CAKE - Earnings call transcript Q3 2019 | The Cheesecake Factory Incorporated

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Operator

Ladies and gentlemen, thank you for standing by. And welcome to The Cheesecake Factory Third Quarter Fiscal 2019 Earnings Conference Call. At this time all participants are in a listen-only mode. After the speakers’ presentation, there will a question and answer session. [Operator Instructions]

hand over to today, your like Ms. now the to conference speaker I’d Feit. Stacy ahead. Ma’am, please go

Stacy Feit

Thanks, And Good earnings Catherine. afternoon. call. fiscal third XXXX quarter welcome to our

Executive Overton, On Clark, Matt Vice Financial Chairman are, call Chief Executive Gordon, David and the and President; today our Chief Officer. Officer; President and David our our

of will facts begin are meaning not that let you Private and Before within discussed considered the quickly we statements that during Reform XXXX. on historical Litigation be remind me this are forward-looking call Act items Securities based the of

filings or Actual in of Commission. Exchange materially results today’s available and could different with be detailed our website factors statements from press result the those a Securities our stated which is investors.thecheesecakefactory.com on implied and as release, in forward-looking at the in

statements made duty undertakes company this on and only forward-looking call no date today’s as statements. forward All looking of the to any update speak

we An of on this in results will our measures conference presenting addition, appear measures financial press directly non-GAAP of In explanation the comparable and reconciliations GAAP on previously website call, described. throughout as most be our to basis. our release adjusted an use

as quarter and begin the fourth and take will outlook Overton financial you initial opening and XXXX, will David for will some remarks well call operational assumptions the with provide our an David full detail acquisition Gordon Matt and some in update. results XXXX. integration today’s then our for through as provide year

With over David that, to Overton. will I call turn the

David Overton

you, Thank Stacy.

performance expectations. comp sales store industry were third operating comparable sustaining Factory. the quarter Both during The We outperform and our at within also the continue to positive sales Cheesecake

decline productivity grow in well particularly the in Operationally overtime on our a work. as and labor labor front. staff quarter, year-over-year They during hourly as retention, manager managed hours well restaurants teams increases and their

saw efficiency year-over-year. also We improve food

Matt Xnd, acquisitions, and will reinforcing dining. David the Fox our we and to on North financial Gordon experiential on integration assumptions. detail Subsequent completed the Italia position leadership end and October provide quarter more Restaurant Concepts

five With first regard of Gainesville, restaurants to tremendous the development, fiscal in we $X Florida open in This weeks capturing opening the had during quarter, continue XXXX. expect sales in that three million a location operations. Cheesecake Factory to the third over to includes

Factory to open remainder during three the expect We additional Cheesecake the restaurants year. of

a mid-October, and to McLean, location expected Child additional open is fourth Child In later quarter. the in Flower opened Virginia, in restaurant one Flower

We also well. Italia one open expect to as during North the quarter restaurant fourth

recently the during licensing in Internationally, we quarter third the second and now expect the under open six to first including which Dhabi, in agreements, location Macau, locations opened location Abu which opened.

We expect XXXX. two locations additional fiscal open fourth to the of license during quarter

North Looking six unit XX as ahead many as as to locations, locations. we the as new opening meaningfully six and Italia FRC as Flower which eight restaurants many Cheesecake five XXXX, restaurants growth our within the Factory of restaurants, expect many Child as with including subsidiary, accelerate to includes

as as internationally expect open licensing Cheesecake to restaurants agreements. Factory also We four many under

for operational call With over will turn David the that, an now update. to Gordon I

David Gordon

Thank you, David.

store sales comp versus the to quarter. Cheesecake GAAP third their Factory pleased restaurants industry are We the The increase see during

this of XX% approximately third off-premise to of the the continue total to during performance Our again supported channel. grow, Off-premise business share as quarter continued comprising take sales in we XXXX.

business We the for improve agreement renegotiated of will delivery economics recently extended further and which DoorDash, with our us. delivery the

pickup in platform our online seek also for orders. ordering continue year-over-year We growth to

dishes of scratch with made we a with another test fresh summer messaging. last we than discussed The and fall marketing TV forward As our our on commercial from in during more markets, Factory Cheesecake our this XX took leveraging call, step XXX

sales see rather of than spot. building, offer focus to not an did immediate the given nature brand expect lift significant We the

the of research media buys following consumer the targeted we resonated results are encouraged additional and and considering campaign purchase in some we However, future. turn, increase. our initial are intent run measure In we the perform messaging that the to

collaborations complemented top advertising, mind. efforts, The campaign and social our Cheesecake make This digital marketing to of including search paid round Factory marketing influencer year and

