Good afternoon. My name is Emma, and I will be your conference operator today. At this time, I would like to welcome everyone to The Cheesecake Factory second quarter 2022 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press the star one. Thank you. Etienne Marcus, Vice President of Finance and Investor Relations, you may begin your conference. Thank you. Good afternoon, and welcome to our second quarter fiscal 2022 earnings call. On the call with me today are David Overton, our Chairman and Chief Executive Officer, David Gordon, our President, and Matt 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, during this conference call, we will be presenting results on an adjusted basis, which exclude impairment of assets and lease terminations and acquisition-related contingent consideration, compensation, and amortization expense. 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 then review our second quarter results and provide a financial update. Following that, we'll open the call to questions. With that, I'll turn the call over to David Overton. Thank you, Etienne. We were pleased with our overall sales performance, with second quarter sales finishing within our expected range despite an increase in COVID-19 cases and consumer headwinds. Comparable sales at The Cheesecake Factory restaurants increased 4.7% in the second quarter of 2022 relative to the second quarter of 2021, and 13.1% versus the second quarter 2019, and once again outperformed the broader casual dining industry. Our restaurants remain extremely busy with annualized unit volumes at The Cheesecake Factory restaurants reaching 12.3 million for the quarter. These industry-leading volumes demonstrate that The Cheesecake Factory continues to be one of the most differentiated casual dining concepts. Our unwavering focus on menu innovation, service, hospitality, and operational excellence enables us to maintain broad demographic appeal and relevance. On Saturday, we're launching our newest flavor of cheesecake, Classic Basque Cheesecake, a unique crustless cheesecake with a burnt top and an ultra-creamy custard-like center. The Cheesecake Factory's version is a classic recipe covered with fresh berries and whipped cream. In addition, our new summer menu rollout began this week as we lean into one of our key competitive differentiators, our distinctive menu, to drive incremental sales. Turning to development, all of the sites we have been working on remain active in our pipeline. However, opening dates continue to be affected by supply chain challenges and permit approval delays. As such, we now expect to open as many as 15 new restaurants in fiscal year 2022, including four Cheesecake Factory restaurants, four North Italia's, and seven other FRC restaurants, including three Flower Child locations. We also currently expect one Cheesecake Factory restaurant to open internationally under a licensing agreement. Despite these timing challenges, which are out of our control, we remain on track to achieve our annual unit growth goal of 7% next year. As I stated on our last earnings call, I recognize that the environment is dynamic, and we continue to face substantial challenges marked by high commodity inflation, a tight labor market, and further supply chain disruptions. Despite these headwinds, we remain committed to protecting our four-wall margins over time, and we will adjust pricing to support this objective. To that point, we are in the process of implementing a 4.25 price increase with our summer menu change, and we will continue to closely monitor the inflationary environment to determine what level of additional pricing may be needed. With that, I'll turn the call over to David Gordon. Thank you, David. Our solid sales results for the quarter highlights our best-in-class operators' proven capability to execute effectively and to capture incremental sales. Operationally, our teams manage their restaurants well, exceeding our expectations across key performance indicators, including food efficiency and labor productivity. Our ability to adequately staff restaurants has been imperative to our operational execution and to capturing those incremental sales. While we continue to encounter some pockets of staffing challenges, our overall staffing levels continue to improve throughout the quarter. Specifically, June hourly applicant flow increased to record levels, well above pre-pandemic totals, contributing to the highest number of hourly new hires in any single month so far this year. Combined with improvement in our industry-leading retention, we now have 3% higher hourly staffing than pre-pandemic levels. As of July, hourly staffing needs are at record lows. We believe our staffing success is a key contributor to the sequential improvement of our dine-in guest satisfaction scores. Industry research continues to confirm the importance of service to the guest experience and overall restaurant performance. The Cheesecake Factory off-premise channel trend remains solid, with second quarter sales accounting for 25% of total sales, and the annualized second quarter average weekly sales for this channel continued to trend close to twice the 2019 annual levels. Now turning to North Italia. Second quarter comparable sales grew 12% versus 2021, and 22% versus 2019, with improvements in all day parts and all geographies. Annualized unit volumes for North Italia mature locations averaged over $9 million for the quarter. Despite the impact of high inflation, the second quarter four-wall margin improved to 16.4% for the adjusted mature locations. For the total brand, four-wall margin is near 13%, as we made progress towards our goal as our pricing strategy is effectively one quarter ahead of the Cheesecake Factory's. FRC drove similarly strong top line and profitability performance during the second quarter. Additionally, two weeks ago, FRC opened