So, the financing costs have gone up. And, in fact, to some extent that’s also impacting some developers from what we hear. So, the macro — you guys know the macro better than I do. But I would say, overall, we’re still happy with our overall development, the number of restaurants we’re opening and how we’re thinking about it. And as I mentioned in my prior comments earlier today about we’re going to cost effectively build our — build these restaurants. That’s the focus. We want to get growth, but we’re going to do it cost effectively.
Peter Saleh: Thank you.
Operator: Thank you. Next question is coming from David Palmer from Evercore ISI. Your line is now live.
David Palmer: Thanks. A question on labor productivity. You guys have done a great job there. It looks like labor cost per unit was up maybe 2%, a little bit over that in the quarter, versus up a little over 5% in the first quarter. I think, you said wage increase was roughly 5% in both quarters. So, if I’m hearing that right, is labor hours down a few percent in fiscal 2Q? And if so, could you clarify maybe what are some of the drivers of that productivity?
Rick Cardenas: Hey, David. Yes. We’ve had a history of discipline and improvement in productivity enhancements. This year is no different. We’re getting more of it, because we’ve had lower turnover than we’ve had over the last few years. We’re still investing in training to get those team members up to speed quicker. We also are spending training dollars on getting our existing team members even more productive. So, our productivity enhancements were the difference between our wage inflation and our labor inflation. I will also say our teams continue to get better with forecasting our business. We’ve added some AI tools to their tool belt to be able to forecast their restaurant business by — in 15 minutes increments, even better than they did before, and we’re seeing added benefit, as I said, from lower turnover.
David Palmer: That’s great. Are you thinking that that sort of labor productivity should continue in the second half? And, I guess, related to that, I wonder what you’re thinking about California, and with the minimum wages coming in April — is that — how does that affect the wage or the total labor outlook for you? Thank you.
Rick Cardenas: Yes. David, our total labor outlook isn’t that — necessarily that different than where it’s been in the first half of the year. I think, we’re still having wage inflations at around the mid-single digits, which is pretty much back to pre-COVID levels. We do anticipate that as turnover continues to tick down, which we expect it should, to get us closer to pre-COVID levels. That will continue to have some productivity enhancements. In regards to the FAST Act in California, we’re monitoring that. Everything that we have contemplated is contemplated in our guidance. I will say we have an amazing employment proposition and across all of our states and all of our brands, but in California, an even better employment proposition. Our turnover is lower in California than it is in most places and our wages are higher. So, we feel pretty confident that we’re okay in California. But if something changes, we’ll react to it.
David Palmer: Thank you.
Operator: Thank you. Next question today is coming from Sara Senatore from Bank of America. Your line is now live.
Sara Senatore: Great. Thank you. One question and then a follow up, please. So, just on the price versus inflation, I guess historically you’ve priced below inflation and you’ve seen traffic gains as a result. Is your expectation that as the gap between your pricing and your — and the inflation kind of reverses over the course of the second half, so inflation ahead of pricing that you might see acceleration in traffic. I know that you’re already gapping out positively versus the industry, but I think historically there’s been — either coincidentally or not kind of 500 basis point gap in traffic and also in your pricing. So, I guess, that’s the first question around as you’re thinking about that trade off kind of margin traffic? And then I have a quick follow up.
Raj Vennam: Hey, Sarah. So let me start with just grounding us on where we are with respect to pricing over the last four years. If you think about our price for the last four years, our pricing has basically been around — at the Darden level has been closer to 17% cumulatively, just under 17%. For the same time frame, if you look at where full-service restaurant CPI is, that’s 24%. So, we have basically created a gap of 700 basis points to full-service restaurant CPI over that time, in the four years cumulatively. In fact, if you look at limited service, they’re at 29%. So, that’s a 1,200 basis point gap to them. So, over the last four years, we’ve been very prudent, and we’ve talked about it multiple times about how we’re going to price very thoughtfully and deliberately and wanted to make sure we’re creating this gap.
And, by the way, that overall pricing we have is below the overall CPI over that time frame by 300 basis points. So, from all aspects, we’ve actually stuck to our strategy of pricing below inflation, which is one of the drivers of our traffic outperformance. But I would say the other big driver is the execution, consistently executing and providing the greatest experience we can to our guests, and that’s what our teams are focused on. That combined with the strategy of pricing under inflation is what we believe helps us separate ourselves from the industry, and we’ll continue to do that.
Sara Senatore: Understood. I guess, to your point, just thinking about sort of cumulatively, it will look a little different in the fourth quarter, I think, than in the first quarter. But it sounds like you’re not expecting a big swing in sort of that traffic even as sequentially the relative value versus inflation might change a little bit. And then, I have a question on just trying to piece together everything you said about like the different income cohorts. So, you’re not quite back up in terms of the high income as a percentage of your customer base to where you were in COVID, pre-COVID, but you’re there, you’re getting closer, but at the same time you’re seeing check management. So, I guess, can you just put maybe a finer point on it?
