Ladies and gentlemen, thank you for standing by, and welcome to The Cheesecake Factory fourth quarter fiscal 2020 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Stacy Feit, Vice President of Investor Relations. Thank you. Please go ahead. Thanks, Rob. Good afternoon, welcome to our fourth quarter fiscal 2020 earnings call. On the call today are David Overton, our Chairman and Chief Executive Officer, David Gordon, our President, and Matthew Clark, our Executive Vice President and Chief Financial Officer. Before we begin, let me quickly remind you that during this call, items will be discussed that are not based on historical fact and are considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results could be materially different from those stated or implied in forward-looking statements as a result of the factors detailed in today's press release, which is available on our website at investors.thecheesecakefactory.com and in our filings with the Securities and Exchange Commission. All forward-looking statements made on this call speak only as of today's date, and the company undertakes no duty to update any forward-looking statements. In addition, throughout this conference call, we will be presenting results on an adjusted basis, which reflects the potential impact of the conversion of the company's convertible preferred stock into common stock. An explanation of our use of non-GAAP financial measures and reconciliations to the most directly comparable GAAP measures appear in our press release on our website, as previously described. David Overton will begin today's call with some opening remarks, and David Gordon will provide an operational update. Matt will briefly review our fourth quarter results and provide a financial update. With that, I'll turn the call over to David Overton. Thank you, Stacy. We had a good start to the fourth quarter with comparable sales, excuse me, at The Cheesecake Factory restaurants down just high single digits in October, despite mandated capacity restrictions. At that time, we had approximately 90% of our locations operating with reopened dining rooms. Through the balance of the quarter, sales softened given the impact of additional dining room closures and capacity restrictions in response to rising COVID-19 cases in a number of our markets. For context, we exited the fourth quarter with 75 Cheesecake Factory restaurants transitioned to an off-premise only operating model and just over 60% of the locations with indoor dining rooms open with capacity restrictions. Our restaurant teams demonstrated exceptional resilience, again, in response to these abrupt shifts. Operational execution was solid during the fourth quarter, despite the challenges faced with year-over-year increases in both The Cheesecake Factory labor productivity and food efficiency. In addition, our strong position in the off-premise channel helped support the business during this period, with sales at The Cheesecake Factory restaurants that were operating an off-premise only model far exceeding prior peak off-premise sales volumes seen earlier in the COVID-19 pandemic. Our restaurants with reopened dining rooms continued to demonstrate strong performance in the off-premise channel as well during the fourth quarter. Notably, we had 24 The Cheesecake Factory locations with positive comparable sales during the fourth quarter, despite capacity restrictions. On the development front, since our last call, we opened The Cheesecake Factory in Clearwater, Florida, in late December to tremendous demand. This location did nearly $250,000 in sales in its first week, even with restrictions. One of the FRC incubation brands, Blanco, opened another location in Arizona, further scaling the concept in this key market. The sixth Cheesecake Factory location in Mexico opened under licensing agreement during the fourth quarter. With a solid pipeline of sites, we believe we are on track to open as many as 12 to 15 new restaurants across our concepts this year. Internationally, we expect as many as three Cheesecake Factory locations to open under licensing agreements. While we are not out of the woods yet with respect to COVID-19, we believe that with vaccination on the horizon, our concepts are well-positioned for a recovery as dining restrictions ease. Looking further ahead, we believe our collection of strong concepts, coupled with our financial position, will enable us to further accelerate growth as we emerge from the pandemic. With that, I'll now turn the call over to David Gordon. Thank you, David. During the fourth quarter, we drove year-over-year increases in both manager and hourly staff retention, which we believe go hand in hand with delivering great guest experiences, and ultimately, sales performance. Time and time again during the pandemic, I've been humbled by how our teams have supported each other, our guests, and communities, and remained dedicated to fulfilling our mission of absolute guest satisfaction. This is a cultural touchstone of The Cheesecake Factory that I believe continues to differentiate us in the restaurant industry. In fact, we saw both sequential and year-over-year increases in our overall dine-in and off-premise guest satisfaction metrics during the fourth quarter. This is an achievement we are particularly proud of, given the challenges of the COVID operating environment. With respect to in-person dining, our top priority is to provide a safe, comfortable experience for our guests and our staff members. We continue to receive positive guest feedback on our safety efforts, as well as the other core attributes that contribute to The Cheesecake Factory experience. We are continually evolving our practices to remain at the forefront of sanitation and safety. To that end, we are working to install an additional air filtration system in all Cheesecake Factory restaurants by the end of the month. While we believe we have always had best-in-class heating, ventilation, and air cooling systems, this new system uses bipolar ionization to actively clean the air, helping to kill bacteria and viruses while reducing allergens and other airborne particles. Third-party testing shows that it can effectively reduce pathogens, including the coronavirus strain that causes COVID-19. We have updated all of our guest-facing health and safety materials in our restaurants to inform guests about this incremental safety measure. We are also encouraging all of our staff to get vaccinated when the vaccine is available to them, providing hourly staff with paid time off for each vaccine appointment. For those guests who want or need the convenience of an off-premise occasion, our offering continues to meet their needs. During the fourth quarter, we continued