the first brick-and-mortar location of Fly Bye, their newest fast casual dining concept offering Detroit-style pizza and crispy chicken. Fly Bye started as a pop-up ghost kitchen inside one of the existing FRC Culinary Dropout locations during the early stages of the pandemic. Sales for the first two weeks are exceeding our expectations, and FRC is planning to open one more Fly Bye later this year. Both locations that are currently open are in the Phoenix market. We continue to believe differentiated concepts and emerging brands FRC develops will drive meaningful growth moving forward. With that, I will now turn the call over to Matt for our financial review. Thank you, David. During the second quarter, along with the broader restaurant industry, we faced substantially higher inflationary headwinds than we had initially anticipated. Specifically, commodity inflation was 200 basis points higher, primarily driven by spot pricing in the dairy and produce categories. In addition, hourly wage inflation, utilities, and restaurant repairs and maintenance were higher than expected. These combined costs totaled approximately $13 million, or $0.24 of EPS in the quarter, and account for the majority of the variance to expectations. Turning to some specific details around the quarter. Second quarter comparable sales at The Cheesecake Factory restaurants increased 4.7% year-over-year. Revenue contribution from North Italia and FRC totaled $146.5 million. North Italia comparable sales increased 12% year-over-year. Sales per operating week at FRC, including Flower Child, were approximately $116,000. Including $14.2 million in external bakery sales, total revenues were $832.6 million during the second quarter of fiscal 2022. Now, moving to expenses. Cost of sales increased by 250 basis points, primarily driven by significantly higher commodity inflation than menu pricing. Labor increased 90 basis points, predominantly driven by higher wages compared to the prior year period. Other operating expenses increased 40 basis points, primarily driven by higher utility costs, which are mostly inflation-related and lapping lower general insurance claim activity. G&A, as a percentage of sales, declined 30 basis points, primarily due to a lower bonus accrual. Pre-opening costs were $2.9 million in the quarter, compared to $2.8 million in the prior year period. We opened two restaurants during the second quarter versus three openings in the second quarter of last year. Finally, in the second quarter, we reported an after-tax $0.8 million charge, primarily associated with FRC acquisition-related items. Second quarter GAAP diluted net income per common share was $0.50. Adjusted net income per share was $0.52. Now turning to our cash flow and balance sheet. The company generated approximately $54 million of cash flow from operating activities during the second quarter. With ending total available liquidity of approximately $433 million, including a cash balance of about $195 million and over $238 million available on our revolving credit facility. Total debt outstanding remained at $475 million. CapEx totaled approximately $17 million during the second quarter for new unit development and maintenance. We completed approximately $11 million in share repurchases and returned just over $14 million to shareholders via our dividend during the quarter. While we will not be providing specific comparable sales and earnings guidance, given the operating environment continues to be very dynamic, we will provide our updated thoughts on our underlying assumptions for the balance of 2022, including some timing nuances similar to last quarter. Based on our second quarter performance, more recent trends, and including the impact the latest COVID-19 virus resurgence is having, we continue to anticipate total revenues for the year to be between approximately $3.32 billion-$3.37 billion, with Cheesecake Factory AUVs reaching $12 million. As a reminder, this includes the impact of the 53rd operating week in fiscal 2022. Taking a similar approach for the third quarter, we would anticipate total revenue to be between $785 million and $805 million. Next, for the year, we now expect commodity inflation of about 14%-15% on an annual basis, which represents approximately a 200-300 basis point increase over our prior outlook and is directionally in line with headline CPI increases we observed during the quarter. We are now modeling year-over-year commodities pressure to be around 1% higher than the annual average in the third quarter and around 1% lower than the annual average for the fourth quarter. The labor market also continues to be dynamic with many complex moving parts. Inclusive of known minimum wage increases, we are modeling net total labor inflation of about 5% for the back half when factoring latest trends in wage rates, channel mix, as well as other components of labor. Given the inflationary outlook for energy and services, we now expect other operating expenses to be in the low to mid-26% range for the third quarter. With the full benefit of pricing, we still anticipate ending the year at approximately 25% of sales in the fourth quarter. As David mentioned, we remain committed to protecting our longer-term four wall margins. However, there remains measurable risk associated with cost fluctuations driven by the current environment. Given the additional inflationary pressures we are experiencing, we are in the process of implementing about a 4.25% menu price increase, which as previously anticipated, is measurably above our current level and is supportive of our margin objectives. The additional menu price increase would put the year-over-year pricing close to 7.5% once fully deployed. Keep in mind, the third quarter will only receive about half of the benefit of the incremental price based on the timing of our menu rollout. We now anticipate G&A for Q3 