximately 48.5 million. Turning to fiscal 2026. Based on similar assumptions and no material operating or consumer disruptions, we anticipate total revenues for fiscal 2026 to be approximately $3.91 billion at the midpoint of our sensitivity modeling. For sensitivity purposes, we are using a range of plus or minus 1%. We currently estimate total inflation across our commodity basket, labor and other operating expenses to be in the low to mid-single-digit range and fairly consistent across the quarters. We are estimating G&A to be about 6.5% of sales, partially driven by our sales growth outlook impacted by the timing of restaurant openings and closures as well as periodic true-ups related to stock-based compensation. Depreciation is expected to be about $115 million for the year. And given our unit growth expectations, we are estimating preopening expenses to be approximately $35 million to $36 million. Based on these assumptions, we would expect full year net income margin to be approximately 5% of the sales estimate provided. For modeling purposes, we are assuming a tax rate of approximately 11% and weighted average shares outstanding relatively flat to 2025. With regard to development, we plan to continue accelerating unit growth this year. At this time, we expect to open as many as 26 new restaurants in 2026, with roughly 3/4 of those openings planned for the second half of the year. This includes as many as 6 Cheesecake Factories, 6 to 7 North Italias, 6 to 7 Flower Childs and 7 FRC restaurants. And we would anticipate approximately $210 million in cash CapEx to support unit development as well as required maintenance on our restaurants. Note, this CapEx range includes some new restaurant construction expenses, which may be classified as operating lease assets instead of additions to property and equipment in the statement of cash flows. In closing, our first quarter results reflect a healthy business, solid top line momentum, disciplined cost management and strong operational execution. Our financial position continues to provide the flexibility to support new unit growth while investing in the business and returning capital to shareholders. With a diversified portfolio of high-quality concepts, experienced operators and a strong balance sheet, we believe we are well positioned as we move through the year. Looking ahead, we remain focused on consistent execution, comparable sales growth, margin expansion and long-term shareholder value creation. With that said, we'll take your questions.

Operator, Operator

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

Andrew Barish, Analyst, Jefferies

Can you just go through it? I know the Cheesecake business has been very consistent on the top line. Any quarter-to-date trends? I know results have been noisy with Easter and spring break shifts, but anything you're seeing in guest counts or check management that you'd be willing to comment on would be helpful.

Matthew Clark, Executive Vice President and Chief Financial Officer

Sure, Andrew. This is Matt. As you know, we're not going to give a specific number. But I think if you interpolate the revenue guidance for the second quarter, we're expecting to have consistent trends continue for the Cheesecake Factory. And I think we feel cautiously optimistic about the rollout of the app and the incrementality that we have potential to drive there. We rolled out incremental new menu items in the first quarter, and we saw progressively improving incidence rate trends on those. So generally, I would say we have a bullish outlook on our business at this time.

Operator, Operator

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

Jeffrey Farmer, Analyst, Gordon Haskett

Matt, you mentioned that the Q1 revenue performance exceeded obviously, the guidance. But what was the primary driver of that outperformance relative to your guidance?

Matthew Clark, Executive Vice President and Chief Financial Officer

Yes, Jeff, this is Matt. It was a couple of factors. Cheesecake Factory comps came in above the range that we had provided there. They were very stable throughout the quarter. So I think that was a positive. And then certainly, Flower Child, that 10% was above our expectations; we had thought more in the mid-single digits. Each of those probably contributed about 50% of the beat.

Jeffrey Farmer, Analyst, Gordon Haskett

Okay. And then one more. As it relates to intra-quarter same-store sales trends, when the conflict in Iran really kicked off in early March and gas prices jumped, did you see any impact on same-store sales for any of the businesses?

Matthew Clark, Executive Vice President and Chief Financial Officer

We were pretty steady throughout the quarter. We were looking at that as well and parsing it. Throughout the portfolio, we continue to be steady. There's a little bit of spring break movement, but even that was probably more muted than we thought. It was very balanced throughout the quarter, and we didn't see any trade down either. So both guest traffic and mix were steady throughout.