BuzzFeed’s we In quality DoorDash, cooking conjunction our launched advanced with a techniques. two and content BuzzFeed Tasty, series views. channel YouTube nearly captured videos The feature on and ingredients highlighting fresh XXX,XXX

eyes these will We opportunities to like Factory. The to increase unaided brand use continue Cheesecake get to on of awareness our

immediately comprehensive North FRC plan Italia acquisitions, for and integration North month to to closed mobilized the our this we earlier Turning and Italia. execute

the North guests. Concept Italia everything to it special maintaining of are integrity We so and that makes

expansion operations further and the strengthen national systems concept. processes enhancing continued support the the and of While to

concept each impressed a so I delivering of place, the passion caliber teams been visited and location great the their their for to experience. personally by guest and commitment the in have

During infrastructure reviewed benefits, the acquisition support we my provide, enhanced and opportunities even stronger to continued this visits an growth, including will programs career operations.

immediately To we of upon the the to that close our conversions system to scheduled Italia are and the the final this end, week. to began transaction point-of-sale complete restaurants convert North

FRC also new Italia negotiated our have have and North We agreement concepts. to extended to delivery

benefits brings the to of that brands. our example scale one these Just

these continue time. will opportunities We to pursue over more of

two the staff My value as as FRC companies organization. can members, with North at well team as has reinforced belief experience his our and that one drive Italia Sam working Fox our greater

and on Factory execute to a balance restaurants continuing performance the our year, businesses, we at the while focused are integration. driving The acquired smooth of Cheesecake For

call turn financial that, With the I a review. over will Matt to for now

Matt Clark

David. you, Thank

our impact million sales Cheesecake X.X%, sales, and temporary bakery including related including Factory were million. total middle right XX-basis-point Third an external in restaurants range, negative revenues other increased closures, The putting us approximately in quarter $XXX.X comparable from $XX.X weather of at anticipated the

last of overall a points basis was basis from XX.X% The Higher and compensation wage in from impact than an was third of payroll of of from hourly of primarily about of the of offset same revenues, XXX sales quarter expected. year. points the costs XX.X% about more year third of due menu last favorable XX Labor were leverage. as period of lapping the produce decrease the a equity price Cost rates. increase revenues, by period balance taxes year. was was to including factors, prior Only increase higher the non-operating

XX.X% Other is workers operating to and favorable the with from due This partially insurance. additional liability higher of lease in planned mainly period standard. offset of rent and Through takes costs same the the the adoption points accounting up revenues, variety other puts new associated general basis XXX non-cash last marketing comp costs including were areas, of by a year.

two the approximately last XXXX of year. quarter $X.X Pre-opening period $X.X in the same expense in opening million same We one versus in was third had the quarter versus third year. million period the last of in openings XXXX

$X.X for X.X% to third up in of G&A costs. objective the of was the from of meet in primarily acquisition fiscal revenues same year, quarter G&A the Absent XXXX, costs, related due on leverage points was our to quarter XX prior track X.X% the G&A us acquisition million the year. keeping basis

quarter share, Excluding our costs, high loss costs excluding profit the and the investments of expectations. our range. the acquisition our $X.XX, exceeded adjusted on third acquisition of earnings end which the minority operating guidance per This drove exceeded

by impact adjustments. our of is minority effective rate, investments, was pre-opening and The accounting driven our costs, the other given rate tax tax and the on G&A acquisition from actual non-reflective loss third which quarter

EPS which our is earning normalized presented the even in rate, adjusted However, rate. the statutory today’s effects higher impact release the than tax calculation at

core during believe third we of result, a the $X.XX is representative profitability the quarter. our As

shareholders Child from North for the flow of quarter, via $XX was our acquisition during before Italia our provided operations used in repurchase million Flower to Cash approximately million third and roughly expenditures, $X.X and cash the during to million $XX $XX dividend and the was returned share quarter. is program closed, we cash capital million

Turning sheet, on the to acquisitions, quarter. and end credit North and This fourth of $XXX Xnd, the we to quarter. $XXX the the on million day closed drawn had funding revolving at the million which we closed of the Italia upsized FRC included first balance October million the facility of support $XXX an third

That review third wraps the financial our up quarter. for

spend full XXXX. fourth a on our quarter few the I for minutes will outlook and year Now,

ranges for earnings have we on assumptions per share most our comparable As realistic we in to this provide continue and past, we have information cost best the time. done based current at estimate the sales

includes in and associated will with in happen as holidays ahead the which impacts any everything weather. or what have assumptions weeks trends, fact we we in know think These of today, factor quarter-to-date

adjusted For Cheesecake XX-basis-point of range the fourth earnings per are this negative based estimate between quarter XX-basis-point to which share an a diluted The estimated on $X.XX reflects of $X.XX shift and to the holiday impact X.X% continuing year. XXXX, at Factory restaurants, in we sales X.X% comparable from to

at estimated EPS purchase time. additional excludes $X.XX of Note, net There interest accounting impact expense. the negative acquisitions incremental be including to the aspects from $X.XX impact from cannot range which anticipated be may the known an this

restaurants. Turning The year X% to sales we XXXX, comparable Factory full approximately at expect now Cheesecake

are XXXX tax $X.XX estimating approximately potential $X.XX excludes as per any effective well share and accounting rate which impact diluted aforementioned also the an adjusted from as negative EPS to and now the the X%. range We This $X.XX in acquisitions fourth earnings quarter, between assumes $X.XX, purchase impacts.