to see significant pent-up demand in our restaurants with reopened dining rooms and remarkable sales volumes at our off-premise-only locations. In fact, during the last week of December, we had a handful of The Cheesecake Factory locations with capacity-constrained indoor dining that did over $300,000 in sales, and a number of off-premise-only locations that generated $170,000 in sales. Weekly sales at our off-premise-only restaurants equated to nearly $5 million on average per unit on an annualized basis during the fourth quarter, as our guests wanted to enjoy The Cheesecake Factory experience regardless of the restrictions the pandemic presented. In addition, locations with reopened dining rooms maintained approximately 90% of their elevated COVID off-premise sales. This equated to approximately $3.6 million on average per unit on an annualized basis, based on average weekly off-premise sales during the fourth quarter. We believe the magnitude of these sales volumes underscores the tremendous brand affinity for The Cheesecake Factory, and that we are well positioned to recapture pre-COVID sales levels as dining restrictions ease. In addition, we continue to believe that a meaningful increase in off-premise sales could be a longer-term sales driver for The Cheesecake Factory as we emerge from the pandemic. The breadth of our menu, our value proposition, and our food quality, coupled with creative marketing campaigns, continue to differentiate us in the off-premise channel, driving both new guests to the brand as well as increased order frequency. We have continued to produce effective on-brand marketing campaigns to raise awareness in the off-premise channel and drive sales. Our second run of our $15 lunch special, which included a slice of our legendary cheesecake, again saw great guest response and drove higher incremental sales attachment compared to the September campaign. This campaign increased awareness of our lunch offering, and again, drove sales to the late afternoon shoulder period. Our January Ditch Your New Year's Resolution campaign was extremely successful as well, driving our highest week of delivery sales ever and our highest week of sales through our online ordering platform since Mother's Day. We've continued our marketing momentum into February with our Random Acts of Kindness gift card and delivery offer that are running this week. Our continued strength in the off-premise channel, coupled with some easing of dining restrictions, has supported an improvement in our sales trends, with fiscal 2021 first quarter to date through February 16th, comparable sales at The Cheesecake Factory restaurants in aggregate across operating models down 18%. Note, these quarter to date sales results reflect a nearly 2% impact from lapping of full capacity holidays last year, including this past Valentine's Day and President's Day weekend, as well as restaurant closures associated with the winter storms this week. For The Cheesecake Factory restaurants with reopened indoor dining rooms, fiscal 2021 first quarter to date through February 16th, comparable sales are down approximately 9%, which equates to approximately $10 million on average per unit on an annualized basis, based on average weekly sales quarter to date. Notably, this sales volume level exceeds what we saw in October. This is supported by approximately 40% off-premise sales mix, which on a dollar basis exceeds prior peak off-premise sales volumes seen earlier in the COVID-19 pandemic. Currently, 166 The Cheesecake Factory locations have indoor dining rooms open. On average, these locations are operating at 50% capacity. The Cheesecake Factory restaurants operating with patios only have done fiscal 2021 first quarter to date through February 16th sales volumes of over 90% on average of The Cheesecake Factory restaurants offering in-person dining. Weekly off-premise sales for these locations equates to approximately $9.1 million on average per unit on an annualized basis, and that's during the middle of winter. We also saw sales levels at The Cheesecake Factory restaurants that have been operating an off-premise only model accelerate with fiscal 2021 first quarter weekly off-premise sales equating to nearly $6 million on average per unit on an annualized basis. Currently, 18 North Italia locations have indoor dining rooms open and five are open for outdoor dining. For fiscal 2021, first quarter to date through February 16th, comp store sales are down approximately 21%, supported by nearly 35% off-premise sales mix. Aggregate sales performance at North Italia has been disproportionately impacted by dining restrictions in a number of its higher volume markets, given the concept's smaller restaurant pace. Currently, 46 FRC locations have indoor dining rooms open, four are open for outdoor dining, one is operating off-premise only, and two locations remain closed. In December, FRC successfully launched a new online ordering platform that offers seamless ordering for guests across their full service brands from a single web location, while Flower Child continues to maintain its separate platform. The performance of North Italia and the FRC concepts during this pandemic has further reinforced our confidence in the strength of these brands and our excitement for their long-term growth potential. 2020 was an incredibly challenging year, and COVID-related uncertainty remains in the near future. We believe with the strength of our brands, best in class operators, and the breadth of high quality growth vehicles, our long-term outlook is bright. We owe a debt of gratitude to our staff members across our restaurants and bakeries, at the corporate support center in California, and The Big Kitchen at FRC, for delivering delicious, memorable experiences for our guests and solid performance despite the challenges we have all faced. With that, I'll now turn the call over to Matt for our financial review. Thank you, David. Fourth quarter comparable sales at The Cheesecake Factory restaurants declined 19.5%. As David mentioned, October comp store sales were down just high single digits, but decelerated to down 32% in December, given the additional COVID restrictions in many of our markets, and the anticipated impact of capacity restrictions on the busy holiday weeks. Off-premise represented approximately 43% of total Cheesecake Factory restaurant sales during the fourth quarter. Revenue contribution from North Italia and FRC totaled $75 million. North Italia comparable sales declined 18%. Sales per operating week at FRC, including Flower Child, were approximately $67,850. Including $20.3 million in external bakery sales, total revenues were $554.6 million during the fourth quarter of fiscal 2020. I will