Operator, Operator

Your next question comes from the line of Jim Salera with Stephens.

James Salera, Analyst, Stephens

Maybe a 2-part question. One, just some housekeeping. Are you able to provide the breakout of Cheesecake Factory comps, the traffic, the pricing and then the mix components? And then as we look at the strong results in the quarter, I know historically, you've talked about kind of GDP and jobs numbers as having a big influence on guest traffic and engagement with the brand. I don't think we've had necessarily very good jobs numbers this year that haven't been horrible, but I think kind of continuing to slow growth in 2025. But then we see your results accelerating. And so I was hoping maybe you could just kind of bridge what's happening at your restaurants that's maybe leading you to outperform relative to kind of the macro backdrop as a whole.

Matthew Clark, Executive Vice President and Chief Financial Officer

Sure, Jim. I'll start here on the specifics of the Cheesecake Factory. Pricing was at 3.3%. As we have noted previously, that's coming down. It will be 3% in the subsequent quarters, given the timing of what was rolling off in the quarter, it was at 3.3%. The mix was a negative 0.3%. So we saw a pretty material stabilization there, really benefiting particularly from the bites being add-ons and not substitutions. We feel really positive about that. The traffic was a negative 1.4%, which was a material improvement over the Q4 results. Also note for the record, the total weather impact for the company was about 1.7% of sales. Of course, there was weather in the prior year. So the net really was about 70 to 75 basis points. So pretty close to getting back to flat traffic for Cheesecake Factory on a like-for-like basis. So really positive movement there. There's a lot of factors at play regarding the economy. Certainly, if you believe in the K-economy component of it, many of our concepts benefit from higher income cohorts. There's a piece of that. I think the flexibility of the menu, particularly at Cheesecake Factory and Flower Child, will benefit us with the GLP-1 trend. You can get anything you want to eat. At Cheesecake Factory, you can get steamed salmon with broccoli if that's what you want and increase proteins, and Flower Child offers similar options. So I think the menu and the hospitality and the service are our primary tentpoles, and we are excelling in those. We're probably taking some share for those reasons. Even though jobs haven't been great, breaking into the economist here, the news cycle around the layoffs is not as bad as it sounds. The job market has been steady. Discretionary income is up slightly, and it's up a bit more than we're taking in price. From a wallet perspective, there's that. Lastly, spending is shifting toward experiences rather than goods, and we're experiential dining. So it's not so much transactional. For all those reasons, we believe we're positioned well.

David Gordon, President

Jim, I'll add one more piece: the continued retention we see in the restaurants at the hourly staff and management level quarter after quarter has allowed the operations teams to execute as well as they ever have. We continue to see that type of execution. We see it in the results of our Net Promoter Scores continuing to be positive. That has a flywheel effect of guests wanting to come back and having those types of experiences. That can never be overlooked.

Operator, Operator

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

Pratik Patel, Analyst, Barclays (on behalf of Jeff Bernstein)

This is Pratik on for Jeff. Just a quick housekeeping question. Can we also have the components of the comp for North Italia, please? And then I have a real question.

Matthew Clark, Executive Vice President and Chief Financial Officer

Yes. Mix was positive 1% for the quarter. Price was about 3% and came down a little bit, and then traffic was negative 6%.

Pratik Patel, Analyst, Barclays (on behalf of Jeff Bernstein)

I appreciate it. And then my bigger picture question was, I appreciate that your brands skew to relatively higher income consumers. But with elevated gas prices, inflation north of 3%, the ongoing stock market volatility, it just seems like everyone is frustrated these days to some degree. So I was just wondering if you're seeing any trade down from fine dining and other higher-end casual dining customers into your brands. Do you currently think you're capitalizing on that? Or is there an opportunity to capitalize on that frustration? And secondly, in terms of whatever read you have on your own customers, do you see any check management in terms of alcohol appetizers or add-ons?