and we allocation, Cheesecake expect unit our cash our $XX needs. ongoing capital in be to to anticipated XXXX support growth between and now regard With Factory to million CapEx $XX maintenance

In plan the Italia quarter. FRC addition, North we fourth during openings support the to million now expect $XX and

support for expect $XXX ahead our growth accelerated to objective cash XXXX, be X%. CapEx $XXX unit and total million we of Looking company to to between million our

an make acquisition million on $XX.XX consideration. installment also payment post-close We will the

fully be we providing call, our in the XXXX on the but assumptions. fiscal meantime, are will providing We consolidated guidance February following

inflation X% On rate and the on about X.X%. be side, have to of we XXXX hourly we our visibility the cost basket expect market food wage approximately today, inflation based for

X% For we rate modeling about a tax XXXX X%. to estimated purposes, of

second the quarter the provided We impact assumptions that we around acquisition also on reaffirming initial call. our

As it including on are will reminder, of depend point this variety these a estimates and a purchase factors at accounting. just

for North neither segments accounting qualify reportable nor purposes. Italia Well FRC

will gauge North costs, providing and FRC beginning your supplemental quarter This include our with and North Italia Italia, and depreciation be well pre-opening FRC. revenue, amortization will performance for We assist next store operating modeling. information and as income, to Italia sales on North as comp for and

to these investments as compliment in license reinforce our international domestic The strategic Cheesecake Factory. and leader and position continued long-term expansion We experiential dining the a made of

the comprised dividend restaurants, they are facility targeted and expected to capital balanced and in program. share credit strategy new investing the continuing under meet allocation to plan borrowings repaying repurchase returns, We of a our maintain

provide with respective value with the Italia exceptional the In are our well-positioned FRC to our teams Cheesecake believe growth Factory in for drivers maximize long-term opportunities dining The shareholders. we accelerated and we strength with concepts, closing, offer growth coupled and brand diversified for guests North experiences, our and of

order your additional said, as to question yourself to limit please will possible, and questions. accommodate that as with take With questions. questions we any one re-queue In many then

Operator

with Glass John [Operator first Instructions] of question from Stanley. Your comes Morgan line the

John Glass

you how Yeah. Thanks if you few about a Fox think and very Matt things much. on just could clarify accretion.

the You talked expense quarter. in interest about fourth excluding

if that understand there’s to it’s I provided the margin think, on that expense? believe are to and was said trying two, you these do expense and the ongoing same XX.X% XX.X% guidance on if wasn’t am not? did you think your that about is or last that’s you or to you the purchase neutrality incremental one. or restaurant of I best that or affirmed adjustments this current comparable make you that So you GAAP earnings unusual have restaurant sure basis also talked an it to you that adjust interest understand it’s material not still is initially if today. that about accounting going including Is that. -- And you quarter basis with if I margin is brands you Number for But there any a adjustments. just

Matt Clark

a number will I easier We talk understand quarter of because John, right. give moving parts kind there’s lot a it sum the just to was Sure. about we first, thought of fourth that. just lump

Some aspects ongoing contributions. interest. making There’s are business the still weighted, positive pre-opening the some heavier there’s that’s of

in just XXXX. have thought pieces giving in a of So Cheesecake bundle on understand to those we guidance we as business would go-forward we been order together all Factory just basis the core

aspect We it the of sort the of interest expense. reaffirming inclusive are neutrality of

helps that. that define hopefully of kind So

respect point GAAP pieces accounting, it to purchase that with attributable to think right? the you of some I going to normal amortization any through to there referenced, kind are of pieces are would an those we estimate So we be are to now. not of of the work right outside what just of that trade names, just that different of there and the of it all at giving component have those, is sort be for

GAAP of how put estimates understanding is case our would best It’s just a current Of roughly consideration might operations. roll the be those based right Otherwise that assumption because course speaking, up there noncash matter and now. on were through.