to be around $52 million and approximately $55 million-$56 million for the fourth quarter, which as a reminder, includes an extra week this year. Our pre-opening assumption remains unchanged at $18 million for the year to support our development plans, with approximately $6 million in the third quarter and $7 million in the fourth quarter. Finally, we expect about $91 million in depreciation for the full year, and for modeling purposes, we're using a tax rate of 9%-10% for the balance of the year. With regard to development, we plan to open as many as 15 new restaurants this year, with three currently planned to open in the third quarter. We would now anticipate approximately $140 million in CapEx to support this level of unit development, as well as required maintenance on our restaurants. Note that this includes some CapEx for locations that have shifted into 2023. In addition, keep in mind that we have reinstated our stock buyback program and have declared two dividends. In closing, despite the many unprecedented challenges encountered during the first half of this year, we are still progressing towards our primary financial objectives for 2022. Specifically, we may be starting to see some early signs that inflation has peaked, including the lowest level of year-over-year wage inflation so far this year, and a commodities outlook in which we are more booked now about 75% for the back half, and that calls for approximately 250 basis points of declining inflation between now and the end of the year. If these trends continue, coupled with our higher menu pricing, we will still be on track to exit this year with four wall margins at 2019 levels. In addition, even including the impact on sales, the latest virus resurgence appears to be having, not dissimilar to the earlier Omicron and Delta waves. The midpoint of our total annual sales outlook has remained unchanged from the beginning of the year at approximately $3.35 billion. Thus, with the strength of our operations team, our brands, and our balance sheet, we believe we remain well positioned to take market share and grow shareholder value over time. With that said, operator, we'll now take questions. As a reminder, if you would like to ask a question, press star followed by the number one on your telephone keypad. Your first question today comes from the line of Nicole Miller Regan with Piper Sandler. Your line is now open. Good afternoon, and thank you so much for the update. Clearly a lot, you know, I guess we could call it outside of your control. Asking a question in the bucket of inside of your control, can you talk about development? I mean, I was revisiting some past recession periods and, you know, probably for different reasons at that time, it was Cheesecake growth, and it did slow. In this case now, you know, it's North Italia that's really the growth engine. You know, how do we think about, if things were to weaken what you want to do in terms of the growth opportunity in the short term there, please? Hi, Nicole. It's Matt. I'll just start kind of on a financial perspective. We have $195 million in the bank. We believe in the long term unit economics of these brands. We are building on the margin improvements in all of them. You know, we believe that we're going to move forward with all of our development goals at this point in time. We've purposely kept the balance sheet remarkably strong, and we really believe that if there is a downturn, it will be shorter and shallower and that there will be a lot of market opportunity to take, and then maybe that will be a good turning point. All of the sites that we have, we continue to move forward with. In aggregate, as we look across the next couple of years, I don't think I've seen a time where we had more sites in total that we were moving forward with. We really don't have any plans to pull back or see the need to do so at this point. Just, can you remind us of the cohort, I guess, by income, household income profile? I'm thinking specifically at Cheesecake, but if you have it for North Italia as well. Of course, you know, across all brands, we're trying to understand a lower income versus higher income user and then the frequency of those cohorts. Is there anything you could share on that, please? Sure, Nicole. It's It's Matt again. I think, you know, the first thing is we definitely skew higher income, higher education, higher tech savvy. You know, we're on average over $100,000 in income. You know, obviously, particularly for Cheesecake Factory, all of the locations are in the best neighborhoods in the entire country. And so, you know, we're surrounded by the best neighborhoods, as well as usually business foot traffic. I would say the same actually for North Italia and FRC. It shares a very similar cohort in that regard. You know, we do get some special occasion guests, but what we've seen historically is those guests still want to come in for an anniversary or birthday regardless, right? Because you still need to treat yourself even in a downtime. I think that, you know, we are in a good position. I just remind everybody, we still have tremendous value on The Cheesecake Factory menu, too. We have items ranging from $5 or $6 to $30, and the large portions make it incredibly shareable. People can navigate with our menu, I think, in a very different way. Certainly the last thing, because I think this question will come up, too, what we have seen historically, if there is a little bit of a dip, is remind people that our number one competitor are the white tablecloth independent mom and pops. I think, you know, we probably will be able to take some market share because we're keeping so much value and the prices that those, you know, groups have had to take in their menu is substantially more than what we're taking. If anything, we're in a better competitive spot than before. Thank you so much. Appreciate