A €“Ricardo Cardenas: Yes. As you think about never ending possible, there were other things that we did during that time. We did a little bit more digital testing and those kind of things that we can leverage across our brands. But €“ more importantly, those filters that we use on what we’re going to communicate. We’re very strong and helped our brand €“ helped Olive Garden continue to build their business, elevating brand equity, very important, and we’ve learned that, simplified the offer. We’ve learned that and not a V discount. So all the investments we’ve made over the last few years to price below what the consumers are seeing in inflation means that we don’t have to really go into the net discounting range €“ the never-ending possible was $3 more expensive than it was in the past, and it was still a strong promotion for us.
But that’s not to say that everybody is going to be on television now, right? So Olive Garden is the 1 that has the real scale to be on television. The other brands have learned things about the digital testing that we did and just the fact of the construct of the promotion.
Operator: Our next question comes from David Tarantino of Baird.
David Tarantino: My question is on unit development and your comment, Raj, about construction costs escalating. And I just wondered if you could comment specifically on the returns you’re getting on the recent openings or the expected returns you’re getting on your upcoming openings? I know there’s a lot of moving parts and I guess the main question is, is the numerator of the return equation keeping up with the escalation in the denominator? And are you seeing similar returns? Or are you getting to a point where the returns are starting to come down? Any color there would be great.
Rajesh Vennam: Yes, David, let me start by saying pretty much on average. Our new restaurants exceed cost of capital by quite a bit. We had a big margin to begin with. Now the construction costs have gone up, so have our unit economics. So if you look at overall performance of where we are, I just mentioned earlier, our operating income this quarter was 160 basis points higher than pre COVID. So our 4-wall unit level economics have gotten better that helps mitigate some of the construction cost increases. Now with that said, we already — we obviously want to continue to maintain the pace of opening. But we continue to monitor inflation in construction costs. And we are being very disciplined. There are a few times where we have walked away from some deals because the cost was too high even though that would have probably exceeded our cost of capital.
We’re just being a little bit more selective on that front. Now all that said, we’re starting to see some green shoots on the construction side. The last few bids, I think, were more closer to or below — slightly below elevated budget. But at least it’s a positive sign. So we think there are — there’s some — potentially this could lead to some decrease in the level of inflation over time.
David Tarantino: Great. And I guess a follow-up to that is, are there projects going on inside the company to try to trim costs out of the box I know — I think a prior question commented, the dine-in traffic has been softer for the industry. Are you thinking about building smaller dining rooms or anything of that nature to get the cost equation down?
Ricardo Cardenas: David, as we think about our prototype designs for the future, we always look for ways to trim costs out of our prototypes and find new ways to build the new materials to use. We have built some slightly smaller prototypes or at all of our brands, not necessarily because of the to-go versus the dining room but because it makes it to go experience a little easier by shifting where that to-go area is. Remember, the dining room is the least expensive part of the building. right? So if you really want to take a lot of the cost out of the building, you got to take the cost out of the kitchen. And we think we’ve got a great kitchen, but we’ll find ways to rightsize the prototypes for the market that they’re in. without overcomplicating so that we have 50 different prototypes.
But we, as I said, our development team is focusing on finding the most efficient building in the markets that we compete in. We’ve also taken some existing sites as restaurants have closed or their leases have expired for other brands. we’ve actually gone in and infilled those restaurants, which are slightly less expensive because you don’t have some of the framing costs and some of the plumbing. So it helps us in that respect.
Operator: Our next question comes from Dennis Geiger with UBS.