John Ivankoe

you. Thank

Operator

Sharon William from Blair. line question Zackfia of comes next the Your with

Sharon Zackfia

helpful you Good talk XXXX anticipate done an of I that how to Cheesecake Hi. interest and guess try a post that you afternoon. then, to with John’s to it the on smaller was could that if international on know open in kind are new for think, year create potential follow-up question, about development format the that prototype beyond? expense quarterly for acquisition? be effort smaller in for international a secondarily, would reaccelerate down, I something be step perform, up And you what location to seeing was to the might the next

Matt Clark

million right and a around of million pay that line. little year on think, but Sure. simply just interest. have beginning X.X% of the sort Sharon, rate. of estimating interest the now now you Right the go $XXX by were run We rate $XXX-ish the we on I net of as down is that kind about the bit we gives a may we and

David Gordon

David Gordon. it’s hi, Sharon

Just continues remain it Factory expectations. above really actually California averages. square to our operating here well foot in Cheesecake really, Factory Cheesecake It’s XXXX on smoothly. that’s Oxnard, the out Sales outperform

to available partners international prior sites see most do today square believe them it excited well, at current, allow around Asia So that find because our they that specifically feet. Cheesecake hopefully was are in not will are estate real XXXX the some to because

positive all it’s that So front. on

Matt Clark

Matt. And is this Sharon,

that to to continued look importantly we next year. all the have of open restaurants partners think three I

timing. Sometimes that’s just

beginning I the think slip this of year of if one kind from XXXX. remember right we at I had in

is rate and average think so, have X% And said the I always that. we of do to think, I run are continuing sort we X% to

Sharon Zackfia

you. Thank Okay.

Operator

of with question Piper from the line Jaffray. next Nicole comes Your Miller

Nicole Miller

afternoon. Good you. Thank

terms or understand same-store perhaps. You had could sales. you commented dining in if to about weakness of casual wanted industry casual I fast delineate share versus

out? giving part, just casual group and is group to are the service about wondering coming limited that Child? dining the A, then terms is And in you And comp something why comps or can and Italia fast casual how if Flower overall so specifically at So Thank up share of you. if not some FRC or customers North

Matt Clark

Sure.

have I those like lunch is of it’s hard sales are think more taking Nicole. Matt. a time I perhaps think, to felt that This for for and I people say casual mean, sure for while area and share, opportunity is On that. of going us things midweek who we fast little some an to are a starved

it then value with QSR we But Box the KNAPP-TRACK was whether deals a same that in I sort that think the at of July. quarter, I else maybe card in the of do kind everybody bit when the third but or data, and -- overall the vein really of or but attributable share MillerPulse look credit took little think or to it’s was Black

going on to what’s share wallet that and spending. do with it the kind has with maybe And retail of so month and

end in thought business speaks would right because of we came understanding we is helpful our at, things are kind managing our it are we that we providing where which pleased from of think and with which the to where really I guidance. for and predictability

of side sales to comps well. provided Italia running do yet for continue to and the mid they North things Year-to-date single-digit store well. comp we FRC do haven’t continues it��s but

say, business. pleased with I -- just really can We are we the are

speaks we have The fast running open the locations, is Child within and that mode in you for continue obviously, casual bullishness to that it. Flower we sort group of only concept really through that to if that’s will and the

Nicole Miller

you. Thank

Operator

David Baird. of question with Tarantino next the comes Your from line

David Tarantino

Hi. that elaborate your Good could you you, performed QX over think, upside? Matt, operating what that mentioned assumptions. Could profit you I drove maybe afternoon. on factors

Matt Clark

It’s Matt. David. Hi,

mean think I you QX, right.

David Tarantino

Yeah.

Matt Clark

across When speaking, versus And virtually are yeah, we all all items plan much the maintain. we I it expectations dead to generally look of -- as have pretty much we hitting we year line think, continue them. were on and pretty was our been

a GL benefit comp and a insurance. had in little We bit favorable of workers’

managing doing and it that We a bit. provided this just a year so little have job great been

are be the I to. costs think we are if we out to favorable you slightly to G&A net where acquisition expecting

otherwise it on. So was really but -- just right

David Tarantino

Got from on Is QX that guidance think the on it. $X.XX of And $X.XX any impact $X.XX the would for ongoing? one-time be acquisition. you the versus inclusive again, to a is consider I $X.XX more in nature then it or one-time in question charges to there the might said What something integrated? what you

Matt Clark

for some mentioned, month so in integration, it going definitely, are a related, estimate had slightly direct the Gordon preopening and It a POS we current of as their there’s like this run quarter than is were north are through do an there higher has because for as there basis components third are systems example of of still literally out that percentage the changing and right in part expenses with to just it. that some on rate David

again, think, more sort clarity would year. to So, at guidance. on next look will of we I I be provide able But the

We whatever anticipating piece estimate significant is. into one-time EPS are purchase neutrality expenses of bundled the for the which outside not of accounting is the the outside interest,

David Tarantino

But and expense, interest G&A represents. the It’s expense what to just the is $X.XX understand pre-opening also so that $X.XX there in we that?

