Michael Osanloo: Yeah. I think you want to separate speed of — I think there’s two ways to think about speed of service. One is what does the customer say in terms of their satisfaction on speed of service. That is a — that is their perception, which matters and it makes them happy or not. Then there is something on speed of service. Just the absolute time it took you to get I guess through your drive-throughs. I think we have material room for improvement. There were nowhere near when we were at our best, and it’s always a balancing act when you focus purely on speed there’s a tendency to perform less well on accuracy on all these other things that really matter. So for us, it’s what’s usually important is you don’t love the old adage of walking and chewing gum at the same time.
So we need to be fast, but we also need to be accurate and friendly and so those things are always a balance. I think we have perhaps pushed accuracy and friendliness to the detraction of speed a little bit. And it’s — we’ll reach there — that will rebalance that. And hopefully that’s a traffic driver for us this year as well.
David Tarantino: Great. Thank you for that detail.
Michael Osanloo: You bet.
Operator: Our next question comes from Brian Harbour with Morgan Stanley. Please proceed with your question.
Brian Harbour: Thank you. Good morning. I had just a couple of margin questions. Was the timing of the openings in the fourth quarter consistent with what you planned, or could you shed any light on what the timing looked like? And was there any impact on 4Q versus like what you might expect in 1Q 2024 from a margin perspective?
Michelle Hook: Yeah, Brian, no, it was as expected, our openings. You can look whether it’s in the K or the earnings release, we give the bond that we open those restaurants. So you can see heavy into November and December when you look at the openings there. And so, yeah, as you look at again those coming into the first quarter, always within that first call it, six month time period Brian. You’re still going to be heavy on the training, heavy on the labor side, heavier on the inefficiency side, whether it’s labor or on the food side. And so that’s where you’ll see, I think a little bit more of the impact would be in that first part of 2024 versus the back half. But then remember we start to layer and then write the new class of restaurants, one in Q1 towards the tail end of Q1 of this year, and then two to three in Q2 et cetera. So yeah I think you’d see a little bit more outweighted impact from those six particularly in the class of 2023 coming into Q1 and Q2.
Brian Harbour: Okay. That makes sense. And then just on your food cost ratio, I think it was a little bit higher than I would have thought in the fourth quarter relative to what you said inflation was were there any product mix drivers of that, or anything we should keep in mind? And then into coming year, would you expect pretty even inflation throughout the year? Anything we should keep in mind. Just with regards to food costs?
Michelle Hook: Yeah, I’d say Brian, the 4.4% in Q4 was right about where we thought it would be, maybe just a hair higher but nothing that I would call out in terms of what we were thinking versus where Q4 came in at. When we look at 2024, I think Q2 looks to be a little bit more heavier impacted for us just based on again these are projections based off of our basket of goods and where we think some of the pressures might come into play in Q2, and then Q3 and Q4 be a little bit more moderated, but yeah, I’d call it more Q2 as maybe being a little bit heavier impacted at least that’s what we’re seeing today.
Brian Harbour: Okay. Thank you.
Operator: Our next question comes from Gregory Francfort with Guggenheim Securities. Please proceed with your question.
Gregory Francfort: Hey, thanks. I have two questions. First, I know you don’t like to talk short-term, but Michelle maybe can you can you address what the 53rd week, is there a comp impact to the first quarter just based on that? And any thoughts on kind of rightsizing expectations for how much weather might be impacting you early in the quarter?
Michelle Hook: Yes, Greg. So, the comp there’s no impact. So our comp is actually a 53 week comp number at the 4.4%. And we did that purposefully because that 53rd week has Christmas in it. And so, when you look at, if we were — if we were to do a 52 week comp, it would have skewed the comp a little bit higher in Q4. And so that’s where we reported a 53 week comp, in the fourth quarter because we felt that was more honest in terms of what’s the true nature of the business doing actually in the quarter. And so therefore, when we come into Q1 Greg, there is no impact because we’re going to continue to be comparing like-for-like weeks Jan one week, starting Jan one week in 2024 to starting Jan second in 2023. So, no impact in terms of whether you think about holidays et cetera, on the cap.
To address your question on Q1 of this year, absolutely we are not immune to the impacts that the industry have seen on weather, as well as how the consumer is feeling as we look at not just performance in January, but performance and February, but I’ll come back to we feel really good about the health of the business to Michael’s point, and regardless of how that choppy the comp maybe in Q1 not just for us, but the rest of the industry, we feel really good about the health of the business the trends that we were seeing outside of a weather impact in January. And so that’s what I would say about Q1.
Q – Gregory Francfort: Got it. Thanks. And then Michael, maybe just I think you now have five stores in the Phoenix market can you talk so the corn honking behind me — Just — can you talk a little about the Phoenix market? I think you now have five our stores there. What has changed as you’ve hit maturity? What benefits are you getting as you scale up that market? And do you now or maybe hitting a path where other markets are looking to go? Thanks.
Michael Osanloo: Yes, we — you bet Greg, so we have we have seven restaurants in Arizona, six are in the Valley area and one in Tucson. And so we are approaching scale. And Michelle, gave a little dissertation on the impact of scale in Arizona, when we went from two to four and the — just the demonstrable margin improvement that we had. But scale allows us to leverage the cost side of the P&L really quickly. It’s a wonderful dynamic because you get supply chain, distribution and even some staffing synergies when you have the scale. The second thing that it does for us, is it creates some revenue synergy because now when you’re craving a Portillo’s beef sandwich dip, with hot peppers on that delicious crusty bread, you have one relatively close.
You don’t have to drive 45 minutes to the one on the other side of the valley or the only one that you know of, there’s something a little closer. And so that tends to be a revenue synergy, once we achieve scale. We’re at the early stages of scale in Phoenix and we’re still planning more restaurants in that market. We’ve got, I don’t know that. But we publicly announced, we’re going to we’re definitely building more restaurants in that market to leverage that scale that we’re getting. So, you’ll see it across the P&L in terms of revenue, but you also see it in margin improvement and that’s that they’re both super exciting things.
Barbara Noverini: We have reached the end of our question-and-answer session. This concludes today’s conference. Thank you for your participation. You may disconnect your lines at this time.
