CAKE - Earnings call transcript Q3 2021 | The Cheesecake Factory Incorporated

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Operator

Good afternoon. May name is Emma and I will be your conference operator today. At this time, I would like to welcome everyone to The Cheesecake Factory Third Quarter Fiscal 2021 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. now call will to I you hand over the Mr. Thank and Vice President Marcus, Investor of Etienne Finance Relations.

begin may You your conference.

Etienne Marcus

call. Thank welcome you, earnings to and our third Emma. quarter fiscal Good afternoon XXXX

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

are at within Before let implied me based of in this filings this factors to meeting detailed be our today's will items update any result are Exchange Private which we Reform with undertakes today's the quickly a statements. not the Securities is during Securities statements be only stated statements begin, duty Act All Actual discussed speak the historical different date on on considered and of our the and made of or investors.thecheesecakefactory.com and facts forward-looking statements call, Company those and forward-looking than in the results remind release, as you forward-looking of materially website that Litigation as in Commission. call that press available could XXXX. forward-looking on no

during this turn on over update. adjusted and will previously review contingent financial Overton. we measures in and Matt begin briefly David some measures Overton which most comparable will David call With a will conference be update. the results directly that, an of call described. will provide third acquisition-related, remarks, expense. our as presenting GAAP consideration operational appear to of Gordon excludes David results quarter non-cash An our our amortization on an financial website, non-GAAP and call, today's the basis, opening provide I'll with then and press explanation addition, use In our reconciliations release to

David Overton

this We at Box of variant, at Knapp-Track third dining in the Company Cheesecake cases indices. time. Delta surge outperforming experiencing Etienne. Factory given strong, to XXXX, you, sales was Comparable fiscal casual a particularly was and performance X.X% the increased quarter Black believe relative COVID-XX Thank restaurants the solidly The the the from both

generated which later in the fourth November continued through teams group from relative at of environment, metric XXXX provide our Xnd, Our The and And quarter-to-date seen have contribution medical this with quarter Cheesecake Matt more XXXX. pandemic comparable profitability solid sales with increased the early restaurants than channel. the incremental higher concepts off-premise consistency strong Factory XX.X% will anticipated costs call. the Sales detail insurance face strengthened in week. fourth versus in associated further we across costs each approximately Fiscal in

considering the and to and this this opening marked year. achievement, new This three the Denver, environment with XX pandemic very associated Culinary demand. challenges have continue Cheesecake see in we today, FRC operating is Italia the market differentiated area, far. to new so location Gilbert, we with for our a On growing a where suburb is restaurants a broader opened response Nashville the Italia Italia Blanco including and which very our Flower And objective we openings Dropout across and the Factory welcome to has the Arizona, third the both North Huntsville, tremendous a of throughout And great in Chicago offering market concept Franklin, and to in the brand. Subsequent that a in quarter-end, in received Blanco is North portfolio. market; in new in in guests a from Blanco second quarter, development Alabama front, North which four is and during Phoenix opened development been warm met in XXXX. a restaurants the Orlando, area and Child the concepts The both

licensing a location Factory Cheesecake week sales of under third are all our a international seeing front, international pre-pandemic recapture we the levels. licensees Shanghai this their agreement. On And in three opened

believe same to and on which comparable have the cost not additional continue pipeline to place, in we us managing margins. are positions prove of we be to further year. call to strong transitory turn operating implementing well in the With pressures Should nature, time, At over growth ahead, achieve driving to a and the breadth will unit our now through cost leveraging sales Gordon. our protect I'll menu Looking environment. focus we committed we management this growth targeted next initiatives David that, to take to the pricing X%

David Gordon

Thank you, David.

the growth top-line restaurants, surging As sales at COVID-XX The our minimal evident Cheesecake comparable on had third cases Factory impact our in quarter results.

to off-premise fourth Continued strong this nearly performance new research, XXXX to learnings in that as the significant be Grounded number completed throughout some a strong, period sales weekly the our channel. the quarter. drive targeted doubled This in consumer XX.X% data a guests XXXX. be longer third new research in off-premise that channel average seen weekly $XXX,XXX, frequent trends channel. in off-premise the XXXX. study levels sales reinforces we approximately the of belief number throughout of period already in Factory higher during Fiscal The same are again were weekly our And are consumer supported Cheesecake performance by off-premise to for as the same is in nearly that attracted driver is double than evidence our quarter-to-date a fiscal which level Factory COVID, emerge $XX,XXX these through we November level that of increase utilizing in from recently channel could the showed further Cheesecake marketing sales the sales via from we the sales average Notably, the a our very We seen in average sales particularly significant in a guests off-premise meaningful cohort. continued term loyalty The XXXX pandemic. Xnd further