Matt Clark

G&A be North expenses, all the would of some it and for with interest for quarter. a and the operations net contribution associated from -- components the pre-opening be and would expense That of FRC Sure. sort a one-time the

David Tarantino

-- include profit and from does revenue assume acquiring? are the And contribution the you all concepts the and -- does your it guidance

Matt Clark

but to Factory, get Cheesecake given haven’t comp sales can that guidance, provided right? we specific you. we revenue for store So We certainly

David Tarantino

very you Thank much. Okay.

Operator

from Wells Fargo. line with question the comes Tower next of Jon Your

Jon Tower

Thanks. Great.

hear in messaging marketing online clearly and been was grow the where doing traffic the then the you that to spend the to of little that think, set the tests go in X.X% for online the was reliant brand with XXXX specifically And on I on David, the has you have brand, given quickly word-of-mouth a housekeeping, for, here and -- time bit curious peer now what delivery television to sales thoughts why X.X%? of tests mix period? Just and is versus shifting I it And that’s mix am some changing. Cheesecake been closer your brand can that’s think roughly and historically mostly the over

David Overton

This Jon. is Thanks David.

total was Online the Delivery that now up about transactions. made is of in it total of which about XX% all quarter of XX% XX%, So from sales. last up XX% at is where off-premise was still and phone-in XX%. ordering slightly is

it as successful renegotiation have us DoorDash pretty like of that with great extension We leverage So be marketing channel deal. the and the to they will well. been partnership we for and with feel to partners are continues a and happy our continue we

Twitter would just changed, As used the out. it word-of-mouth is stood far and social them would it word-of-mouth And using today way in used have when marketing than it’s marketing social at to to influencers of that the every perhaps front friend, word-of-mouth in mean about your is to and we get the those media even channels are or you Instagram you not we whether you are tell or different media looking have if I as in evolving. say, today goes, what avenues we past. think, think we I that it’s And mean

that with being search paid do we along going the continue on to and the are time. all So to

year. of doing been what and doing different that throughout not have year now all that’s from last we We were that this

continue promotion, can difference just time test, far just see affinity able to really want the to increase a like that were awareness just brand those of in still we who the true concept. that as if and for are a as as without be to would make we over here. that offer a is as as of without other television frequently to sales the And to it people those stays it’s remind some to especially thinking And maybe aren’t markets we that to us

and research as and it a people talk And are more bit the the really about to more earlier from about scratch from did fresh the had more us I so post talking that little seem previously. of they said TV we we they resonate made than commercials hear we

and much about and that that this So have that, are we we plans more talk don’t I’d evolving done talk say we February do different but year. any in year, will to will we about than next have

Jon Tower

of little Does the spending include forward? evolution bit percentage potentially a sales a going more as

David Overton

if know talk does will we think I year. do next see it certainly about we when you let we would and

Jon Tower

Thanks.

Operator

Will line comes next with Stephens, of question Slabaugh Inc. Your the from

Will Slabaugh

Yeah. Thanks, guys.

talk you that any or could be at quote-unquote integration conversion wondering of other was whether on that You think POS either any integration FRC should technology concepts? going how on North North. mentioned characterize will or about And about you other period at initiatives going however secondarily, that? we I or would the the if if personnel otherwise you

Matt Clark

Well, this is Matt.

to we have as and performing little going ahead certainly maintain proceed we for acquisition from to were you want to we we on beginning and We and are North, year some before, the of plan pieces about we the are disruption. the performance well, the growth. careful think, it bit be how for out are businesses because and really around culture been and contemplating watch the FRC so I that to said had able newer the a of for we really based are doing

and would more have That chicken being whether secure technology sense and can that if scalable we those more great said, we would opportunities or that will that are where be see time make cheaper look be can to great. together over platforms buy we

we start into an that. apply, provide we that I a get in to of but will those the can to continue visibility update as will think, from we we learn North integration many lot facets more

Will Slabaugh

you. Thank Got it.

Operator

comes America. next of Francfort of with the from Gregory Bank question Your line

Gregory Francfort

you could breakdown much why up Hey, if question. the you ones. can forward not now in what me margins I just, other loss because basis hundred guys. thinking, little years a more the casual few it the alone terms for is XX% dining, so guys to you going the and in how affiliates of But understand am to quarter? Thanks you XX% Maybe curious I guess, guess stepped question that? that for can point industry see far was have And two will Cake through unconsolidated I for a away dropped shakeout, think guess, much. points from, XX%. is how to XX% maybe to bit then I to And of pressure. and a start you what the few bigger you margin have play you help this sort Thank very out of is are how works a quick

Matt Clark

Greg, this Sure. Matt. is

components think the can But you I details associated to get transaction. with on there first some the offline. the loss some were really affiliated we with