David Gordon, President

A couple of things. The incidence rates and the add-ons have remained incredibly consistent. Some of the early check management that maybe people were anticipating with the bites, we didn't see. People are attaching bites along with the rest of their meal at Cheesecake Factory. As for the high-end consumer and white tablecloth, Flower Child may be taking market share from QSR or from fast casual that have had to take more price to protect margins. Flower Child has not had to do that and offers an elevated experience. Along with that elevated experience and menu innovation and ongoing LTOs, we are taking market share from consumers who feel pinched, whether that's fast casual or QSR. That has benefited Flower Child.

Operator, Operator

Your next question comes from the line of Samantha Cheng with Goldman Sachs.

Samantha Cheng, Analyst, Goldman Sachs (on behalf of Christine Cho)

Congrats on the strong results. With the new Cheesecake mobile app launched earlier this month, I know you mentioned that guest feedback has been positive so far. Could you touch on any additional early observations that you have from the app rollout regarding member engagement and frequency? And how do you expect personalized marketing to evolve following this launch?

David Gordon, President

We still haven't discussed any actual numbers around the rewards program, and you should anticipate we won't be doing that, either, for downloads or members. What I will say is that we are very pleased with the amount of downloads we've seen thus far. We're also pleased with the number of sign-ins after downloading because downloading is one thing, but engaging with the app is another. We're happy with the number of folks that have enabled locations and allowed notifications because those are ways we can engage one-on-one, get the best ROI, drive incrementality and continue to gather data to ensure marketing spend gets the best ROI long term. We're super happy with the launch early on. The amount of engagement in the App Store and Google Play was very high in the beginning and continues week after week to be significant.

Matthew Clark, Executive Vice President and Chief Financial Officer

Just one qualitative note: I've been really pleased with the number of new guests signing up. We're opening the funnel to attract incremental traffic, and it's not just about engaging current rewards members but growing the total base.

Operator, Operator

Your next question comes from the line of John Ivankoe with JPMorgan.

Chris (on behalf of John Ivankoe), Analyst, JPMorgan

My first question is on Flower Child. The 10% comp is really strong against the category that came in roughly flat in the same quarter. You mentioned unit growth depends on your management pipeline, whether it's general manager and executive chef. Where are you on that, especially as the category is growing really fast compared to other segments in the restaurant industry?

David Gordon, President

Great question. We still believe growing at the pace we want requires the right type of general manager and executive chef. We're pleased to see continued retention benefits at Flower Child because that's key to career growth and enabling people to reach those roles. We feel confident in our current growth trajectory and that we have the pipeline to meet those expectations. The team is very focused. If we decided to ramp up a bit, they remain focused on the most important areas to enable growth in that talent level to have general managers and executive chefs in place in time for that growth.

Chris (on behalf of John Ivankoe), Analyst, JPMorgan

Second, on North Italia. Looking at numbers, new unit volumes came down a little in the first quarter. How are new units opening up and can you give more detail?

David Gordon, President

We've opened 2 new restaurants recently. We just finished our first full week at our new Brea location in Southern California, the busiest opening week in North Italia history for any individual location. Very well received in an existing market. In the new market in Northern California about a month ago, that would have been our busiest opening if we hadn't just opened Brea. New markets have been very well received. We'll continue this year with about 50% new-to-existing markets, and we're pleased with the early results.

Operator, Operator

Your next question comes from the line of Jim Sanderson with Northcoast Research.

James Sanderson, Analyst, Northcoast Research

Congratulations on a great quarter. I wondered if you could talk a little more about store margin at North Italia. That was a bit lower than expected. What are the unlocks or remedies to get that back up to the mid-to-high teens?

Matthew Clark, Executive Vice President and Chief Financial Officer

A couple of things. There's certainly a little pressure from the comp and some deleverage on fixed cost. It's also about investing the right amounts in labor and having the right menu offerings at thoughtful prices. There's a bit of the mix of mature units; each year the group that comes into mature margin set differs, and this year included some higher-cost markets. So some of it is optics. The most important thing is to focus on positive comp store sales; that's the primary attribute to recapturing margin. Overall, we feel confident mature margins should be in the 16% to 18% range on an ongoing basis. We're close to striking distance; it's not a big movement from our range, and much is just moving pieces that happened to be in Q1. We are focused on recovering that.