Treat promotion. popular or last For example, Treat our celebrated with with we guests, week, just Halloween our

continue to more messaging And continue and we channels. brand-based same a execute of digital The raise are At profile with a the different social focus broadly key Factory to offers on the cheesecakes meaningful to Our time, these Cheesecake demand. creative differentiator. drive

is While Gen X the over launched X our themed cheesecake each we on with core averaging generated our And views. million content reaching have Snapchat, launched over campaign million our focus to TikTok video better recently views guests, September, over with reach Z reality unique XX augmented of presence audience, and million primary owned in we filters users. the

to staffing. Turning

pockets this The While Cheesecake of remains performance market continued tight. some meaningfully to The restaurants. we our have has stifled challenges, labor not at sales staffing encounter Factory

some may we believe shoots. seeing green we However, be

That for were in unused in top workers and ways and donated meals the U.S. XXX Magazine and only flow We teammates its of for our We surrounding XX,XXX to solid throughout advance well than identifies food across XXX,XXX recently country, our opening our enabling were the the opening, Factory recognized saw Care list. application donated companies from banks we quarter as the recent company Nourish and list, XXXX. as of were their restaurant supporting we received the employees Magazine food we to Cheesecake over the example, fully restaurant the make the For XXX date. hourly People be more for healthcare meaningful caring our highlighted turnover pandemic. recognized during staff Companies to People which the also non-profit in restaurants pounds communities. moderate staffed third Huntsville They over to Program,

our Our culture positive both, people staff a unwavering our the which is first to commitment to industry-leading manager continued contributor hourly values experience. we guest retention to and key believe contributes and at levels, a

Italia. North to Turning

and comp growth of North. with Flower approximately sales through top-line given Sales levels. the comparable quarter, XX.X% sales North case than to-date, seen have surge was quarter approximately Xnd during strengthen comprise notable further the sales solid the has FRC X% fourth strong at third similarly to of we quarter performance sales continued Third on face versus in pressure off-premise XX% the performance at also strengthened versus smaller further has of store with The drove experienced Child. channel Factory more at at somewhat and labor also fourth the the nature of Cheesecake quarter-to-date November up COVID XXXX Off-premise concept. restaurants, XXXX

top-line the We navigating a driven proud run easy restaurant It teams not is our are to concepts how great the and today. environment. performance of operating are we've our dynamic incredibly across

so all of of across we our our to to that, our dedication Matt review. appreciative team's be So, to and will concepts. culture maintaining continue now for financial With I call absolute satisfaction over guest our the turn

Matt Clark

Thank you, David.

per XXXX up FRC $XXX.X the Sales Factory were at Cheesecake year-over-year. during third to sales And represented at were million bakery X.X%. XX% fiscal totaled during just operating sales XXXX sales were restaurants Revenue in comparable total up including and Italia Cheesecake Italia contribution million. the comparable under $XX.X from period, Relative quarter increased quarter. million Flower Third third North North the restaurant comp approximately versus of increased Factory sales period. X% of total year-over-year XX.X% quarter and XXXX. $XXX.X sales, FRC, XX% $XX,XXX. The revenues were including external the Child week Off-premise

contracted market levels. level cost year, variances. to the points, to to for that revenues, in drove in year-over-year meet that on sales as most detail the leverage. The impacted last primarily abnormal significant where given inflation, Cost this the with sales disparity of provide going at the impact I'm XXX points nearly buying the basis third usual, of and by our mix exited of some percentage concept. quarter volume significant basis We year-over-year But the As need was cost pricing XX higher sales sales spot quarter note expenses. North buying exceeded saw we declined the third we of course, Italia, of by of that impact due spot in COVID driven were from

the large number leverage, drove. were for points, offset training with and to expectations, approximately by However, primarily medical costs group aggregate costs. reflecting $X.X due claims. Relative declined to expectations, quarter sales partially efficiencies given our a Labor X% of sales approximately line the our wages we higher higher cost in of insurance of XXX million inflation came basis

than and associated higher items approximately on for In total, than anticipated sick had margins quarter. these $XXX,XXX the training expected. were surge, costs points $XXX,XXX approximately pay, also impact largely XX had about with We basis higher Delta the

to Versus We by our incremental higher operating declined supply associated points prior had in million due year XXX products. This expenses also chain Other translated the during certain margins. quarter the pandemic about inflation saw and recruiting of with to for than non-food costs period. basis relative disruption over points, $X the basis to than gas, to including we leverage expectations, sales X%. budgeted environment, slightly higher natural wage primarily XX anticipated costs impact over with associated

primarily also with costs Child across year in restaurants, earlier. Pre-opening the $X.X the that North compared in of quarter, sales to a challenges Flower third the period. leverage, of similar seen as declined one opened cost period. cost Italia XXX North were basis locations two prior such elevated Child have points, million percentage tight one and I of the controls. the our Italia year Flower concepts as quarter with this $X.X due impacts, We referenced as during G&A prior sales well as year versus Blanco Two in million sales to

share per share diluted quarter Third net was common $X.XX. was Adjusted GAAP $X.XX. per income net income

Now, $XX.X In quarter turning the CapEx and reflects million. maintenance tax $XXX a our million approximately quarter. $XXX with $X on this sheet. million activities for rate We during repayment. liquidity during credit a cash for from recorded available the approximately quarter balance balance benefit $XX reflected to and a third our associated used ended million repayment the of $XXX totaled flow payroll revolving the million, million, with of the The cash total new flow approximately third development. and operating tax of deferred quarter cash turn, of facility. Company $XX million approximately approximately unit available This approximately required including

continues to dynamic. Looking ahead, operating environment the very be

you keep are shift, X% December the year end -- underlying updated the fiscal negative from for holiday that on fourth expectations to our given about for want anticipating we comp quarter, on we impacts XXth. will our a the So, balance sales

related we contracted into X% elevated to as to We're that and quarter volume Christmas or to New XXXX. would continue year, approximately anticipating labor of fiscal the the sales for our to group labor expect as the will and X% than to as the incremental sales normal over seasonal sales higher from the inflation to large much we and be we dissipating wage expected Note, continue some tight. of better of these be basis a even Taking fourth seasonality would expectations. into move QX quarter see of to in than elevated the trends, to as as meet our operating balance And Years training our sales into percent slightly quarter, high-volume between provider. favorable concepts to market more first trends points. prior versus and So, exceed needs and rate market XX cost the quarter medical to are leap in time, such, acquired claims of expect expenses the the leverage, third need ingredients other remains Similarly, are spot be levels. the expect as purchase to is third carryover by as anticipated factored well account