still provide the usual line item detail. Cost of sales increased 10 basis points, primarily reflecting a shift in sales mix with relatively higher year-over-year third party bakery sales. Labor increased 310 basis points, primarily attributable to the cost of maintaining our full restaurant management team in the reduced sales environment and higher group medical costs. Other operating expenses increased to 30.2% of sales, due primarily to sales deleverage, increased marketing, and costs such as additional cleaning and PPE associated with COVID. Our operators managed the business as well as we could have expected during the fourth quarter, in light of the abrupt changes in dining restrictions, with The Cheesecake Factory restaurants flow through within our expectations at approximately 40% year-over-year, inclusive of COVID related costs and restaurant level management deleverage. G&A increased 50 basis points, also reflecting sales deleverage, partially offset by a lower corporate bonus accrual. Pre-opening costs were $2.8 million in the quarter compared to $6.3 million in the prior year period. One The Cheesecake Factory and two FRC locations opened during the fourth quarter versus three The Cheesecake Factory, one North Italia, and two Flower Child locations that opened in the prior year period. In the fourth quarter, we recorded a $14.6 million impairment charge, primarily comprised of non-cash charges for two Grand Lux Cafe locations where the leases are expected to terminate in the next year. We recorded approximately $5.4 million of COVID related expenses in the fourth quarter for costs such as sick pay, healthcare, and meal benefits for furloughed staff members, additional sanitation and personal protective equipment. Approximately 2/3 of these costs were in the other operating expense line as I referenced, with about the remaining 1/3 in labor. A specific breakdown between line items can be found in the related footnote in our earnings release issued this afternoon. GAAP diluted net loss per share was $0.85, reflecting the potential impact of the conversion of the company's convertible preferred stock into common stock, and excluding the COVID-19 related costs, impairment charge, as well as other items, including a half million dollars in acquisition related costs and contingent consideration. Adjusted net loss per share for the fourth quarter of 2020 was $0.32. Now turning to our balance sheet and cash flow. We ended the year with total available liquidity of approximately $250 million, including a cash balance of approximately $154 million and $97 million available on a revolving credit facility. Total debt outstanding was $280 million. The company generated approximately $36 million of cash flow from operating activities during the fourth quarter. CapEx totaled $12.1 million during the fourth quarter for required maintenance and new unit development. We made a $17.25 million deferred acquisition consideration payment to FRC during the quarter. A $5 million dividend for the fourth quarter of fiscal 2020 was paid in kind to holders of the company's convertible preferred stock. While we will not be providing guidance, given that the operating environment continues to be very dynamic, we want to provide some thoughts on our expectations for 2021. At present, we continue to expect commodity inflation of approximately 2%. Based on current governmental roadmaps for minimum wage, we continue to expect wage rate inflation to be more favorable in 2021 versus recent years. For modeling purposes, we're using a normalized tax rate of approximately 10%. While we still expect some deleverage in the near term, given the continued COVID pressures, specifically in labor, as we continue to think long term with respect to maintaining our restaurant management teams, as well as in the other operating expense line, we would expect the deleverage to ease as sales continue to recover, enabling us to continue to work toward recapturing our pre-COVID margins. With respect to development, we believe we could open as many as 12 to 15 new restaurants this year based on our current pipeline of sites spread across our portfolio of concepts, including as many as two to three Cheesecake Factory restaurants, six North Italia, and four to six FRC restaurants, including one to two Flower Child locations. As a reminder, for North Italia, we target an average unit size of 5,000 sq ft-6,500 sq ft and average sales per mature location of approximately $7 million or approximately $1,200 per interior square foot. FRC unit sizes range from approximately 3,500 sq ft-15,000 sq ft, and the FRC restaurants target sales of approximately $1,000 per interior square foot on average. For modeling purposes, based on the FRC pipeline for 2021, we would expect an average unit size of approximately 5,500 sq ft. We would anticipate approximately $100 million-$105 million in CapEx to support this level of unit development, as well as required maintenance on our restaurants. We will continue to refine these assumptions as more clarity on the operating environment emerges. In closing, while COVID related dining restrictions impacted our sales performance at the end of the year, I am very pleased with how our teams pivoted and protected margins and cash flow. We have had a solid start to 2021 and are very encouraged by our first quarter to date sales performance at The Cheesecake Factory restaurants, given the continued capacity restrictions. We believe that our concepts are well positioned for a recovery as vaccination continues, dining restrictions ease, and we head into spring. With the strength of our balance sheet and operations team, we believe we will be able to further accelerate growth to our targeted 7% level and take market share. With that said, we'll take your questions. In order to accommodate as many questions as possible, please limit yourself to one question and then queue with any additional questions. Operator? As a reminder, to ask a question, you'll need to press star one on your telephone. Your first question comes from the line of Sharon Zackfia from William Blair. Your line is open. Hey, good afternoon. Thanks for all of the detail. I guess I have a question of two parts, but they're related. You mentioned that 24 locations, I think, had positive comps in the fourth quarter. I'm just wondering if there's any commonality between those locations other than the fact that I assume they all had on-premises dining. The street's sitting at positive comps for the first quarter. You've got a bit of a hole to dig out of from January, just given how restrictions were kind of evolving throughout that month. I mean, how do you feel about your line of sight to regaining positive