John Ivankoe: Hi. Thank you so much. At first, I was hoping maybe you could help a little bit with industry comparisons in January and February. Obviously, COVID lapse from the previous year helped, but also an unusually warmer, really lack of winter. I mean, I guess, if you were to kind of normalize those months, I mean, how much do you think you may have actually kind of been helped by kind of a bounce back in the early months of 2023 that we should at least consider on a lapping perspective. I know it’s very tactical and it’s not my style, but I would love to know your perspective on that. And then secondly, my experience is that casual dining operating companies don’t love presidential election years, cost of media breaking through, disruption of consumers what have you.
I mean do you share that perspective and is there anything that we should be just kind of considering as we kind of go into calendar 2024, what is obviously going to be another difficult election cycle? Thank you so much.
Raj Vennam: All right, John. Let me try to answer in a way that I make sense, because, obviously, when you look at the seasonal situation, third quarter last year was wrapping on Omicron from the year before. It was just a whole different in terms of dynamic. But as you pointed out, the weather — the winter weather in that quarter for us, third quarter, which is December, January, February in aggregate was favorable to five year — to the historical averages. And so we do expect winter weather in the third quarter to be essentially a headwind in the Q3 just based on historical averages. If the weather this year is anything like what it would have been historically that it is a headwind for us. I would expect it’s the same for the industry, but I can’t — I don’t want to speak confidently about the industry, but I can tell you that’s how we are looking at it.
In fact, we — that’s part of the reason, we didn’t get into this earlier, but that’s part of the reason our internal estimates have comps, the same restaurant sales for the Q3 being the lowest for the fiscal — within this year, primarily because of that weather headwind. And now, I’ll have — maybe Rick can talk about the presidential years and how we think about it.
Rick Cardenas: Yes, John. Yes, this is an election year. It’s probably going to be a pretty contentious election, with a lot of television advertising. The good news is, we’re not as reliant on TV as we were in the past. And I think casual dining was much more reliant on television in the past, and chain restaurants were much more reliant on television, but now there’s other media out there, more digital, more online video. And so, we aren’t as concerned about an election year as maybe in the past. That said, it depends on how contentious this gets and how much media is out there. We feel confident that if we continue to focus on our strategies and execute, when people go out, they’re going to come out to our restaurants.
John Ivankoe: Thank you.
Operator: Thank you. Our next question is coming from Brian Vaccaro from Raymond James. Your line is now live.
Brian Vaccaro: Hi. Just a quick one from me. Thank you. Following up on your private dining bookings comments, could you help frame the degree to which you’re up year-on-year or any perspective on how that might compare looking back to pre-COVID levels? Thank you.
Raj Vennam: Yes. Brian, we’re not going to talk about how much we’re up in this current quarter on private dining year-over-year, so we’ll let you know how that happens after the quarter ends.
Brian Vaccaro: Fair enough. Thank you.
Operator: Thank you. Next question is coming from Nick Setyan from Wedbush Securities. Your line is now live.
Nick Setyan: Thank you. I just wanted to follow-up on the pricing below inflation in Q4. Historically, you’ve always priced below inflation. I guess, is there really a big change in terms of the magnitude of the pricing below inflation? And then beyond Q4, is — are there enough operating initiatives to kind of maintain four wall margins? Or are you willing to give up some margin in the medium term?
Raj Vennam: Hey, Nick. I think part of this is really the cadence of when we took pricing actions. So if you recall at the beginning of the year, we were very clear that we’re going to have on a year-over-year basis, we’re going to see more pricing come through in the first half than the back half, just because that’s the function of actions we took last year. There is not a lot of new pricing actions we’re taking this year. There are few and that’s why instead of the 3% of the 3.5% to 4% that we have in total pricing is carryover from last year. So there are few actions this year. Typically, we tied it to our team, we typically take pricing with our fiscal year. So now things can change, but the way we look at it is, we take a longer term view and we’ve been very clear on the year that we are getting some margin growth.
Our guidance implies margin growth. And I’ll then refer you back to our long term framework, which kind of talks about over time we expect to grow margins. Any given quarter do we give up margins? Yes, maybe, if that’s the right thing for the year. I mean, at the end of the day we look at over longer periods of time.
Nick Setyan: Thank you.
Operator: Thank you. Next question today is coming from Danilo Gargiulo from Bernstein. Your line is now live.
Danilo Gargiulo: Thank you. Raj, I want to build on the — last statement that you made on the margin expansion over time. So if we think about kind of the long run, and given the solid results that you already had in the restaurant level margins, can you help us understand the path for the incremental margin expansion? Meaning, why do you see the biggest upside over the long run as you continue to scale?