G&A $XX of quarter, fourth the approximately just We for of million. continue and million expect $X preopening to under

for estimate the X%. tax our Finally, quarter now rate we approximately fourth be to

Factory still and is to remainder quarter the in in would we X% expect Note change at pricing as disruptions process fiscal our The have mentioned, remain economy, for Cheesecake first year this in should XXXX, supply due we in of currently protect you margins. restaurant purchasing menu, next menu pricing as that these will be while to of David further contracting, to the the nature, at not and our that implement the proved of impacting in the team Looking broader level plans industry chain transitory to cost the actions ahead circumstances. pressures year, the during the

X% pricing of pricing Specifically, were year also of labor year, this inclusive And as of an are many to With total new for of if could so to spot of support we inflation known increases, to X.X% a is year X.X% concepts. require it currently additional menu plan current XXXX, would pricing us to The regard our at the as minimum anticipating dynamic. portfolio commodities wage our open full restaurants far. margins. X% next to across to menu XX take X% we development, the at around we're market remain for level restaurants be our experiencing spread to levels

and For would modeling the protecting share of Factory we X market Despite unit as this enable the to pandemic CapEx the least restaurants. locations, North at X impacting other development believe this cost the and brands our restaurants. on delivering point, so FRC anticipate to well maintenance X $XXX X far in Italias, required year, Cheesecake purposes, economy, expect at to this environment as support would approximately Child restaurants, We while EPS broader million level restaurant ongoing we pressures related importantly, our we're industry long-term solid gains. Flower

also breadth XXXX. growth poised With our unit the of our high-quality your growth we're we said, believe in fiscal And that vehicles, to take questions. objective X% with achieve we'll

Operator

first Sandler. with [Operator Instructions] of comes the from question Long Piper line Your Joshua

Your line open. is

Joshua Long

question. Great. for you the taking Thank

consumer The the wanted first into I been lately. here research one conducting that was to you've dig

bringing and compelling, brand interesting in new regards very your consumers to Sounds funnel. especially into

But, I from how been engaging customer years? them, where brands imagine, you've cohorts. prior what using might So, guests been, how that maybe your I those was you've learned. of they're early from conversation in terms and the you you're they've if to over curious differently what loyal it's the you've in be with with share able still learned

David Gordon

This is don't David that Thanks it's Gordon. been, where Josh. they've they've back to I but The know Cheesecake been Factory. good

what versus So, a approximately cohort, what think significant frequency comprise of XX pre-COVID. XX visits increase in to now was year, seen a frequent I which is our the we've closer

very of to the a of seen marketing, the value frequents mentioned. be been come see. we the that which them is remind new Factory, the So, the not the marketing third new use the and have and marketing that as decreased loyal of that's Cheesecake quarter, second just third had and guests, even to great throughout And to sign. COVID guests a Certainly, significant brand, great a some in we've during About of but back we are come the to guests beneficial number time our of has back have quarter. to where did beginning throughout we you

we and proposition the talked points from back with menu Factory the that a we And with. that the Cheesecake we have the other positive have that that price frequent around that of the and particularly that is moderate as talk research at see the of very menu a found of the about value come cohorts. breadth insight Some we lot guests

[Technical what overall, channels feel Difficulty] the the and through we've that forward. with So, pandemic, engage we to those continue doing been guests marketing moving throughout we'll different

Joshua Long

in. forward. particular, North in more, one and in to about and guests the and of XXXX maybe Great. start markets be just markets, of and able what on portfolio for how I performance from in you them? sneak how brands engage brands, Thank brand new And if about you markets the versus planning and the going market that. existing in your think go backfill Curious growing of learned Italia, you -- it you terms opportunities grow now And you they beyond? you’ve pipeline as balancing your you Thinking awareness portfolio how perform backfilling for as might

David Gordon

been Sure. as Well, for in new already growth we we in one talked in that have Orlando, into really feel XX% about, very restaurant up North that they although do We relatively really, has Miami opened rate really the positive it and will that the moved markets new that in good been. would strong have market, just today we and Dadeland, the anticipate about well. have so I that as sales we've think the North and

in we’re Chicago Matt example, a that in Northeast. lot in Blanco an as mentioned, So, of I there think has or the opened are that today yet. markets not the

slow then understand the from and it's in markets newer in some that has markets, received rate nothing will there that those thus guest point, try seen far. we've maybe geography to on I and how into think, based every we’ll successful fill perspective. that But, XX% have a at down North is in acceptance and North this the of moved still growth look plant to that slowly that continue been