comps? Hey, Sharon. It's Matt. How are you? Thanks for the questions. I think, on the first one, you probably nailed it. The commonality is that there was mostly on-premise indoor dining available. Certainly we've seen some pretty good trends throughout the country where that's available. It wasn't like it was predisposed to a certain geography. I think the second question is an important one, and certainly I think for our company, maybe compared to some others with the exposure to California and the West Coast, where the restrictions really weren't lifted, even for patio dining to return until the end of January. Certainly with those sorts of restrictions still in place for a third to half of the quarter, depending on if and when California has any in-dining room availability again, it would be hard to post a positive comp. I think that being said, it feels like things are sort of bookending the quarter from the beginning of the fourth quarter to now. I would just point to in October that The Cheesecake Factory was a - 8%, and that was with less than 50% available on-premise dining. We're starting to get basically back to that place. There's a lot of noise still with the weather and the holidays. Just looking at yesterday's comp, we were pretty much in line with that, right, if you take out the closures in Texas. It feels like we've gotten full circle, and it should continue to improve as the capacity continues to get better. Certainly, we are very encouraged by having the 40% off-premise maintained. You've got to believe that as long as we keep some of that between where we were and where we are now, and the capacity returns, that we're going to be in a really good position for sales once that happens. We can't really predict too much going forward because the capacity is controlled by the government, if that makes sense. Yeah. Thank you. Your next question comes from the line of Brian Mullan from Deutsche Bank. Your line is open. Hey. Thank you. A question on off-premise. It looks like your average weekly sales in the off-premise business were about flat sequentially, despite another increase sequentially in your dining sales. Pretty impressive. I know you touched on this a bit in your prepared remarks. Could you just elaborate on maybe why you think that is, why the retention is better than peers? Is there something particularly unique about the brand or the strategies you're employing in this business? Then maybe any updated thoughts on what you think retention could look like here post-COVID once the dining rooms come all the way back. Sure. Thanks, Brian. This is David Gordon. Cheesecake Factory, number one, is known for our menu. The breadth of menu items available for a guest, along with the value of price points and the range of price points, makes it pretty compelling for an off-premise occasion. As a family, you certainly can order easily one, two, or three times a week if you wanted to, much less a month, and have varied options at varied price points. I'd say number one, the quality of our product and the menu has always been a differentiator, and it continues to be in the off-premise. Of course, the cheesecakes are a big part of that as well. A portion of the marketing that we've done throughout COVID, and certainly in the fourth quarter and moving into the first quarter of this year, have seen some successful campaigns around the cheesecake. We also see that we have a certain percentage of new guests that are ordering off-premise and/or delivery for the first time from DoorDash, and increased take rates over the quarter. We think the offering is the number one reason. I would also give credit to our ops team for continuing to do a good job in execution. If you're going to do continued strong sales in off-premise, you can't disappoint guests. You have to get it right the first time. I think our teams have continued to do an excellent job there in some really challenging environments. As we've seen increased guest satisfaction scores for off-premise, that also is a reason why a guest would come back and order again. We feel that a good portion of what we've seen is going to continue to remain. I think in some of the opening comments that 90% of the off-premise growth, we still see that in the restaurants that are at 50% indoor dining capacity. There's no reason for us to believe that we wouldn't continue to see that to some extent, at least the majority of it, when dining rooms reopen at even greater capacity. Thank you. Your next question comes from the line of David Tarantino from Baird. Your line is open. Hi, good afternoon. David, I wanted to follow up on that very last question and perhaps get your thoughts on the durability of this off-premise channel. It seems like a lot of the casual dining industry is seeing elevated off-premise sales. Most are saying they think it will stick post the pandemic. I guess, what's your consumer feedback or data saying related to the behavioral aspect of that? I guess it seems like it's optimistic to think a lot of these sales will stick when dining room traffic returns. Is it a different occasion, or is it replacing something else that's very clear according to your database, I guess? What are your thoughts on the broader macro trend for the industry related to this? Well, to some extent, people that weren't perhaps exposed to an off-premise dining occasion before have been forced to be exposed. I think some of that behavior is going to stay. I use my parents always as an example. They never ordered to-go food, ever, before the pandemic, and now they order it all the time and find it convenient and useful. Along with continuing to go out to eat, I think they're going to be more inclined to continue to order to go once things get back to "normal." When we look at our own restaurants today, the ones that are even at a 75% capacity and may be on a short wait at times throughout the week, those restaurants are maintaining that off-premise. People are still going to continue to be pressed for time. They're still going to be looking for convenience. A lot of the technology that has enabled off-premise to be executed in a much more seamless way for guests, I think, is what's changing a lot of that behavior and will continue to be changing that behavior. People will continue to be pressed for time. They're going to have still two people working in a household. Some of those behaviors they've learned, I don't see any reason why they won't stick. I think that those brands that, as I said earlier, execute well and have a great offering will be the ones where perhaps an additional occasion, along with coming to dine in, an additional occasion at home will continue to be par for the course. I think just from a pure