it. Your next question comes from the line of Sharon Zackfia with William Blair. Your line is now open. Hi, good afternoon. I guess just talking about the consumer demand perspective, I think you're the first call I've been on that's mentioned the new variant impacting sales. Can you kind of provide some color on what you're seeing there and if there's any regionality to that? Secondarily, within the quarter itself, it seems like you may have seen kind of a greater slowdown, if you will, towards the back half of the quarter than some of us had expected. Do you think you are starting to see some fallout from lower income consumers? Is there anything you can look at from an average check perspective to see if, you know, there's fewer appetizers or fewer beverages attached? I guess lastly, just to kind of round all of this out, what are your thoughts right now on kind of price elasticity of demand as you go into this next price round? Sure. Sharon, it's Matt. I think I took good enough notes to get to every point here. Sorry about that, Matt. No, no. I think they're all good questions, right? I think they're all very relevant and tied together. The first thing I would say is we went back and we looked at the last 16 months or so of sales, and there is a very high correlation that you can track to the movement of the virus. And when you see more cases, I mean, as I think it's been documented previously. You know, keep in mind, one, now cases are probably undercounted by a factor of 10 if you read any of the medical journals, because everybody's testing at home. When you see the cases move up, you see sales come down. Then when you see the cases go down, you see the sales go up probably higher than what is the sustainable level. We've seen this happen over time when it's like holidays get moved and, you know, people will go out on a holiday and then maybe they don't go out as much the next day or the next week. It's kind of the same phenomenon. We ran a regression against the trend by week over the last 16 months. What we see for our business is that we keep returning to 2019 plus pricing levels. Back when we had our last call, I think in April, we were running above that, and we said that. We said, "We don't anticipate that we can continue to run 3%-4% above that level because that's just not what the trends are pointing to." Then the same thing I think happens on the downside when we've. You know, in the first quarter in January, we ran, you know, measurably below where we ended up, but it rebounded as we went through the quarter and people were able to get back out. For example, in the second quarter in June, we pretty much ran at 2019 plus pricing. We were right on our plan, right? I think it's just a matter of comparison, you know, one of those periods to the other period where it might be hot or it might be not. You know, when we look at the trends, I think we're able to see those pockets that are moving up and down based on case counts, you know, whether it's in California and here in L.A. County, they're talking about going back on a mask mandate, if you can believe it. You know, we can see the sales performance both, you know, in the beginning when it starts to go down, but also when it starts to come back up. You know, when we see a recession, we see much more broad-based, but even sort of smaller declines. This has been much more regional pockets that kind of go up and down a little bit based on that. What we haven't seen is any trade down. The check average remains right on the year-over-year trend. The attachments are all right on. Desserts, you know, continue to be a big driver for us. I would imagine that would be true of our new cheesecake. I mean, I think that we feel like it reverts to the mean over time, depending on the scenario, and that's what we've seen happen at each of the last five quarters. I think with price elasticity, as I mentioned in the Nicole's question, you know, we have so much flexibility in the menu, that historically, we you know, we're able to capture our price and guests can decide how much they're going to spend and they can share. The other thing, importantly, we remain even as we move to the 7.5% pricing, that'll put us about 1.5% below the full service average in June, which I guarantee will go higher based on, you know, everybody needing to catch up a little bit more. I think competitively, we remain in a really good spot. Again, as I'll just reiterate, as we compete against the independents who likely have even more inflation because they don't have the scale of The Cheesecake Factory, I think we'll probably be even more competitive, and be able to to fully capture our pricing and keep those guest trends such that we see that 2019 plus pricing trend. Okay, thank you. Your next question comes from the line of Jared Garber with Goldman Sachs. Your line is now open. Thank you for taking the question. Matt, I was wondering if you could just help frame for us the components of the comp, just to make sure we have the price and the traffic mix, you know, understood, for The Cheesecake Factory. I know that the traffic and the mix components separately are driving a little bit different as the off-premise business normalizes. I was hoping you could give us a little bit more color there just so we can understand maybe if there is some, you know, declines in traffic. I wanted to follow up with some of the commentary from the last couple of quarters about a loyalty program or a CRM program that you guys have been working on and maybe where you are with that and how that might help stem you know potential future traffic losses in an environment where consumer spending is decelerating. Sure, Jared. This is Matt, and I'll answer the first part then hand it to David Gordon. It is a little bit of a funny math, as you pointed out with the whole to-go business and the way that we count