Matt Clark: Lauren, this is Matt. I think some of it has to do with seasonality. We touched on that in the script. Others have commented on that. I do think that sort of the mix of on-premise off-premise has shifted slightly, right? So you see seasonally the summer is a little bit lower in off-prem, that comes back in the fall. So I think you get a little bit of a pickup there. I think school calendars have shifted, right? I mean we actually saw this trend starting to develop pre-pandemic. I mean this sounds cliche, but everybody my age remembers going back to school the day after Labor Day. And today, I think half the country goes back on August 1. So I really think a lot of what you’re seeing now is with schools back to normal, whatever their schedules are with the off-premise on-premise, all of those factors, and frankly, I think too we’re executing at a high level.
I mean I think some of it is just our performance. As David Gordon touched on, we have a very strong NPS. Our operators are fully staffed. So I think we’re able to turn tables. I think we’re able to do the things that we need to do. And it’s incrementally a couple of percent makes a difference. But I think those are the two things that I would call out.
Lauren Silberman: Thank you. That’s helpful. And then just shifting to margins, as I always visit how you’re thinking about recapturing restaurant margins as we think to 2024, what are you embedding for restaurant margin relative to pre-COVID and any puts and takes we should consider?
Matt Clark: Yes. As we have said, our objective is to get Cheesecake Factory back to 2019 to begin with. We obviously have had some headwinds in that journey outside of our four walls. And I think we have made very good pragmatic long-term decisions to recapture it over time rather than all at once. I feel like the journey that we are on will get us there, right. And our objective is to continue to expand the four-wall margins. As I have said, I think Q4-over-Q4 is going to be better. I think Q1-over-Q1 is better. And so continuing that progression will get us there. It’s hard to put a specific timeframe on it. Obviously, we gave a range of net income. So, it implies there was potentially a range of four-wall margin performance. But that remains I think a very achievable near-term goal for Cheesecake Factory.
Lauren Silberman: Thank you very much.
Operator: Your next question comes from the line of Brian Mullan with Piper Sandler. Your line is open.
Brian Mullan: Hi. Thank you. Just another one on restaurant margins, but just at North Italia, on the last call, you talked about plans to drive – seeing an opportunity to drive improvements there. Can you just remind us what some of those initiatives are and where you are in that process? I know in the prepared remarks, I think you just referenced taking price, but anything on the operations side to consider as well.
Matt Clark: Sure, Brian. This is Matt. I think a couple of things that we are really focused on. I mean you did note price for us that is part of that plan. And we look at being about one cycle behind Cheesecake, right. So, this would probably be the last notable price increase. And certainly, we think that’s actually going to close the gap in totality. But aside from that, we remain focused on a couple of key areas operationally. One of those being food efficiencies, so that’s an area that Cheesecake Factory best practices and systems have been deployed over time to North Italia. And we see a really good opportunity to lower food costs over time by bringing those standards up to where the Cheesecake Factory is and implementing the systems that we have there.
The second one that we are focused on is really bringing new restaurants up to speed over time, a little bit more faster, right. So, the mature margin is one thing, but if you can bring the early stages of the restaurants up faster, it sets up for success in the longer term as well. And the third one is really doing a lot of side-by-side restaurant comparisons. Now, that the portfolio or the fleet, if you will, is in the low-30s for North, we have a much better idea of looking at sales volumes and geographies and understanding what the appropriate operating metrics can be and comparing those and our field leadership team is really laser-focused on the ability to do that. And I think actually a fourth one that I would mention is not direct, but it’s an indirect margin driver, which is sales.
If you look at the North comp store sales, they remain exceptionally strong. We are growing traffic. We are growing our off-premise business. So, there is really no better way to improve margins than to grow sales and that may go without saying, but I just wanted to add it on.
David Overton: Brian, this is David, I would just add two things to Matt’s terrific answer there. One is that we continue to leverage our scale of supply chain and look for opportunities to purchase products that perhaps are in our broader basket that we can also use in North Italia, while still keeping it unique and special, and we have had some good gains there. And just back to the sales point, I think the team has done a terrific job on understanding and maximizing reservations for sales. And part of that has been the expertise that Cheesecake has brought over the past 4 years to North and our ability to ensure that we are not just turning tables fast, but we are maximizing the tables that are in the restaurants as much as we can to get the most productivity out of them.
Matt Clark: So, I guess Brian, the answer is we are doing a lot, and we have high expectations for the concept going forward.
Brian Mullan: Thank you. Thank you both. And maybe could segue, just Flower Child. Is the plan still to bring this brand under the Cheesecake Factory umbrella by the end of the year? And if yes, can you talk about some of the benefits of doing that? And do you expect that to impact the growth trajectory? And maybe over what time period would we start to see that accelerate?
David Overton: Sure, Brian. We are on track with Flower Child, bringing that fully under our umbrella for this year. We are looking forward to accelerating the pace of openings next year. We would anticipate over time that it too would be a 20% grower year-over-year. The portability of the concept continues to be very promising. It’s doing well in new markets, very strong infrastructure and the teams there that’s very focused on developing management to enable that growth. And I think we would anticipate some of the same scale advantages that we have with the other concepts with Flower Child, whether that’s supply chain, some of our HR infrastructure, etcetera. But thus far, we have seen good availability of sites. Landlords are excited about the concept. We continue to feel it’s differentiated in its space. And certainly, the guest demand and the traffic has been fantastic.
Matt Clark: Brian, just one piece on that, this is Matt. In addition to a key initiative for us for this year, although we don’t carve out the segment yet for Flower Child, we are on track to get to the margin target that we need to be at to make it a growth vehicle, which is in that mid-teens level. So, we feel really good overall about the trajectory of Flower Child.
Brian Mullan: Thank you.
Operator: Your next question comes from the line of Jeff Farmer with Gordon Haskett. Your line is open.
Jeff Farmer: Thank you. You guys did touch on it, but when it comes to menu price increases in 2024, what you guys are contemplating, how are you looking at the trade-off between either protecting or growing margin and any potential traffic headwinds that could come with that pricing?
Matt Clark: Jeff, it’s Matt. It’s always the art and science, right. I mean I think we are looking at what the industry is doing. We tend to want to be in the middle of the pack with pricing. That’s been our historical perspective. Typically, we only price to protect against inflation. If you take the average in the industry, their inflation is similar to ours, so that’s going to kind of mean the same answer, right. So, we are not going to be way off path either way. I think we have seen better than industry traffic. It feels like a relatively normal year. We have great operational execution, right. NPS is typically a leading indicator in our industry of where we are going. And I think that’s why we launched rewards, right, as a means to drive incremental visitation. So, it’s always going to be a balancing act. Certainly, it feels like next year could be more normal with respect to pricing though, as we commented before.