data perspective, David, this is Matt. There is also some support for that, right? If you look at our ability to specifically target day parts like lunch, I think it's very impressive that our overall off-premise sales are similar to what our historical on-premise sales are by day part. We wouldn't have thought that, right? You're thinking in casual dining, it's going to be much more at the dinner hour. By doing activities that actually bring awareness to how great a Cheesecake Factory burger is, people realize that the value premise there costs the same as if you go to a fast casual, right? I think, and you've got a lot more choices. We also see that, for example, the average delivery guest, their order rate in the quarter is twice what our historical average on-premise guest was coming in for, right? The stickiness there is also clear. Two times the level is pretty strong. I think that we are seeing data points. Again, not saying that we keep all of it, but that there's definitely a stickiness to a good percentage of it. Yeah. That's helpful. One more quick one on this subject. The consumer feedback or guest scores or in particular the value scores, is there a difference between your on-premise scores and your off-premise scores? If so, what's that difference? Well, we actually get a lot more feedback in our off-premise channel because of the amount of surveys that we're able to give out, and the response to those surveys is much greater. They're relatively similar, and the value question is relatively similar. There's not great disparity. As I said earlier, we've seen the improvement in the NPS score for off-premise grow over time. We added an NPS survey to our online ordering platform and have slowly seen that number increase over time. They're not that different from each other. We just have a much higher volume of actual surveys on the off-premise channel. Great. Makes sense. Thank you very much. Your next question comes from the line of Jon Tower from Wells Fargo. Your line is open. Great. Thank you for taking the questions. Just a few from me. First, Matt, when you talk about the returning to pre-crisis levels of store margins, can you kind of help pinpoint exactly what that's referring to? Are you talking about aggregate, or are you talking about Cheesecake Factory specifically? It's hard to tell based upon the acquisition what the number might be there. I have a couple follow-ups. Yeah, Jon, that's a fair question. I would say it kind of comes back to both, interestingly enough. We would kind of look at 2019, and we would target The Cheesecake Factory four-wall margins being the equivalent on equivalent sales volumes. Roughly, North Italia and FRC would be very similar in margin structure when the growth rate is kind of moderated because they were in hypergrowth. From an aggregate number, it would look very similar also. It's kind of the same answer but for different reasons. I think if you look at the flow-through for the fourth quarter, The Cheesecake Factory was approximately 40% at the four-wall margin. The total company was approximately 40% if you back out things like impairments and if you really look sort of just at the pure margin. That sort of bears out what we're talking about. Keep in mind that that flow-through included the COVID costs and keeping our full management teams. We ought to be able to flex back up better than that because we would assume that we already have the management teams and some of the COVID expenses go away. I think just mathematically, you can get back to equal or better margins if you get back to the same sales level. Great. Just to clarify, and ensure we're on the same page, the 15.7 or so that was reported in 2019, is that the reference point that we should be thinking about? Yeah. Yep. Okay. On top of that, just in terms of thinking about the marketing, it seems like that's changed quite a bit, relative to where you've been pre-crisis. I think pre-crisis level of spend was about under 30 basis points of sales, marketing was. I'm just kind of curious, where are you thinking that can go over time? I know your presence on social media has certainly stepped up, and it's part of the reason why the off-premise business has grown so well during the crisis. Where can that move to over time? Well, I don't think it's going to be as significant like some of our peers, 3% of sales or that. We still look at it on a value add basis, and we run ROIs to make sure that any of the promotions we're doing or things like that are going to drive incrementality. I don't think that we want to be in that sort of promotional game forever, because it isn't how the brand grew, but this environment is appropriate for it. We'll have to see. I think if you, again, go back to kind of pre-COVID levels, maybe it goes a little bit up from there, but not meaningfully. Okay, just lastly for me, in terms of hitting that 7% unit growth rate, I think 2021, you're targeting roughly about 5% or so year-over-year growth. How should we think about that ramping to 7% over time? Is this going to be a 2024-2025 type of level or maybe even sooner than that? Well, I think we're going to look at the operating environment. If the capacity restrictions are essentially lifted by the middle of this year because of vaccination, whatever all those drivers are, we're looking at sites right now to get there for 2022. We want to be prepared- Okay. ...to get there in 2022. We'll probably wait to pull the trigger 100% until we see that, but we'll be ready to do it if the environment is appropriate. Thank you. Your next question comes from the line of John Glass from Morgan Stanley. Your line is open. Thank you very much. Sorry about the one more question on the off-premise business. What are the restrictions from a capacity standpoint, right? It's easy to say, well, you could add 30% or 40% of volume just based on your experience. Your high volume restaurants, maybe what is the upside capacity for your kitchens? Are there things you're doing to relieve that pressure, either technology or cooking equipment? How do you think about how your ability to handle that incremental layer of sales given a full recovery of the dining rooms? Thanks, John. This is David. I think as you know, with the breadth of the menu, our kitchens are already very large and able to handle a pretty high capacity. Some of the things that we're going to continue to put in place may be a throttling mechanism to ensure that at the busiest time on a Saturday night in our busiest restaurants, that we can manage the amount of throughput that's coming in through our online ordering channel if we needed to. As of now, we're able to handle that capacity, and as I said earlier, the restaurants that