it, as one guest per transaction versus in restaurant, it's butts in seats. That being said, for the quarter, Cheesecake Factory pricing was 4.8%, and then traffic was actually then reported as a +5.7%, and the mix is a -5.7%. They were direct wash out because essentially our comp was equal to the pricing. You know, I can tell you that we continue to get a little bit more on premise. I mean, actually it is true we have greater traffic in Q2 of this year than we did last year. You know, I think that continues to happen. I think also, you know, when we've looked at some of the research, there's a good percentage, maybe a third of our lapsed guests or more are still not even comfortable coming back in. When we look at that gap and, you know, we talked about that being around 90%-ish, give or take what point in time you're looking at it, of what the on-premise traffic recovery has been. If you look at the gap, it's really the lapsed guests that, you know, still may not be comfortable. Even as we've talked about the movement between on-premise and off-premise, so long as we track to that $12 million AUV, we're gonna be happy. We're agnostic and, you know, we just wanna give great guest experiences. Overall, we seem to still be tracking to the number that, you know, six months ago we laid out. Hi, Jared. This is David Gordon. Just on the rewards program, we launched our pilot in mid-June, so we're about 30 days into the pilot thus far in the Houston market, which is comprised of five restaurants. Our pilot objectives were really to measure our ability to train the program well, to make sure all of the technology was working effectively, that guests could redeem in the methodology that we want them to, have a great guest experience, and most importantly, understand the enthusiasm for the program. The good news there is that we have over 20,000 members just in that Houston market, which exceeds our own expectations. Our plan is to continue to measure the data and the ROI of the program throughout the remainder of this year. Whether we decide to do another small beta this year is still to be determined, but our plan would still be to move forward at some point next year with the full launch of the program if all continues to go well. Great. Thanks for the color. Your next question comes from the line of Brian Bittner with Oppenheimer. Your line is now open. Hey, good afternoon. Thanks for taking the question. Matt, I do just want to flesh out the trends that you're seeing, just given all the uncertainty we all have with where the consumer is headed and whether the consumer could or could not pull back. You know, since your disclosure on April trends, there was, you know, a pretty marked slowdown in comps, and your revenue came in at the very low end for 2Q of what you expected. Your third quarter revenue guide, I think, implies trends do continue to slow from the second quarter. You can confirm that if you'd like. The question is, are you saying that this is simply just a reversion to the mean and perhaps a return to normal seasonality as well maybe, and you just simply do not believe anything you're seeing in your business relates to more softness economically? Brian, it's Matt. You know, I mean, first of all, who knows what really. I mean, that's why you're asking the question. That's what, you know, everybody asks the trillion dollar question, you know, is what is the consumer going to do and how are they behaving. I don't know that it's any scarier out there today than it was in March when the war was announced or when gas prices reached the all-time high in April. I mean, you know, I mean, certainly those indicators have actually only gotten better over time. The job market remains two job openings for every one person looking. Anybody that wants to work can get a job. We're seeing that lower income cohort is coming back to work based on our. There's other ways that the money will potentially move around to support the economy. I think for us, a couple of things. We do believe that if you track over the last five quarters, that it reverts to the mean. I mean, there have been periods of time that are well documented that you know, last December and January were significantly slower in casual dining. I would say down double digits for most people, but then it recovered you know, remarkably and just has moved around based on a lot of these factors. You know, we look back at probably the only good comparison that people might be thinking about for our size of company and the timing, which was the great financial recession or catastrophe or whatever it stands for. When we saw the data, when we looked at that data, the trends there were much more moderated over time and broad-based across all of our restaurants. You could see a pretty linear movement, - 1% to - 2% to - 3%, -10%, -20%. Not these pockets that we're seeing today that don't seem to indicate. You know, when you have a geography that is still running the same level that it was running three months ago, you know, that wouldn't tell me that's economics. That just tells me there's another factor in play, right? Otherwise, you'd see it in every state of the country. That being said, there could be a little bit of a slowdown. I mean, I think the media has fueled that tremendously. You know, the scare factor alone probably is what is creating it as much as anything else. Our guide for the third quarter factors in that we are a couple points below where we were in June, and we believe most of that is due to the virus moving through different parts of the geography. The latest week we had is better than the weeks we had before that. We're actually seeing it come back up already. That's what tells me it's not so much the consumer pulling back, but when I see the latest week better than two weeks ago, well, that doesn't indicate a downward trend. Our net guide for the