As were are some to a to certain retention we those adjustments, some key of point accounting noted of in time. those bonuses people

we would before. it have G&A ex been, driven pre-opening discussed for have to looked So by transactions as the and upsized what mostly similar it has

you was of of there. So a that one-time magnitude that range the gives absorbed event kind to

three this XXX pressure With basis the on to I up anywhere the depending you accounting margins, impact a can margin to has four past regards from structure probably, are to the couple things One couple that doubt is remember. look like points impact looking no over and how at lease years, been of or percent. so think, years the there year a

little of sales that not the for a environment I was was of a XXXX. deleverage. from and productive think some impact bit that Certainly industry the

pretty now our look we over stable the objectives based year past, results on say, if year-over-year at and margin basis a we that you hit our the the set on for out it’s guidance. five much think I have quarters,

comp with and pricing. so about a X% that’s And and -- X%

maintain in this think I to that are margin. able So we environment

think if does on comparable depend I little to pressure. sales even traffic have bit positive it continuing a there’s of

before still commodities range said the of in it’s peaked, they least X.X% sort think the same we escalation remain about hasn’t gotten as that has running labor have. but at We worse,

continue the very the the way past environment business the leg we we a have as So for year of that seems that next and manage over this to half. doable

Gregory Francfort

lot. a Thanks

Operator

Ivankoe the line with Your next question comes John Morgan. from of J.P.

John Ivankoe

about some you. comparison the if may, that in that as of was efforts you third Thank quarter may firstly, versus model were couple ‘XX? through actually hours kind in of Hi. driven labor if think reducing the legs overtime. the fiscal of How successful of we will A terms paid and I easy reducing much how of much that have

Matt Clark

John, it’s don’t it comparison. easy necessarily think was I Matt. an Hey.

big think bears fruit. example are truly industry-leading it doing to we a retention are do that great overtime think job I a I you on piece for and when the and just efforts, is able staffing on

focus that. on I forecasting are being think we better doing slightly this just also had a job year real I and scheduling and think on a we tight

first I continue of and the into think quarter the next all of those fourth part year.

are continuing that have those right As and guidance. of in we always think are I our paying dividends said, we sort now are about incremental and improvements

John Ivankoe

the similar terms you does of perhaps food And you look have Understood. it captured? you waste How is category. with and when a opportunity at your in food one. A was cost mean, versus T, I on there be sure exist that how margin think the question could I of much gap of side Okay. different an waste, do a just How am much significant

Matt Clark

high I Well, upon we to been see run very over efficiencies. continue that years two to that. have past the pleased improve we

on called it. seen from we is benefits prep a to forecasting. ongoing that. So what we have program It’s the improve Prep we And production really out rolled X.X

are at are right some and we looking other are trialing. we things now There where

and a of some of effort is pricing good of of Because and you labor I sales sort some labor hitting between a think right? cost that’s cost it, in rates. that bit trade-out the on little and leverage a it’s in with way and just think inflation I the based combined about goods there’s deleverage to are way getting think

costs total, on about can pre-pounded, how are core you and like think, buying combination improve we if I in we chicken continues that can focus aggregate right? think -- But about things our do there there

something chicken be right a might about require same we price talked and the that see as we before to labor but that pilot have have today running could that less now hours. we the So be if

continue when those combination. think look we I So we two in at to look

John Ivankoe

of final I And DoorDash X% the me, Great. kind is I mean, excuse is few it, Okay. sales. guys how rewritten I times mentioned, and the of then promise, between is X% DoorDash, will quarter? one mean was significant savings, mean, talk in that if place you agreement third something we delivery when better savings, a notice about mean, P&L it getting X-point we from for the that in XX-point a deal and the that is I I

Matt Clark

been keep place the always that has we to the objective feel that business balances margin Our out. it a in

So make get to dine-in we the about them talked have margin to guest. a relatively equal sure we that needing

think that a fair darn pretty gets this us deal. I and is close

it I of is middle in the year. rolls in think sort this benefit the of what that

So, those going just helps initiatives us relatively margins next that core one hopefully, of flat keep it’s into year.

John Ivankoe

you. Thank

Operator

of the question from with next comes Your Barclays. Bernstein Jeffrey line

Jeffrey Bernstein

the and comp could that in tough then full I for if you get trends Great. that and you maybe were comp to components behind one provide much. slow quarter? that’s last context wondering the just after you Thank it start very am trends, the quarter the I mentioned X.X% evident and whether today, is off the had in think one third the better comp you can know just on saw in mentioned start And questions, you I well any a follow-up. of you Two again I you provide that as quarter ultimately that quarter.