are even at 75% of indoor dining and maybe have a few extended patios, are able to handle the impact of the majority of the off-premise. I don't really think that there's any inhibitor to us getting to what we stated earlier as the majority of those sales staying. The design of the restaurants, our ability to have the bakeries set up where they are with two cash registers to allow for ease of ordering and ease for pickup for guests. We haven't had to do much when it comes to changing the design of the restaurants to be able to meet the demand. If we need to, we needed to add any capacity in any way or move something from one station to another, we've been doing that for over 40 years as we change the menu on an ongoing basis, and we can continue to evolve in that way too. Our operators are able to handle just about anything that are thrown at them. I wouldn't anticipate that the capacity is going to be a restriction on keeping those sales. John, this is Matt, just to add again to some data to that. If you go back historically, kind of pre-recession, and sort of what's happened in casual dining, just from a traffic perspective, we probably could handle 15% more compared to where we were back then, plus pricing. Right? If we get to those levels, it'll be a really good problem to have, and David and the team will figure it out. Got it. Thank you. Your next question comes from the line of Jeff Farmer from Gordon Haskett. Your line is open. Thank you. Just a quick follow-up to some of the earlier questions on the margin front. Can you provide an update on the relative margins across really all three ways you're selling food, so on-premise, the curbside to go, and delivery sales, so margins across those three and any efforts to narrow the gap, that would be helpful. Hey, Jeff, it's Matt. In a normalized world, right, if you think about where we're trying to get to margin wise, they're really very, very close. We've done a lot of things overall to support that. If you think about the specific drivers, there's no difference really from the last time, I think, in that the delivery is probably 1%-2% dilutive. The online ordering or call-in is probably 1%-2% accretive, and both of those are to on-premise. Net-net, the way it sits today because roughly 60% to 2/3, depending on the period, are the online ordering and call-in versus delivery. It's a net slight positive, but it's pretty much a wash. That's the way we like it, really. We're thinking about it so that it's agnostic. We can drive the business is how we want to do it. Thank you. Your next question comes from the line of John Ivankoe from JP Morgan. Your line is open. Hi. First, a follow-up, and then, I guess, another question. First, you did mention overall breadth of the menu. I think we would all agree with that as one of the key reasons to why your off-premise business has been so successful. Even with that having been said, is there any change in terms of how the consumer is using the menu or certain items measuring very high in preference that might suggest that you have an opportunity to scale back some of the menu, whether just in terms of consistency or simplicity, cost or speed? Then I have a follow-up as well. Hi, John. Thanks for the question. It's been an ongoing question for years, even before COVID-19. I think we see the ordering patterns continue. Favorites will always be favorites, the no veto vote is really, I think, what's continuing to help us grow these sales, is that there's so many choices, so many options, and I appreciate the desire for simplicity. Certainly, our operators would have the desire for simplicity. It's our differentiator, and will continue to be. We came out with a Timeless Classics menu at the end of last year, and they're just about now completing two more weeks of the new menu rollout that's happening currently. I wouldn't anticipate that we're going to be looking to shrink the size of the menu for any short-term gain. We're here for the long run, and we'll continue to leverage the menu as a great marketing tool and the ability for guests to be able to get whatever they want. Understood. Thank you. Secondly, I guess the original question. In terms of the competition that you have in your specific trade areas, what type of a change have you seen, whether in the malls or lifestyle centers or in a very near-in radius to your existing stores, what kind of change have you seen? Certainly, we can see national and state-level data, at least somewhat see state-level data. What type of a change of effect of competition do you see as coming out, post-COVID, at least on a near and medium-term basis? Well, I think to your point, the national numbers obviously are out there. I think when we talk to our operators and the boots on the ground, at least 70% of our locations have a few, I would say, restaurants nearby or near them within a close proximity that have closed and haven't reopened. Whether or not those spaces are reopened at some point with the previous tenant or more likely will then be re-leased here sometime in the next 12 months, I would anticipate that there's still going to be money coming into the market for restaurants to continue to grow post-COVID. Currently, it's probably a few restaurants in each market. Some of those could be a fast casual to a full-service restaurant. That's what we see probably in the majority of those geographies. Thank you. Your next question comes from the line of Jeffrey Bernstein from Barclays. Your line is open. Great. Thank you very much. One follow-up and then a question. Just following up on the margin commentary. Appreciate your ultimate objective to get back to former levels, but maybe if you can give any kind of directional thoughts as we think about 2021, whether it's some sort of sensitivity or directional guidance. I guess we're already halfway through the first quarter. Any kind of color when you're running comps down the 9% you mentioned or anything along those lines, any sensitivity you can share as we look through 2021? I had one follow-up. Hey, Jeff, it's Matt. I think I would use, for, I think, modeling purposes, the year-over-year flow-through on the sales that we saw in the fourth quarter. I would use the equivalent metric on the upside. I think we're all looking to try to figure out what the sales environment is. Once you come up with your best estimate there, I would use that flow-through metric for each of the subsequent quarters. I think you could go back to a 2019 version of that to get better comparability, probably. Okay. My question is just on the labor outlook. I think you reiterated that you expect inflation to be perhaps a little bit less onerous than you had seen in the past few years, which I know had