quarter is a couple points down, but to accommodate kind of that starting point. If you think about, again, and we'll just go back to our perspective, the full year revenue guide hasn't changed from us, right? I think that just points to how we think about it right now. No, that's super helpful. Thanks for that. Just second question is, as you exit 2022 with four-wall margins that match 2019, which is kind of where you're leading us. If that does indeed occur, I guess, are you saying that 2023 EBIT margins would be positioned to nicely exceed 2019 EBIT margins? Is that kind of where you're going with this? That's been our objective from the get-go. If we can get the four wall margins back to 2019 levels, you can see the math. I mean, G&A is better, and depreciation is better, and so the net enterprise EBIT margin should be measurably better. As we noted in the prepared remarks, if the commodity inflation doesn't get worse again, and if the labor stays on track to where we've seen it today, we believe that we can accomplish that. As David Overton mentioned, we will continue to note inflation, and if we have to, we'll keep up. You know, we have I will say it's very, really important. We have, you know, kind of like the Fed, we have a dual mandate. We wanna grow market share, and we wanna protect four wall margins. Sometimes those are at odds with each other, and it's like threading the needle, and I think, you know, that's what we're trying to accomplish. Thank you, Matt. You're welcome. Your next question comes from the line of Jeffrey Bernstein with Barclays. Your line is now open. Great. Thank you very much. First question, just following up on the last one. Just because I think you did just benchmark your third quarter comp assumption relative to June. If you could maybe just share what the comp trends were by month through the second quarter and what they were running in July, just to frame the trend you saw through the second quarter and what you're assuming for the third quarter. Yeah. I don't remember April. We could go back and check that, but in June, Jeff, we're basically thinking about 2019 plus pricing as we were kind of right on our plan, which is sort of that reversion to mean. In July, we're running a few points below that at this point. Our assumption for the third quarter is that we get back a little bit. We've seen the trend improve recently, and that we would move back to being close to that level essentially by the end of the quarter. It's a little bit of a U-shape. Got it. Okay, and then just to clarify, I know you said you're taking 4.25 points maybe with the summer menu, and that would get you to 7.5 ultimately. I guess consider further increases. I'm just wondering, well, one, if you could just share what you think the pricing will be in the third and fourth quarter. I know you mentioned managing the business for the long term. I get the sense that means we're not in a rush to necessarily fully offset all the inflation that wouldn't necessarily be right for the business long term. How do you think about how much of the inflation you want to offset in that framework of, again, you know, managing the business for the long term? Yeah. Jeff, it's a good question. I may have Etienne check my math on this. I just wanna clarify, the fourth quarter pricing will be 7.5%. The third quarter pricing will be around 6% on a weighted basis because of when the menu rolls out. It's kind of in the middle. Okay. So 6% in the third quarter and 7.5% in the fourth quarter. Our intention is that we're gonna fully price for all of inflation. You know, we think our business model is right on. All of the other factors, productivity, etc., the guest demand obviously is there. We're executing the business model. When you have input costs that are the sole reason that margins are being pressured, it's logical to pass that pricing on in an environment where we're still below full service dining, well below grocery. We still have room to make that happen. I would say keep in mind too, from sort of a strategic perspective, we may be a little bit behind, but that's kind of traditionally our way. We're more of a fast follower. You can see the progress in the North Italia margins. They're about one quarter ahead of Cheesecake on the pricing. You know, as we noted, the goal for that brand was about 14% for the year to get to by the end of the year, 'cause it's gonna be a couple points behind Cheesecake because of the growth. It's getting pretty close, and so it's working. We believe the pricing for Cheesecake will work. We are pricing to these costs. If we see some degree of give back, if natural gas can revert back to at least, somewhere between an all-time high, which is where it's at and where it was, you know, if some of the commodities stabilize, if our overtime gets better because we remain fully staffed, then we have some room to grow on top of that. Understood. Just lastly, I know you mentioned, you know, you're pretty well positioned with a higher income consumer and in pretty more affluent neighborhoods, I guess. But the fact that you're heavily mall-based, is there any change or the malls impacted any differently than just the broader well-to-do neighborhoods? I mean, I guess from a mall traffic perspective, are they back to pre-COVID levels or are occupancy levels at the malls back to full strength just so that being within the mall, within those well-to-do neighborhoods, I don't know if you're any better or worse off than anybody else in that neighborhood. Thank you. Jeff, this is David Gordon. I don't know that we've seen any market change from mall-based locations versus the rest of our locations. They remain consistent and strong. The tenancy in the malls remains consistent. We haven't seen any drop off in actually retailers as far as occupancy goes, and traffic has remained really strong and consistent. That's