Matt Clark

Sure.

sort X.X% But positive and look traffic X.X% have talked offsetting mix of was negative that. we at as was about a mix X.X%. the So about, we pricing

we period, I year quarter from July on that attributable of So be we trend roughly the saw essentially are the that the sort the of trend we about X% guidance speaks to providing. of half to of are the all back really right the speaking and as back off was beginning think and that

maybe So I a that matching Prime about why be of that or think there’s pulling Amazon been conjecture lot just might retail sales. in Target Day

really nobody think I knows.

that’s middle the so comps from and standpoint X% the saw. between analysis that a we shown year what some has we in years of been years five balance feel consistent now. like have been think right of past somewhere X% there’s the comps are think of or I I to But our than lower July the that over run I the four

Jeffrey Bernstein

the then terms I in on to FRC guidance guess And it. Italia. related and of clarification just North Got

is quarter $X.XX that excluded already the fourth closed. I in despite the mentioned having it’s $X.XX think you acquisition to being

clean just this So costs make a all those to it that try correct? including to going and you XXXX, is therefore is starting start then year in fresh and are

Matt Clark

right. exactly That’s Perfect.

versus where trying are said, core can so will then that we where have we includes said everything as we and so year people to we And we we a clean keep trying, we XXXX. have are guidance are just that understand think for

Jeffrey Bernstein

the But from the quarter excluding fourth then units these the but or are revenues including you you revenues the are also so excluding costs?

Matt Clark

out. revenue help we again, provided specific and can you guidance haven’t So, model we that

We guidance are providing the comp for sales Cheesecake Factory. store

the but We core just that way a out sort exclude understand contemplating the are guidance. so it’s in are to bridge of giving not you as it we gap you expense to

Jeffrey Bernstein

revenue the... you otherwise Understood. sure mismatch the would the but have that also stripped whether No. revenues out seem I just are in wasn’t like a it side,

Matt Clark

Correct.

guidance not those provided have well. for as the revenue We

I So it’s think comparable.

Jeffrey Bernstein

XXXX. Okay. And $X.XX to know the that’s within we are there, $X.XX into there that you I but give, majority you of of the going as applying one-time? percentage lots the is mentioned think about one-time pieces versus Can ongoing

Matt Clark

the that half believe which interest speaking on the Yeah. is Roughly will of we expense, about basis operations. go-forward be covered a in by

is let’s heavy of I to incrementally say, a relative then and have that’s quarter the you well, of you think some and another have it one-time pre-opening quarter expenses. as base it

Jeffrey Bernstein

Got Thank helpful. you. you. Very

Operator

question next the Andy with Barish from of Jefferies. line comes Your

Andy Barish

guys. Hey, Yeah.

look more North question or one out. as we question Just North-FRC

of of North getting running too and where then margins is you a that North on? businesses, aware now incorporate terms to FRC are kind the there right I guess margins higher, that what’s just bit in of year higher is Cheesecake be level terms FRC have mentioned broadly there Is just of equate provided You specific in kind bit anything next you that should in the unit economics little for and going little what still thinking we those new forward restaurant of a going lower. do without

Matt Clark

Matt. this Andy, So, is

that high the keeping first. way contemplate mature extremely economics mind out second that to FRC. of I sort run in the sort Just both part of most The And growth unit people and rate the North right? that’s rate, tackle think for model and it

what of groups the higher restaurants with a at you seven the waiting you performance those respect margins. When that’s if look margin we got concept. obviously base or aggregate those up for of different six have restaurants on economics same-store when we Because XX of the are performance looking are at we are providing issues some opening in to unit

performance previously the strip new margin to growth posted units aggregate year next the sort heavy provided we contemplated that for that comp at in piece. looks website. for guidance The the the of out modeling performance So is and on

Andy Barish

helpful. labor And two the just and... the side equations prime quickly Very of there, anything the on very different you much. that main Thank costs on cost

Matt Clark

the Cheesecake, question difference little It’s the but little and that’s a modeling. more sort labor speaking concept, is for maybe similar. relatively it’s otherwise a probably for a mean on for of FRC bit Cheesecake I pretty bit bit good close complicated less little proportionately simpler. a North

Andy Barish

Thank you.

Operator

Your of with DiFrisco Matt comes Guggenheim the from next line question Securities.

Matt DiFrisco

number just to number you this are this million Thank horse starting I say or base for the $XXX advance so? here. far it the adjusted I neutral is take XXXX, as guess guidance. in the little you. a of of when dead further beating for apologize a from And or sort sort GAAP of as you But

Matt Clark

right? for So good question. It’s the neutral FRC, a piece is

looking… For the That’s Cheesecake we adjusted are North Factory. be the from at FRC core interest the of and perspective business we looking so combined, will it

Matt DiFrisco

Okay.