been in the mid-single digit range. Just wondering if you could talk a little bit about maybe the opposing forces. Obviously, you have national minimum wage going up, but at the same time, you have unemployment higher, which would imply perhaps maybe a little bit more available labor. Just wondering your outlook on the labor cost and availability you're seeing, whether you have the ability to offset some of those pressures with cost savings or pricing or any kind of color you can provide in terms of how you think about it from a minimum wage perspective, especially as you have such great color in California, where you're already dealing with these elevated wages. Thanks. Sure. Just to think about the math for a minute, and as we look at while you do have some minimum wage going up, and I don't remember the number of states, but it's usually between 20 and 30 states at this point in time. The levels that they're increasing off of the current base is just a smaller percent, right? California taking a dollar at this point is 6%, and two years ago, taking a dollar was 8%. Just mathematically, those increases as a percentage keep getting less, and more of them are being tied to m ore of a cost of living adjustment, which has been relatively low too, right? I think that that's helpful. Mathematically, that piece of it just is weighted down somewhere in the 1%-1.5% less than it was previously. We have been running, just for context, 5.5% to sometimes 6%, sometimes 5%, but somewhere in that ballpark. I think that availability is a good question. I think partly it's going to depend upon people coming back to the workforce. The unemployment rate is relatively high, but you have a lot of people that have exited, too. I think it's key to be an employer of choice and to do things for your staff. Sort of like what David Gordon was talking about in terms of putting in new air filtration systems, things like that, where we pay for staff benefits when they're on off-premise only. I think those are important because wages are one piece, but making sure you're fully staffed with a great operations team is probably equally important, and that's not going to get necessarily easier. Even if it appears sort of from a top line that unemployment is higher, we think it's still going to be a very critical component. Do you ever share ranges of price points? I know you have different tiering structures, presumably in your highest wage or highest cost state versus lowest. Do you give kind of a range of standard products, kind of what your different pricing structure might be? We haven't to date. It's not still worked out there, but it's public information. We pull probably two dozen of our competitors nationally, and we're just able to get that and see it, but we haven't published it just because it can be a little bit of a moving target every six months, and so we don't want to have stale data out there. Thank you. Your next question comes from the line of Gregory Francfort from Bank of America. Your line is open. Hey, thanks for the question. Clarification on the question. On the guidance for the full margin recovery at 90%-100% AUV, is that still the right way to think about it? My question is, you guys have operated in California and have a bigger portion of your stores in California than the rest of the industry for a long time. Can you maybe talk about how you think a move in minimum wages to $15 will impact the restaurant industry and your business, and how you will operate through that kind of, I don't know if it's price elasticity, just your experience in California, what that tells us about how Cheesecake might handle that environment going forward? Thanks. Sure, Greg, this is Matt. I'll speak first to the margin question. As we noted, the 90% to 95% also depends on a lot of other things. Exactly how much the wage rate inflation goes up, what commodity inflation actually ends up being. I think it's going to be roughly in that ballpark. If you just do the reverse math again on our fourth quarter, I think gives that good illustration. We were at a 40% flow-through on the downside, inclusive of COVID-19 and the extra management, Brian, de-leveraged. We ought to be able to flex back up better than that. 40% would be our target, we would not have those other items. I think that somewhere in that range is still appropriate, and we'll just have to see where the other big drivers come in this year to know kind of where exactly that would be. I think on the second part on the minimum wage piece in California, it certainly changes the competitive environment. We have seen that most competitors, labor input is just a cost input, and you can try to put some technology around it to improve efficiencies, et cetera. At the end of the day, most competition prices for it, and I think that that's the necessity to maintain margin structures that are competitive and attractive for continued investment. That being said, I think it also does drive some competition out, and ultimately, the stronger survive and take market share because you see those that can't handle the increased pricing or the increased labor costs. I think some of those cities like San Francisco or Seattle, probably good examples of how that's actually happened, and people have decided not to compete there. You end up being able to take the pricing because there is less competition, I think is how it ends up. I would just add on that it goes back, also the breadth of the menu allows us to have a very wide range of price points. Even as we're taking more price maybe in California or in the state of Washington or in the city of San Francisco, you can still get great value across the menu, whether you want to spend $31 or you still want to spend $12.95 or $13.95, and get a hamburger or a sandwich or a salad. The breadth of the menu gives us a competitive advantage from a pricing perspective as well. Thank you. Your next question comes from the line of Brian Bittner from Oppenheimer & Co. Your line is open. Thanks. Good afternoon, guys. Again, just a question on the margins. In the reopened stores that are trending down 9% year to date, I guess basically you've recaptured 90%+ sales in that control group. I know it's such a short window, tons of noise with winter and rolling over the holidays, what are your learnings from the margin recapture so far year to date in those stores? Is it just kind of reconfirming everything you've said about the margin recapture path, what you've seen in those stores? Is it just kind of reconfirming what you said about the flow-through path as well? This is Matt. I would say yeah, I like the way you said that. I think it reconfirms and supports the assertions that we're making. The operators