Operator

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

is line Your open. now

Jon Tower

questions. you'd Awesome. manage beyond taking David into mentioned Overton, to the Great. Thanks potentially just taking and for the in costs 'XX. pricing above call earlier measures

expect on the perhaps in hoping menu was you is your on mean back curious could some the there? of what appealing to that you you options, plans or Are elaborate there. labor I are thinking just thoughts some would management put there So, you system? I'm what

Matt Clark

Matt. Hey, Jon. It’s

we or to relative I from robots, what us can steps opportunities we tough, example, you the replace our present -- the whether for pounding kitchen, providers dining opportunities steps, right? take chicken themselves pretty shrimp to can out but I it's were have supply and we as chain, think where to boys some think, or you're kitchen service that continue for to current like pre-COVID, that. the full as to well deveining in And, improve that with casual opportunities at environment. things the the look do in of improve

just have elevated averages. also off-premise had of channels. we've and the strong. because it of designing great we're be. very where the productivity environment, a on-premise of we And that to and check used And job training has we And even our actually when part we've out the at we a standpoint, overtime ahead been done at slightly think around look looking productivity workflows elevated is coming costs. types of this I recruiting and But, from

that And continuous reduction the all. it's key a would around expect like the believe would be I of menu sales that can the and driver at typically improvement. that's high, expect it important sales, recapture margins. levels is We approach we wouldn't that. any I keeping sort see our of to to so So,

Jon Tower

it outlined, where last in spend about you third you going And the in just to or talked plans quarter on least that? there at that then, And sense. related out? Was it. loyalty Makes process the call at least had of any the rolling to are

Matt Clark

have next in And I a And able year. further by that next Hopefully, quarter. still think would be, we There little I we'll we the fill more said time more with right. that's think be a third we a timeline. what where the update would that in nominal it last amount don't the of we be specifics. was I only think thought think to call, we is bit

Jon Tower

Correct average weekly sales, on to wrong, point slowest And is talked then, just sales October right seasonally I'm least this the at if and lastly, average me fourth for quarter, but you obviously… about $XXX,XXX, weekly historically, date during now. the year quarter

Matt Clark

Yes.

quarter fourth correct. -- the During is that

-- includes sales the is XX.X% you the good number. that So, great feel Halloween we traditionally period, strong really date a which about if the And is weekend, look quarter basis, a comp so. to at not that of where

Operator

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

Sharon Zackfia

guess, I question real just question. clarification of one kind a and

Eve fiscal out my So, question into given elasticity second in that wider sales? the a comps normal. of shift Should 'XX. between I average then, weekly gap New we was Year's as price and expect take demand. on And really

could think, like that one any to was think said customers willing And you about to inoculate the that you fully of learnings what heard you value really help and multichannel customers are process? I you I margins into about might guess, do. on menu your how how your the much mentioned what pricing I you have XXXX? and of and do And try finding that that. you the breadth

Matt Clark

questions. Good

To one, obviously Year's think technically, because the days Eve, the the and first the right. of you're that answer yes, nights lapping there. I New comp versus AWS, The is couple big

a there's a of think little bit I So, differentiation.

and piece, we pretty second elasticity menu offerings the breadth we given are price we're points there. for overall of the On at, breadth where the at the look Cheesecake, when price in confident of

the competitive And based typically been averages what be what say, that margins, the the of would we would think where we we seeing. at, I below look what we're see to need And cover we're nation. on right are we have looking average the probably the environment. across bit middle a would of little we the in that I pricing also, do is one at always things

I sales make to the we pickup to trends, we're omnichannel and on-premise. for And and that delivery guest. that one case. we in as and standpoint and think well. to I that think And that be that our believe but from from frequent the the things as come can us I always But, perspective, mean, things good based competitive always come evident, menu enough about portions, of I the didn't we think, I that speaks on on we'll very today's is is And labor with the certainly, a there's omnichannel. fully the based look of when feel touch it lot a as value that that They our every well to the cost on sure on-premise. the quality as the to So, see we value change, position that experience on they see, food, today. think the cover they of guests,

only piece, And as that so, mentioned, we've seen David increase. Gordon

stronger So, this environment those overall. as proposition the gotten loyal value view having guests, I in think,

Operator

Haskett. line Gordon the Farmer from Jeff with comes question of next Your

Jeff Farmer

for touched You more a looking couple it bit of little a color on I'm but times, just here.

all So, just are that Are your the line that And concepts. a in across to strength? could it of thoughts couple pretty point you of like strength terms the that on sales much of there things sustainability are QX-to-date, driving improving what looks momentum? your top of

Matt Clark

in concepts all all pretty it think, I much geographies. is Well, and across

obviously summertime, operations the we've I the at the accommodate or everybody in so for I that been amazing the outperformance And the business to market. about And saw same of all or we the think service. think, our what weather you we that kind teams of that to I storm to keep mean, limiting important. And closing drives able that. manage certainly days always have level, hear that think closing is restaurants versus are about part, execution the shifts guests. our levels most staffing I can doing is been incredibly are

that's I that it. of a think part

done we the drive all the think the in well. all as that accessible of be I things channels, to have to value and supports that of

been of testament. past consistent good And over one to industry pretty probably And, I we've everything, six brands months. not impossible a it's in say predict. sales a bit factor think I most total. the the probably So, would in little that that's it's the

Jeff Farmer

of quick then, of staffing point pockets? of you in just did but labor, a And referenced just these of little shortfalls just theme on the perspective, But lower terms in you'd and pockets staffing is and something the again What in bit on supply-demand that. is common to seeing touched follow-up, going these pockets, you them than themes, sort what terms in levels the you, again, again you from common like briefly, a a that being today?

