Jake Bartlett: Okay. Okay. And then my other question is on margins. In the quarter itself, as you mentioned, your sales were in line with expectations internally. But you’re at the lower end of guidance for margins. My question is, what drove that? What surprised you to the downside there on the margins. And as we look forward, you didn’t explicitly give restaurant level margins or G&A guidance. But can you help us in terms of what is driving the expected kind of margin compression that’s implied in guidance in ’24. Is it the margin sign? Or is it G&A deleverage that you think is going to drive that?
Craig Pommells: For this quarter, for quarter one, the — as we were — we had some hypothesis. It was data driven as we went into the quarter. But we weren’t certain. So we were — we started out with some additional advertising. We had largely committed to that, and we added some labor as well. We were seeing really good results from the advertising. We’re seeing good results from the labor. And it also gave us more confidence in — gave us more confidence in November. So as a result, we invested a bit more in labor than we had originally expected. We knew we had that out there as an option, but we went ahead and we did some more. And that, we think, played out well. Now things that we’re unexpected or kind of came in on the — on unfavorable side of our internal expectations, there were a couple of them.
Wage rates came in a little bit higher, maintenance expenses came in a little bit higher, public liability — general liability came in a little bit higher. So we had a couple of things that kind of didn’t — that were on a high end of the cost range. But the primary driver was, we were making a bet. It was working. And we just continued down that path because we were seeing a lot of good impacts from that. So what does that mean then for the rest of the year? I won’t go into a whole lot of detail there. I will say just directionally, we — the things that we’ve been doing that are working, probably to continue to do those. So where advertising has been working to a greater degree. So I would expect that we’re going to continue to do more advertising.
Now we try to measure all of that best we can. We do some test and learn. And as long as the ROI and that remains compelling, I would expect that we’re going to continue to do that. The labor investment is also — has also been working out well, not only in terms of the short-term traffic and our ability to really execute at peak periods, but you see a benefit to guest satisfaction, you see a benefit to turnover, which pays a dividend in the future. So we’ll continue to invest in those things as we go throughout the year.
Jake Bartlett: Okay. Thank you very much. Appreciate it.
Operator: Our next question comes from Andrew Wolf with CL King. Please go ahead.
Andrew Wolf: Good morning. My question is also guidance related. Actually two. First, on earnings, the implication of your guidance is better margins going forward for the next three quarters. So you called out that the advertising increase is going to continue as well as labor because it’s driving traffic. But I might have missed this, but could you go through the — if you’re still expecting $30 million cost — net cost savings — gross cost savings this year to help defray some of that cost? And if that’s the case, what the cadence of those cost savings would be against the increased spend that’s helping with the traffic?
Craig Pommells: Hi, Andrew, it’s Craig. The — I’ll start with the cost saves. We talked about $30 million of the cost saves last fiscal. And we delivered on that. I think we started with $25 million in that, we increased it to $30 million over the course of the year. We actually have an internal target for cost saves in fiscal ’24. That’s consistent. It’s not higher than that. However, we also realized that we’re making a lot of investments. So it felt a little odd for us to be talking about a cost save. At the same time, we’re spending a lot of money in labor, spending a lot of money in marketing. So the way that we are thinking about it internally is we’re saving costs significantly more than we did last year. We’re reinvesting those cost saves as a way to support these guest drive-in initiatives and overall long-term business strengthening initiatives.
Andrew Wolf: Okay. That’s good. Can you speak to the cadence? I mean, have you realized in first quarter like a pro rata amount? Or is it going to build more proportionately later in the year, the amount of cost savings?
Craig Pommells: The cost savings, I don’t have the exact quarterly breakdown in front of me, but because we have a program that is a sustained program, a number of the cost savings that we started in fiscal ’23, we didn’t get 12 months of those cost saves in ’23. So there’s quite a bit that was carried through into fiscal ’24. And then we have additional cost savings queued up in ’24 as well.
Andrew Wolf: Okay. And on the sales guidance, I just want to test the way my numbers sort of back into what I think your scenarios could be. It’s a pretty broad sales guidance for the year from here. So I think you’re anywhere from things could continue to get better as I assume as you hopefully, you’re — well, one of your plans at least. But then there’s a scenario where it looks like things would actually get worse and perhaps even worse than the quarter you just announced. Is that because you have to bake in the — even though — I think Julie mentioned the recessionary odds are lower that given consumer behavior, and we’re not out of the woods in the economy that you just have to put in a pessimistic scenario and you decided to also include that in your sales guidance range.
Craig Pommells: I think that’s a reasonable point of view. The economy is uncertain. So who knows what’s going to happen. And I think to the extent that things continue to play out the way that we’re seeing them, we would be towards the high end of the range. But to the degree that they don’t, either from an external perspective or something happens internally would be on the low end of the range. The macro environment, it’s still volatile and the overall economy has been doing well. But if you can dig below that, there are some concerning elements there. So we’ll just need to kind of see how it goes and as a result, we’re still pretty early in the year. As a result of that, we think that leads to that type of a range.