Matt Clark

carved and … of because it attributable piece obviously out neutral because that’s losses excludes the the sort is part. that

Matt DiFrisco

say reflective when -- you of will the guidance… or to And talk quarter that out $X.XX stripped fourth completely it you do when completely in acquisition to for be is a bucketed your The are you the different, with about nothing Cheesecake, $X.XX of all

Matt Clark

Yeah.

Matt DiFrisco

for $X.XX to the … here $X.XX?

Matt Clark

Yeah. Yeah. Yeah.

Matt DiFrisco

guess, question, And out current so the there. then last more Yeah. I on you. Thank trends seeing that are you

business. square a I too seen affect might patio to the starting to is be called sort some there, or think the this is is of of impairing but have any there it footage far have haven’t I that going wildfires or you quality coming anything it under say soon know would what anything on out is business, the large you you that? pressure air so

Matt Clark

Well, everything that is guidance. we our know in do

and called was that the specifically of above the think we speaks and itself only so I holiday thing beyond shift. range So contemplate, it the for out that really -- sort

Matt DiFrisco

Thank Okay. you.

Operator

comes Dennis line with question of Geiger from And your last the UBS.

Dennis Geiger

for Thanks question. the Great.

that’s recapture, of four to if there previously, are you add those difficult this maybe maybe Just question maybe to you targets? you, whether or not pillars margin a previous the at anything you five follow-up similar whether thinking about about term if have of And how on the able or Matt, margin to else to share those maybe targets notable anything for the is generally term that longer are kind target kind on time margin or there’s still and some opportunities are talked relative add? longer if then incremental

Matt Clark

Sure. This is Sure. Sure. Matt.

keeping all key still think, of that comp So, store in the walking to yeah, X% that play, think, that range. I today, through I I in is the X% those right? call sales mean, sort are

the are the if that’s I right? the of the That’s think is flat. we that proven of Cheesecake majority case we still four-wall Factory business, sort have anchor. holding margins the

that that, that addition the a on year. leverage And to talked we delivering we in tenth about I getting are think G&A

and continuing to the international with are again middle build range. of next year partners right sale the in for restaurants our We

build. think that piece margins the the a accretion I So it’s small of over obviously, North that we have time,

on So I those. executing all are think we of

But kind we margins. of capital target be expanding aggregate returns think accelerated we core flat total I our we returns course the our margins look confident we without with does to the continue have if store growth to now that manage X% are goal X% levers in comp the hit in that forward place and range. Right of in the program can to sales

Dennis Geiger

I relates pricing in, Great. one other could one And look if just kind bit. as you of then to little out just as a get it

other what on kind seeing that’s are we you macro the with environment good that a happy X% you And of then from given If as the a little the perspective? and if side cost ahead a is consumer late? level level look how are

Matt Clark

think it’s based the on pressures. level a I cost realistic

slightly of restaurant economics. middle average and I sales cost right based are. again there the Again, you at geographies companies of think levels the we look based pricing in the different different as have are on on think most will labor warranted where

as position But for are and the being of as little a given comfortable different art it a you a sort pricing not certainly we range take everybody menu and in of else. be want you bit the to than the I to. science bit the It’s to and us the in middle depth little much have ability to of think manage

Dennis Geiger

Thanks.

Operator

a from do James. Vaccaro with question You have the Brian of line Raymond

Brian Vaccaro

Hi. Thanks.

quarter. that deliveries a off-premise, the has for in here bit and third it others plateaued one quick and sales more mix also one that seems you on here off-premise Just

you of anything end? tailwind believe that year growth would and Thank improvement if sort other of dine-in comp assumes initiatives you, trends or you offset does what a help dine-in out an on by that’s curious marketing QX driving Just the less point might is at you. that? that off-premise guidance And Matt so your in trends specific

Matt Clark

does and the the time up in business I the think delivery who what part of first that little are driving, just and of -- the college a who is the does down doing that and ordering, seasonality creates the bit appear of that, business. off-premise does on seasonality based an of it the summer people sort

the compare accurate it’s now, growing whether third percentage seen representation of second been and quarter it’s a the not. sort an get quite a really of quarter even plateaued to as can’t bit We as you or that have

to we year said and what X% are we and like a happy along growing believe. can we it’s that grow think So have that’s we X% be if feel all to still we that going

put people think numbers I overshooting have there other it. maybe out bigger

at seems to and least about us on positive be for that So track we that. for feel

So quarter the for just the in pieces of assumes our working all have fourth past guidance quarters. three that us been

Operator

questions no time. this at further there And are

Stacy Feit

today. joining Great. for you Thank

Operator

conference today’s your concludes this gentlemen, for Thank call. you and Ladies participation.

disconnect. now may You

The Cheesecake Factory Incorporated (CAKE) 29 Oct 192019 Q3 Earnings call transcript