David Gordon

not keep -- country. sales, to can that week meaningful and Matt's one is I to a predictable, think, is Jeff, from of to able a us day the this It's there is is the enough It's this week, one sustain relatively to country But Gordon. an like the really David point, sales. retention, it's part us closed our it's for valuable consistent not and be of It for not of be see focus then to having relatively hours, honest. not to of on be to theme. think, I be you it's suddenly, and part And be been the any has stations open as all can continue sales. on driving our impact to teams that able different

And in been have here a would to recent operationally. able other skip staff what really decision helped our that the at beat us fully Matt ready and didn't as sales team, open. we've has I managers and add be that think operations place COVID up. mentioned just level, the to because more and able the then, is been stable really the maintain like tenured to of high of of execute We to that a sales of retention had, seen. pick throughout the back said, we've staffed our to the it's I opening think, although being staff challenging, weeks, most decision in types I And to So, little thing the our it strategic Huntsville I seems a great. all which it's keep

Matt Clark

shout the Because have probably you've I and This tirelessly. a The got important. this full you've our usual, just sure the super has, and in the add is team. close give to is certainly and worked drills long-term chain again. are Matt to partnerships that a is staff you just menu of have support more we our can very more but thing making Factory also the one best expensive out industry have piece time that well. or supply fire got bit would than they and another The are And things product, as have the to more all there vendor have to Cheesecake it

Jeff Farmer

All right. you. Very Thank helpful.

Operator

comes Your Jared with question of the next Goldman Garber line from Sachs.

Your line open. is

Jared Garber

much I so restaurants Thanks staffing to that continue or on back the or to of our whatever issues, But, off be question. just sort there suggest the question either lack related is. thereof. to or circle closed are wanted Hi. contacts prior shut would of that the terminology right pockets for

you way are sense the off-premise follow-up a healthy. think margins. I'm throttling, if the some strength of who noted to have I to that dined to volumes seem and I sense noted, wanted a impact So, due there. then, And get would get from if the of And sense much of is pretty sales out a that to if to obviously, there there's an if one in don't on but have will, just consumers shifting of wanted a towards off-premise that you data, that some sales in maybe -- of channel in. know you get you tease some wasn't part restaurant. just your I trying

Matt Clark

Matt. this Jared, is

to guests go But that we on just that mean, going closed the guests most on based out of actually. the They and on-premise are they're that they next is, we've figure when that and time pretty their I to to thing choosing out. willing restaurant restaurant they is wait. necessarily not going us, wait. that difficult the the it's we've to known think, that to I fringe, dine are to going the got taken go, occasion are what to are was seen

are up back they times to on -- were have what We wait historically. our Saturdays,

that. So, think I not it's so much

occasion you're I choosing to. that to the think it's go just just base

Jared Garber

any sense. usage, you makes as from That away pandemic? we or further shifting it. move weekend And in the in of weekday parts day height maybe versus are Got seeing the

Matt Clark

here be remarkably our right the than Nothing it's half a I quarter, consistent. and looking more percent, really, at to pack mean, I'm moves stack for honest.

Monday And so, of other seen, more we But, we're capacity. obviously, Monday closing or little early to And stronger think, like parts, of I of terms fair, little Tuesday. -- bit be mid a that a the have in of the the the week, probably days and we've I week. coming companies little on think And, a mean bit bit in but days, that. and a be across Tuesday still day or something the the on could a all result up strength

Jared Garber

And just on on the side. think, more -- one I margin

just of I lines? wanted think of more be it it Italia a sense or bit those geography, you something the that might to along mentioned the and challenges the little demographics to or why labor related business, North related rest is Is to that a seeing get maybe earlier is. versus of staffing

Matt Clark

just think locations which size not right? We're about, yet. The of Cheesecake I to best-in-class. Factory, even We're it's there concept, mean, comparing Well, XX it two I is talking is things. the the

they're So, staffing. you as sales tall by great you've I think just comparison. a numbers, a date, I job, in really that can quarter to think, doing order their see stabilizing got their And

think comparing we're very tough a a think, And I of competitor sort big that saw and everybody really just to there ourselves. crunch. mid-summer I

Operator

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

Jeffrey Bernstein

questions. Two

one, margin outlook. first just broader restaurant in of The the terms

is for to intent prefer around front, initiatives? wondering kind to risk goalposts, little case, the trying protect flat, beyond take in if as of pricing of take that's the a the XXXX, traffic, needed concerted the just the productivity theory, pressure, that margin idea your keep to which be pricing strong, the margins pricing Just margin. bit but wondering to with in to do the maybe specific at proposition to pricing, or measure being hold willing presumably goal on you Just using are to you of value

Matt Clark

Matt, it's It's quarter. question Jeff. Hey, the I think, of the definitely

and is want and science, that. of little You art a just bit it we would to couple things. little a a I bit nailed get do say right. Pricing

sales X%. the the I kind sort to put at cadence as really proteins to incremental and It's X% But, we didn't degree looking there really X% we're some now, think that that was we was case. of going that when absorb that market of I quarter, a be don't would you I and some would be. the protect is impact that we right XX.X%, margins, in top-line be that we in that an see could extra the I able think think or well. of we're don't to can look of we actions even commodities view the And preemptively think elasticity, most sacrificing it protect of being some fair levels But think by see fourth that as off if our right that of our a I pricing a December, think, we now, margins. on our being logjam to said, in, keeping we're can people what the certainly but And for key understand trade-off.

