We look at our typical basket versus everybody else. We compare ourselves to not just fast casual, but QSR and sort of the best of QSR. And we feel we have a very strong price position, but we’re also a little cautious and we’re going to play it by year, where we forewent, I guess, any pricing in October. As Michelle indicated, we’re going to have a 2% pricing that we’re going to lap off of in January and we’re still evaluating whether or not we do anything there. We feel we can, that’s not the issue. But we really do want to protect our price position and be a really great value for our guests. So, that’s the balancing act for us.
Sharon Zackfia : Thanks. And I guess, I don’t want to labor the point, but I hear all the time from investors like, how does Portillo’s stack up as a long-term investment if traffic is slightly negative, which has been for a couple of quarters. So, it would be great if you could help contextualize maybe what’s happening in traffic and I know you’re burdened by this big Chicago base where you got kind of declining population. But if you could help frame kind of why the optimism on the long term when investors look at the near term and they think, well, what’s the consumer saying with that traffic number.
Michael Osanloo: Yeah. I think you actually said it well and thank you for teeing up the answer. But, look, the Midwest and particularly in Chicago, we’re in a negative population state, right? So, as population declines, that makes transaction growth very, very challenging. You effectively have to steal share from other people. As I enumerated, the bulk of our growth is Texas, Florida, Arizona, all states with significant population growth. And so, we are putting ourselves in a position where, just from a transaction standpoint, it’s almost transaction arbitrage. We are repurposing capital to states with transaction tailwind and we will be a beneficiary of that along with all the other restaurant companies that are in those markets.
What we like to think is that in Chicagoland and in the Midwest, we can fight the negative macro trends with the strength of our brand and steal share where appropriate. But in these growth markets where we’re repotting ourselves and putting all of our capital, we can rise with the rest of the tide there. So, that’s the play for us. That play is going to have some quarterly fluctuation. We’re not frankly too torqued up about that. But over the quarters, the years, we’re very confident in Portillo’s transaction strength, in Portillo’s traffic strength, in Portillo’s comp strength, and especially our margin strength.
Michelle Hook: Sharon, I’ll just jump in for a minute and reiterate our long-term growth algorithm right of that low-single digit comp growth and the revenue growth that we’re going to generate from the new units. As we talked about on the call, that’s really going to drive that revenue growth as we go forward. And we’re definitely not saying, I know how important comp is and as Michael said in his prepared remarks, that will ebb and flow. But that new unit growth and the development that that we see in the pipeline, I think is really going to propel us. And so, I’d say that’s definitely the investment thesis for Portillo’s.
Sharon Zackfia: Yes. Thank you.
Operator: Our next question comes from Andy Barish with Jefferies. Please go ahead.
Andy Barish: Hey, good morning, guys. On the labor line, some nice leverage there, again where seasonality maybe goes against you a little bit. I think you quoted the wage increases were only around 2% for the quarter. So, should we read into that that the wage investment that you took kind of picked up steam in the latter part of the 3Q, just trying to drive those comments with the results.
Michelle Hook: No, I think, Andy, you’re right. Q3 labor was up 1.9% and we did make the investments in late June, early July in terms of those wage increases and they were normal increases. So, there was nothing with the increases that was out of the ordinary, I call it. And as we go into Q4, I expect that the Q4 inflation rate will be very similar to what we saw in Q3. So, nothing I would call out, Andy, that indicates that Q4 would look any different than Q3 from an inflationary standpoint.
Michael Osanloo: Keep in mind, Andy, year-to-date number on wage inflation is 4.8%. So, that’s something to just have in your head.
Michelle Hook: Yeah. We started to lap, Andy, some of the wage increases that we had given in prior years that started to roll off. And, again, to Michael’s point, we’re up just under 5% year-to-date. And when you look it even versus 2021, we’re up just under 17% and actually up 30% when you go back versus 2020. So, yes, we’ve made significant investments in labor over the past three years, but we’re starting to see that normalize.
Andy Barish: Great. And then just with the number of openings in the fourth quarter, any kind of guardrails or guidance on that restaurant-level margin sequentially or year-over-year, I’m assuming it’s going to be down sequentially with all those new openings. But anything there that does kind of help us with those six openings in the quarter
Michelle Hook: Yeah. I would say, Andy, when you look at we already said Cicero opened in October and Michael mentioned Arlington’s going to open shortly. And then, when you look at the remaining restaurants, those are going to open later in Q4. And so, yes, you get a little bit of impact to the margins, but also the pricing that rolls off to — the 3.4% pricing that rolls off does impact you when you look at that margin picture in Q4 as well. And so, yes, I do expect sequential margin decline Q3 versus Q4. But I do expect when you look at quarter-over-quarter, Q4 2022 versus Q4 2023 of that margin improvement.
Andy Barish: Got it. And then just one final one for me, I’m happy to hear about the start to the fourth quarter kind of in line with what we’ve been hearing from others and seen an industry data. I think last year your catering business kind of really got hurt with the weather and sort of the holiday week. Anything else that we should be aware of just as the fourth quarter unfolds versus year ago —