great clarity. Right, no big difference between your mall stores and your non-mall stores. That would wipe that question out. Thank you very much. Yep. Your next question comes from the line of John Glass with Morgan Stanley. Your line is now open. Thanks very much. Recognizing you may not think you're there yet, but if the consumer continues to slow, what are the contingency plans? You know, I remember from 2008 to 2009, if this is the correct timing, small plates or small bites was introduced. I think that was pretty successful. That may still be around. Forgive me for not knowing that. Maybe that gets refreshed. How do you think about responding, understanding there's uncertainty out there and you must have a plan if you need it is. What might that look like this time around? Hey, John, it's Matt. I think it's, you know, it's definitely a relevant point. You know, rest assured that the management team is constantly evaluating our strategic responses to the environment. I think, just to remind everybody that we came out of that recession with better margins and better sales than we went in. I think the key, obviously, there's two sides of the coin. One is to ensure that you have value and you remain relevant. We are able to put out menu items on a special card at different price points whenever David wants to do that. We'll watch the environment and certainly that's an easy thing for us to deploy again, if that's what we wanted to do. As David Gordon talked about earlier, we're in the midst of piloting a rewards program. That would certainly be a new vehicle for us to be able to deploy that type of activity very surgically if we wanted to. The third thing I would say on the value side is, you know, we were very successful during the pandemic running promotions when we'd never done that before. You know, it is something where we built up a little bit more muscle. If that were the case, we certainly could pull that as well. I think we're gonna have more at our disposal than we did before. We have more learnings than we did before and the ability to reach specific guests. I feel confident that we can respond there. On the margin side, the key is that most expenses in the restaurant space are variable over time. It's the degree and the speed at which you can recover the variability of those margins, right? Even with rent, for example, we're on percentage rent in every case, and so it's gonna move with sales. There are some moderately fixed components over the medium term, but the most important thing from an operations standpoint is to get alignment around that variability and to recapture that margin. If we're shooting for 2019 margins, that would be our goal. Now, it depends on how deep and how long any pullback is, but our goal would be to maintain that same level of margin over the medium term. Got it. Okay. Thank you very much. John, this is David Gordon. Sorry. I would just add operationally that, you know, a good portion of our operations team, especially the field leadership team, experienced the 2008, 2009, 2010 recession. They're very nimble. We have best-in-class retention. Our operators, if we ever were at a point where we need to make any structural changes to how we were operating, are the best in the business, and then we'll be able to flex appropriately, if we ever got to that point in time. Thank you. Your next question comes from the line of Brian Vaccaro with Raymond James. Your line is now open. Hi. Thanks, and good evening. It sounds like some of the sales decline or moderation you're seeing, you're attributing it to reemerging COVID-19 concerns. I guess looking across regions, are there certain regions where that's less of an issue? If so, are you seeing any changes in behavior or ordering patterns, etc., when customers are in your restaurants? Then also within the off-premise channel, can you comment on how delivery versus takeout is performing? Sure, Brian. This is Matt. You know, for example, we saw a sort of initially more pressure in Southern California and the Northeast. You know, that is where the greatest number of reported cases have been. We've seen less impact initially in places like Florida and Texas. Now, it moves around. You know, I was just looking at another geography and noted that, you know, we had seen this past week a little bit of pressure. Sure enough, I googled it in the news and this particular city, the headline in the local paper was, The Summer Surge Is Back. They were talking about a whole bunch of cases. We could almost be like a sounding board for the CDC. You can track it. I mean, it's. You know, people can't go into restaurants when they're sick or they're home taking care of people. We saw a statistic that there are twice as many people out of work now than at the Omicron surge back in the holidays. It was like 4 million people, right? So that's pretty meaningful. In those areas where it's been more stable, we haven't seen any change really in the behavior of the guests with respect to check average, et cetera. So that gives us, you know, a lot of confidence that nobody's trading down, at least in our, in our restaurants. It's really about purely foot traffic at this point in time in those geographies. The off-premise mix of that 25% remains very, very consistent, and delivery comprises 11%, phone and walk-up is 8%, and online ordering is 6%. Almost right in line with the previous couple of quarters. All right. Great. That's helpful. I think on the labor front, I think you said you expect net wage inflation of around 5% in the second half. Can you remind us, how does that compare to the wage inflation you've experienced in the second quarter or the first half? Yeah. We went into the year thinking it would be about 5%. It bumped up to around 6%-7% for the first half of the year. The 5% would represent an improvement of about 1%-2% net in the back half. As