Jeffrey Bernstein

in-restaurants. one increase have assess the trying I does on acceleration the be increased even off-premise? just for, that would in potential like that impact just and Does off-premise? most And how Cheesecake or you the strength growth materially growth change returning to to-go the gets unit by presumably the attention, maybe people about the that guess, The the maybe the from with that it excited unit you you're the the just is despite seems follow-up in to It think I'm wondering business. Understood. economics

Matt Clark

I that. think maybe like seems so, parts it's too to -- there's two it

the of sort -- getting, mean, about of could we're that into like we right markets we confident But, now. going going as increase feel into we the we you're the growing And that, that regardless is about Huntsville, total look when certainly that part stickiness first to AUVs. at talked think The restaurants, pretty some the opportunity. what total it just be appears I

don't So, different model. the got say off-premise equally. nets opens of on-premise. as commission new. early I it's for a know about is labor economics anything too The pretty if it And the think The -- the in I a out certainly same piece, the it are bit mean, delivery, though, but total to you've I little up

And competitive take think out be we that double I only single pricing So very or for we're worked digit digit as we agnostic. possible. want as -- low us. for that's to delivery, because And

the omnichannel, we'll guest wants do. to drive So, whichever

Operator

of Morgan next with line Glass John comes from Stanley. Your question the

John Glass

on follow-up it 'XX Is wish restaurant -- on -- do pricing basis you Is what that to, planned and in is make you last the you you hold inflation, saying, question. the I it if a just want place? Matt, about First, just you're year I can could the goal from contemplated you with to if think know that of full the to sure we margins higher? 'XX? or right keep

Matt Clark

Yes. a fixed totality, When level couple getting restaurant There's the on leverage in are we the things. and EBIT. we appreciation. total right, at, and And so look then there's of margins G&A there's

about sufficient pricing But, in I levels. to have, XXXX in getting total, pandemic we mean, back related noise the shooting power thinking we're there's when we also been of the Obviously, XXXX to look the issues. I as today, level. so, things for. think what lot And a we've sit back get that's to

by year quarter think But, a because really off, that's And good first comparison, not right, kind got so, we do and what was flat, noise. then you've I mean, true. of is far mean some XX we so this -- other the

John Glass

And be level? of it, Okay. would way necessarily the restaurant what model my the 'XX? in you level, that at not level, right shoot an but like sort Is about to think X% for EBIT EBIT

Matt Clark

I leverage getting, four-wall think with some of the get might back margins we to Well, going inflationary It we're the be through I mean, of that pressures. depends working mean, to on certainly, I we're flat some too. still that math. But,

John Glass

Got That's very it. helpful.

Matt Clark

is term. to …John goalpost somebody a else's good

John Glass

Got markets What you you you others, restaurants in about use to you brand market enter markets? it. think North Italia you newer have there new how awareness? guess I the about build particularly Thank awareness, do the those you about concepts? talking Is for total, going very brands, when much. existing thought and those brand When do to I’m

David Gordon

think So, philosophy the -- Cheesecake obviously it's Cheesecake more breadth. of because much and of its Factory of than a local I size

do marketing friends the smaller but haven't pretty a aggressively. of So, in in we there like move new have geography, do whether good even that new local that on And guests We email communication traditional as buzz within is much news markets, time, businesses, social good ground a the good been also prevalent they market, use of restaurants. to things are those The into done is boots what is all marketing already their cetera. FRC the we a some within points Instagram had of that's platforms the family marketing, certainly at would company. do local database concepts. rented in we at and around et of a billboard, to lot marketing We've you channels.

thus, seems it markets, and So, a be working. at bit of to different far strategy we've little Cheesecake, it's those because in the seen success

John Glass

Great. Thank you.

Operator

line of with comes Mary Your Hodes the Baird. question from next

is now line Your open.

Mary Hodes

the for Good afternoon. question. you taking Thank

you of I outlook commodities labor? protect clarification XXXX X% pricing the wasn't question. and inflation. just the XXXX, or outlook, be need have enough what in would guess, margins On Would commodities to to one whether that both just X.X% you to the given theoretical the clear cover I all was for

Matt Clark

Right.

Matt. So, that's clarify, Mary. point to a is This great

major So, level in X% that includes both the inflation spot of at the The about contemplated and level. is commodities this of market pricing labor the that's inputs. that year's

Mary Hodes

what then, would commodity…. And Okay.