James Sanderson, Analyst, Northcoast Research

And just a follow-up: how would leaning into lunch impact the store margin generally?

Matthew Clark, Executive Vice President and Chief Financial Officer

It's about aggregate traffic. For lunch, the incrementality and recapturing that traffic matters. Staffing levels are already set, so you're able to recapture margins at a higher rate than the average. That's the key; bringing in more people when we have capacity is the biggest lever on the margin side.

James Sanderson, Analyst, Northcoast Research

Just last question for me. How should we look at the ability for you to consistently expand consolidated store margin over time? It seems pretty flat with prior years. What's the formula to get back to modest expansion?

Matthew Clark, Executive Vice President and Chief Financial Officer

Our full year guidance still calls for about 25 basis points of 4-wall margin expansion in total. Every quarter will have ups and downs depending on items like group medical or produce prices due to weather. Our outlook for the year remains unchanged because much of that is timing already anticipated and built into expectations. We feel confident that 25 basis points is attainable across the portfolio, and that's our plan for this year. That would put us north of the 16% range and is inclusive of adding 26 new restaurants. That's still our target and remains viable.

Operator, Operator

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

Karen Holthouse, Analyst, Citi (on behalf of Jon Tower)

Anecdotally, it seems there's more social content coming out and it's showing up in our feeds more often. Could you comment on anything you're doing differently on social, how you're measuring engagement in that channel and how meaningful that could be as part of a go-forward marketing strategy?

David Gordon, President

We have a strong social presence across Instagram. In the past 6 months we've dipped our toe into TikTok using influencers, paid and nonpaid. For Cheesecake Factory, one beneficial aspect is the PR we get regularly through culture and appearances on late-night TV, not paid media. We use many tactics across social media platforms and take a multichannel approach, and we'll continue to do that.

Karen Holthouse, Analyst, Citi (on behalf of Jon Tower)

Second quick question. Cheesecake Factory has large brand recognition. As you move around the world, are you building anything explicit in your second quarter or annual outlook for a potential benefit around the World Cup and associated tourism?

Matthew Clark, Executive Vice President and Chief Financial Officer

No, I think that would be a nice upside. We do have great worldwide recognition and we do hear that. The World Cup could be a benefit; if that happens, we'll all be pleasantly surprised to the upside.

Operator, Operator

Your next question comes from Kelly Merrill with Morgan Stanley.

Kelly (on behalf of Brian), Analyst, Morgan Stanley

Do you have any plans to iterate on bowls and bites as smaller portions become more popular among consumers? And can you remind us, is that menu going to be refreshed a few times a year like the core menu?

David Gordon, President

Menu innovation remains core to everything we do. You can expect in our next menu change that we'll be refreshing bowls and bites, and there'll be new opportunities for guests to enjoy new flavor profiles and innovative menu items, whether on the bowls and bites menu or the main menu. Our plan is to continue ensuring we have variety across every cuisine type and price point to offer guests the most value in any way they choose to use Cheesecake Factory.

Operator, Operator

Your last question comes from Sara Senatore with Bank of America.

Sara Senatore, Analyst, Bank of America

One last question on North Italia. AUVs are down a little year-over-year, perhaps more than same-store sales. You've talked about cannibalization and awareness previously. As I look at this year, is cannibalization still a factor for North Italia? Conversely, are you opening in more new markets, and is that part of why AUV might come down? Any insights into the development strategy would be helpful.

David Gordon, President

The mix for this year is about 50-50 new and existing markets. We called out cannibalization last year and still have some lingering in certain markets. For new markets, we opened in Northern California with a very strong opening. Historically, North Italia has a longer ramp; we expect to open a bit shy of our targets and grow into those over time— that's our internal expectation. If we exceed expectations, we could see some short-term cannibalization, and we're okay with that.

Operator, Operator

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.