Sara Senatore: Thank you. A question on margins and then a quick one on marketing. The restaurant level margins better than we had expected. But I guess given pricing, the gap between pricing and commodities, even with labor inflation and I think the mid-high single digits maybe then in that context, the margin expansion wasn’t quite as high. I guess given that pricing is going to roll-off and inflation is, I think it could shift higher. Are there any kind of dynamics that I should be thinking about with respect to that margin performance? I think you had said in the past that we should expect it to moderate, but a pretty wide gap between commodity inflation and price this quarter and offset, I think, by mix and some other factors.
Is anything — any different dynamics that we might expect to see through the quarter the quarters to come? And could you talk about whether the fine dining, whether there was an impact from Ruth’s in terms of just sort of negative mix versus just with the negative comps that might have delevered.
Raj Vennam: Yes, Sara. So let me try to make sure I answer all the aspects of that question. So let’s start with the margins. So from a margin perspective, yes, you’re right. If you just look at absolute pricing and commodities inflation or overall inflation and you could say, well, you didn’t get the full delta between the pricing and inflation. The things we have to think about are a few things. One, there is a negative mix. First of all, let’s start with the brand mix. When you have negative comps at our — some of our high-margin brands that has a negative impact on our overall blended margin. And you saw that LongHorn and Olive Garden had 230 basis points each of segment profit margin, which is really what — where you’re seeing the most strength.
The decline in fine dining, part of that is driven by incremental costs they have year-over-year. Their pricing is starting to catch up. But also, there was some negative mix, on a one-year basis, there was a lot of negative mix on alcohol. When we look at what’s happening with — at Fine Dining, there is trading down to lower-priced wines and other alcohols on a one-year basis. However, when we look at it versus where we were pre-COVID, we don’t see a big fall-off. So this feels like there was — clearly goes back to that exuberance that existed a year ago that we’re wrapping on. And so part of that margin impact is from that. And then, the last piece I’d say is, some of the restaurant expenses still have high inflation, whether it’s repairs and maintenance, we’re running mid-single digit inflation on those lines and so that’s part of that.
Last piece is utilities. We had a record summer — record heat. So that caused tremendous usage, much — we’ve ever seen historically in terms of electric usage and that translated into some incremental cost to.
Sara Senatore: That’s very helpful to hit all the parts. Thank you. And then just on the marketing, you said your top line was pretty much as expected, maybe traffic a little bit better. I know you took up marketing as a percentage of revenues by 20 basis points, 30 basis points. Could you just talk about kind of the returns you’re seeing on that in that context of in line and maybe a bit better traffic, how you’re feeling about that ratio versus going back to the lower one or edging it higher?