Matt Clark

process saying markets think still remains the one we're our commodities that today, Mary, contracting of thing. that's we're it that We're in spot I the outlook yet. maybe dynamic. and just that saying don't

just we're people for So, metric things to use, to that giving at. where are understand

Mary Hodes

you're running then, to improving a a there to currently up what you get are that's understood. Is what planning internal way at? to external of not initiatives XXX%. if is you're that XXX%? then, needed think back the staffing, to frame And that get a on there other backdrop is levels to just or do to And Yes, deploy targeted percent XXX%,

Matt Clark

mean, I that's a sales XXX%. are we at at, where versus the not been challenge. are our Well,

But so, staffing We the at costs need overtime. recruiting sales are because And we've in stable. run And continue from been XX.X% still they tight, little still close seems bit why XXXX, a higher remain that's to people the to same we summer about it kept higher level the We've the bring above still very were to remains bit it. the level because little we running in. we're and right? as months. levels It a like busy

there in do So, in environment the I positive to needs for But, think pretty I the here. all overall fall continuous think some that's operators. restaurant improvement probably moderate be

David Overton

day are team David. to is our people operations that attraction sure the we know who quickly. that that to leave two. make on recruiting continues today has to teams add jobs the once they them I there this side of or them get would that available. just our to innovate Mary, continue make sure hired, And one a been out that have attracted, don't just engage really there somebody for make keys It's somebody to you with really, sure

making are of that's everywhere ads can be, very whether posted job that a and team the job the So, of doing terrific restaurants, is corporate other sure methodologies, active there recruiting recruiting on, not using that going for passive our and just that is assisting or texts some recruiting.

Mary Hodes

Thank Okay, you, both. great. I'll it there. leave

Operator

of line the comes with question Dennis from next Your Geiger UBS.

now is line open. Your

Dennis Geiger

the half Matt, margin just wondering highlight just you versus will mature Italia if stores grow less -- mature longer more gotten mature, it this back the of on that anything the gap takes the where sort structure the could and of stores if if bit. that's margin, North are to or that the if I than And versus time But come into North little wondering owned you if could margins? at non-mature to the of recognizing that probably more the there store stores going or less dynamic those sort it more Great. think brand, a margins any forward the curious just of that better, point. or some margin mature you've

Matt Clark

brand a basis face we of little The mature from of about market. of versus spot XX.X%, Cheesecake the in were buying on note like did there's of pressure in on points North the the sales margins the pressure bit that seems cost incremental But, prepared level which quarter for the XXX QX. restaurant had the it remarks versus

the some fact level, saw if there's think was you in the aggregate from I We just improvements good. in that supply productivity an major disruption So, overall, factor chain.

well. The supported P&L other very of the were components

Dennis Geiger

just biggest into to more it level discovered one just it brand sort the then and more value factors kind that to discovered wanted resonating? you. factors? customers. you, that I to the there. was is back stands out Thank of more, if work are there, just that if maybe come insights And if understood of it's recent service about I add there Anything those there's others, -- better of that for Maybe you're on the or versus talked doing just the or the earlier. brands you quarters anything survey other the rediscovered the that I'm more recently a on newer recaptured versus you everything job curious, folks it's some months, recent in

David Overton

resonated. do for Sure. that everything brand I think Dennis, stands it's the

we and for channels been before. there meaningful, off-premise guests to available that are guests reminding through the easily they're think, access that off-premise using hadn't I of those out was lot a

that not COVID were And one they positive very think of seen I But doing, omnichannel the a I also feedback. lot only approach Matt was were but comfortable protocols. about think us were marketing high with we other actually to they support have safety on talked I that said well. that we And all restaurants. beneficial. that was the mention they our once in didn't So, felt scored that very in really the everything The we of contributed as guests thing

Operator

with Mullan the comes question line from next Deutsche Your Brian of Bank.

Brian Mullan

there price to how you Question here, want could is to want aside the from clarify beat a on of environment, to for. units your dead XX.X? think any next plans there year out year? or anticipate, that units laid But that tailwind the horse. acquired, units from restaurant you at North just something headwind putting unit about since the inflationary which least you way margins. and you Is in next I FRC growth opened Matt, ownership, don't a level acquisitions relative X% the near-term? any the to The those the drag XXXX you've result for of I

Matt Clark

question. fair a It's

I of those the expect of of orientation margin weighted structure restaurants. that newer of the think, because Cheesecake their perspective below because would brands, the we growth just slightly would be a

little think But, But, that there a we've has don't I bit too that potential it is there. big think I So, for out. modeled potential. it's when the

brands, I opened units the you X% X% below think, on one look near-term. how those of be many it depending in when Cheesecake, have to could at

something could so, And in. that kind I think of model you like

Brian Mullan

would what the next would of with that benefits, would Okay. if those Child. to over year? new Can it What move? And did operational some take brand to openings do What on the Italia? corporate about Thanks. some that the you brand take follow-up, Flower are you then and that? North with you metrics to were question just are just key that do model, And you right? with talk have where brand Why of want you that you’ll be way to the be fully you watching make

David Overton

This is David. question. Great,

to at the Sam I'd team, growth we gentleman the under North. allowing believe two work some operational Factory Flower at have are In Child say It to just today but do probably that that’s years moved restaurants really Child Flower Flower going Child, Cheesecake North, with XX states. do And the they've we -- at the team FRC, the opportunities. Cheesecake and with has Factory well, what to in every again, through stay been geography new now sitting Factory we're a XX So, it's almost. from today operating entire with those that and up that's Flower Fox on they north, us and at Cheesecake over a the Cheesecake like different focused leader short-term, just to to continue about going to have coming solid and of Child happening at not continued was that's everything into, help close continue we

near-term about supply time, help continue same say on that this think to the we'll one in of to areas we we with model, short-term. chain. help without the costs the of the talked And Child be we've of of the pricing, at will that's operations to maybe taking that the over But the some that are already So, food for some call. plan. on I'd year next focus leveraging help I of Flower to within contracted in can do sort stuff