in the beginning of the pandemic on our teams came up with the way they were going to run each of the different business models. It is predicated on that flow through perspective. They've nailed it every time. I think we have pretty good measurement and controls. The sales environment just keeps changing because they change the capacity restrictions, et cetera. Nothing really has changed about our business model or those levers that would tell us anything different. Okay. Thank you. Your next question comes from the line of Jared Garber from Goldman Sachs. Your line is open. Hi. Thanks very much. Wanted to quickly clarify on the new air filtration systems that you guys said should be completed by the end of the month. Is that something that can help accelerate the reopening of dining rooms as you understand the laws or regulations that are being put out by the different states, or is that something that's just a longer term thought process around hopefully protecting your employees and guests going forward? Thanks, Jared. This is David G. Certainly it's number one to protect our guests now and going forward, and our staff now and going forward. There haven't been many jurisdictions that have any type of restrictions around air quality. There could be moving forward. I think in the city of Philadelphia, actually, they've just come out with some compliance regulations. This may help us if there is more compliance regulation around reopening dining rooms to greater capacity, only if you have certain standards of air filtration. As of now, that's in only one or two places that I know of. Thanks. That's helpful. Then one follow-up on the off-premise side of the business. Obviously, the stickiness there has been really impressive. Wondering how you guys are thinking about the physical asset base of these restaurants as dining rooms do reopen, and hopefully we all get back to going to restaurants. How you're thinking about managing the actual operational challenges of having people available for pickup, people waiting for delivery orders, plus what we all know after visiting your restaurants is sometimes some long wait times in the front of the restaurant. Just wondering how you're thinking about the actual physical asset as it relates to maintaining some of those higher level of off-premise sales when the world normalizes. Well, the good news is that the restaurants were already designed originally to be doing, if you go way back, 8%, 9%, 10% off-premise sales. As I had mentioned earlier, having a cashier already or two cashiers working in the bakery where we've always executed our to-go business has really helped us throughout the pandemic. We've also continued to leverage technology where we can. Things like texting a guest when their order is ready so they can wait in their car and not even have to come into the restaurant allows us to ease some of the pressure you might have in the physical building. Ensuring that DoorDash drivers are stationed in a particular part outside of the restaurant. The malls actually give us some good availability there for more places for people to wait that aren't necessarily inside the physical building. The good news is the size of our restaurants, I think already allows us to be able to execute the high off-premise we have today, and that will only continue. We'll look for other ways to leverage any technology that we can to make that execution even more seamless for the guest and not impact the in-restaurant dining experience in any negative way. This is Matt. In fact, we're already managing to accomplish that, as we pointed out, a few dozen locations that comped up in the fourth quarter, that they're already dealing with that situation. Right? It won't be anything new. I think the operations teams have done some learnings, have put in best practices, and we're executing those right now so that we're prepared for that volume. Great. Thanks for the color. Your next question comes from the line of Lauren Silberman from Credit Suisse. Your line is open. Hey, thanks. Another one related to off-premise. Obviously, you guys are doing exceptionally well. I believe off-premise sales volume is $5 million for restaurants operating off-premise only in the quarter. I think you said $6 million annualized quarter to date, meaningfully higher than AUVs of your peers. As you think about the future unit growth potential, would you explore smaller off-premise focused boxes that could expand the addressable market for the brands? How are you thinking about the opportunity for new formats? I'm not sure, Lauren, that that makes sense. Part of the beauty of the economic model is to capture on and off premise. There is a fixed component of a Cheesecake Factory because as we've noted, we have bigger kitchens. We don't really want to limit the offering because that's part of the magic. I think we'd have to look long and hard to see if it actually made sense. I think we'd rather we have a 6,000 sq ft location. I think we like that, and that can do the blend of business. I think that would be more interesting to us to find ways to get into more markets, maybe because the off-premise has become permanently elevated, but that we would still tend to want to have the full offering, the full kitchen, et cetera. Okay, that's really helpful. Then just a quick one on the labor. Would you be willing to give any color on your staffing levels in terms of what portion of hourly employees are tipped versus non-tipped as we think about potential labor reform? Yeah. Stacy, do you have that? It's about 30%, roughly. Okay. Thank you. Your next question comes from the line of Brian Vaccaro from Raymond James. Your line is open. Hi. Thanks, good evening. Just two quick ones for me. I think you said off-premise was 43% of sales in the quarter. What was the delivery mix embedded within that? It was about 40% of that 43, and then 30% online ordering and 30% phone or walk-in. All right, great. Matt, can you ballpark where you see G&A settling out in a post-COVID world? I know there's a lot of moving pieces layered in the acquisition, normal bonus, et cetera, could you help level set that for us? Okay. I'll use your word, Brian. It's a ballpark. That's a fair word. We believe that with normalized volumes, we can be slightly below 6.5%, which would be our objective is to be improving by a tenth a year. I think that we would be in that 6.4-ish, 6.3-ish range. It would normalize volumes. That's kind of our objective, if you think about that for the back half of the year. All right. I'll pass it along. Thank you. There are no further questions at this time. Ladies and gentlemen, this does conclude today's conference call. Thank you for participating. You may now disconnect.