Operator

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

John Ivankoe

efficiency Many been run current I mean, availability style to service couple cost of your served boxes? more you Thanks. of guess of for any encourage way potentially think similar environment, all restaurants rethink past your throughput, style that decades. in drive that’s service could and or are labor I that more still -- a I availability them guess environment, the way, does include traditional service drive the customers and/or you the full technology in various do fairly

David Gordon

Gordon. is This Hi, David John. Thanks.

ourselves that to and shows we high consider about touch, dining and care experiential to want a that provide the in hospitality high leaders the and service. really value are as some be drive level through we think just guests out of People we the We about through today. I of in that as of talked getting the to the hospitality, want not sales get fast we've can. the they restaurant And

Matt use that So, in house. or who the might do, that the talked earlier about look doesn't won't as we knows what the kitchen, we of to front for technology mean ways in

the just necessarily the high that now may talked guest there tablets in ways hospitality dining. the I not we've of years other experience whether payment table. for about removing be be think style the casual end improve about. I putting evaluate that's type that without processing or to to not on talked That's to ways other we want But,

would continue part been in continue leaders which Cheesecake we'll sales what we'll be always think that of we in long-term drive evaluate the So, area. to the Factory. such of But good a hospitality we can anticipate world I do that helps to that’s’

Operator

Vaccaro Brian Raymond line question next with from Your James. the of comes

Brian Vaccaro

levels? comment July, maybe And please? still that saying saying ballpark, you to over were you sustain think, Can the you clarify in just below So, if I or of XXX% need XXX% you're X% you average made you're are in just were a levels, my to you clarify what you're think in level? 'XX XXX? back are there, notes right. staffing that you Can the on what just to little you you

Matt Clark

July move below the we same XXX% a I we're It late in month. early and XXXX. And this June, think does right staffing to of of of little bit maybe month that slightly were year, around level

those So, which metrics, within us a bit below of given or the puts where little be, percent we'd two sales both a like obviously of to levels.

Brian Vaccaro

then green applicant you're some I might on also there, rates, shoots just seeing versus highlighting? Can elaborate market. on said in think you're think in flow differences or the be seeing specifically dynamics and what are And you seeing turnover other you any comment the labor worth maybe you new the you

David Overton

just over where markets, shoots to are easier have for has bit had a certain the probably staffing green previous that's certainly it quarter. been the little The the references rates turnover The past availability been beneficial. few stabilized months and just been than

in unemployment. more. as in it able does stabilizing So, very is members very staff promising are again, a staff things restaurant but feels change, you're little though to full that bit over market XXX Huntsville, it It a X% about a has talking is dynamic. And being

hope. little of us gives bit a So, that

Matt Clark

things seeing applicants It's number other Matt. on an believe of applicant of I we did From flow same would the we're in the that. as summer. two say I perspective, middle

is of that to again, wage a to mid-summer that October slower period And our a the back I So, norm sort inflation peak think of is. rate that's positive relative anyway. kind

think moderation just mean, two little over a the seeing, back of you're I so, bit the past months. And to

Brian Vaccaro

AUVs in are but running And in of good it so think pretty premise Child Flower said, looks strong last right what I recent million was mid quarters? quarters, that off you run on Flower for is the then, far, two there. David, in Child, And it range kind like the mix $X

David Overton

on depends I'd but XX%, XX%. Roughly it location, about XX%, average the say on

Matt Clark

sales right, good X.X the development with new levels, and And X.X, the we've markets. in stability really and Brian, new that's the right around with you're the seen brand

sales level. but so get slower Arizona same and had could the little yet seasonally we strong, a certainly, And bit been held

geographies, really has the stability out we're we're So, play trends been of seeing with sales against impressed that how noteworthy. and different the

that bringing you appreciate I up. So,

Brian Vaccaro

one the sorry, last quarter? third bookkeeping question. just And bakery I'm in what Matt, I if it, missed sales but were

Matt Clark

$XX.X million.

Operator

of Andy from the Your next Barish with question Jefferies. [Operator line Instructions] comes

Andy Barish

us can in next year, allocation Matt, order cash pretty Hey, rank increases just sort afternoon. what significant like in you Good of would what guys. just free to capital flow? Hey, look give be given for looks

Matt Clark

are an was part. it's with overlooked those often about on the our restaurants the piece $XXX and Andy, we Sure. million super build Obviously, would laid important say, CapEx out but based of maintenance. I to come that in the discussions obviously, the revolver we amendment. But, we believe that will bringing interested we with outside Board dividend, back to to current that recent need be performance, to play.

if those a get we We of probably there I to repurchase there. year. in the up choose rank initiation ahead were to pay certainly come off could would revolver. And think also next that So,

Operator

you questions and no This today's further attending. Ladies thank at are There this concludes time. gentlemen, conference for call.

disconnect. You may now

The Cheesecake Factory Incorporated (CAKE) 4 Nov 212021 Q3 Earnings call transcript