we noted, you know, we have seen the year-over-year wage inflation moderate, and so, you know, looking at that trend and all of the other components combined. Okay. Then I think, Matt, you know, overtime and outsized training and other costs has been a pretty significant headwind for you. Are those costs starting to ease more recently? I guess, if not, why? When do you expect some normalization in those areas? Yeah. I mean, I would tell you it kind of comes in waves still. I mean, no pun intended with the virus. You know, when we hit March and April, and even in May, as business really took off again coming out of the winter, you know, we had to hire a lot of people. You're running, you know, ads to hire people and you're training people, and then you have newer people and you have higher overtime. What we've seen is that in an environment where the labor side is a little bit more stable, which maybe we'll get to in this most recent stage because our staffing levels are at a better point and that, you know, everybody knows that back to school with casual dining, the aggregate sales levels dip, you know, that's a pretty known seasonal pattern, that we might just see some of those, Brian, ease in the late third and fourth quarter. All right. Thank you. I'll pass it along. Your next question comes from the line of Jon Tower with Citi. Your line is now open. Great. A few follow-ups and, yeah, I was hoping to run through here. Just, hitting on the COVID flare-up stuff, you had mentioned that certain markets, obviously it's showing up. But you didn't call out whether or not that's actually impacting your own staffing levels at the stores. I'm curious if that is the case, and then I got a few more questions, if you don't mind. Yeah. Jon, this is Matt. There's no question. I don't know that we have. I could give you a specific number, but what I can tell you is that our sick time is running well above what we anticipated it would, right? There's only one real driver of that. We also, on our operations leadership calls, I can tell you anecdotally, it's one story after another as it kind of moves through a market, you know, and you'll talk about a restaurant and, "Oh, these three managers and eight staff members, you know, called in this week." We are definitely seeing that. Fortunately, we're able to be in a slightly better spot to buffer it, but we are seeing that move through the restaurants too. Okay. Just kind of following up, I think, to John's question earlier in terms of your ability to respond to changes in the marketplace with calls to action. I mean, you know, I think, Matt, you had mentioned earlier in the call you're seeing scenarios where cases move up, sales seem to go down. How do you fight this going forward? I mean, you do have a much bigger media presence, social media presence than in the past, and you have utilized promotions in the past, I think, coming out of COVID, you know, to drive some traffic. You know, how quickly can you respond, and are you doing any of that yet? Well, I'll tell you there's a couple things. One, we just completed some consumer research, and so we'll be digesting that to understand a little bit more about how consumers are behaving and what they're thinking, and particularly around our brands. We felt, you know, the timing was good to get back out and understand because, right, it's sort of a new paradigm with people. I think, you know, we'll learn a little bit more about what we think would be effective. I think in aggregate, it's about understanding the trends in the individual markets and adjusting operationally to them. Because at the end of the day, if we hit the $12 million AUV, which we're still believing we're on track to do, the volumes are there. Whether it moves up or down 2% or 3% in any given month, that's really not gonna dictate a big change in strategy for us other than potentially operationally, right? We need to get the margins. If that causes us to be more or less efficient, well, we have to learn and we have to adjust to that. In aggregate, if we continue to trend as we believe we are to the 2019 plus pricing levels, then, you know, I think that the volumes are there. We just have to navigate around the ups and downs a little bit. Jon, I would just add, this is David, on the promotions front that, you know, we meet on a weekly basis and look at the status of where we're at, and we can pull the lever on a promotion within two weeks. Whether that's something that we wanna do off-premise, DoorDash only, or something for online ordering. I think all of our learnings, as Matt talked about earlier, from the pandemic and the flexibility of our current playbook versus what we had prior to the pandemic, puts us in a pretty strong place to be able to react pretty quickly to whatever fluctuations we see. Okay. Just lastly, I think, you know, you just hit on DoorDash. I believe you still have a fairly exclusive relationship with them, and I believe the economics are pretty favorable to you. You know, given how other brands, 3PD partners in particular, or 3PD brands have grown, have you explored the potential to move onto other platforms and/or considered taking even more price in the delivery channel? I think today you sit at something like 3% or so differential between in-store menus and delivery menus. You know, competitors are much higher than that. I'm curious why you wouldn't or if you've considered taking pricing there. Certainly as we continue to take pricing on the menu, it's also a conversation we have around our competitive advantage for delivery. If we feel like we can hit the margin targets that we're set out for in the sales without taking more than that 3%, that's what we would prefer to do. If we find that we need to take more than that 3% differential to protect margins, we'll certainly discuss that and have the ability to do it moving forward, if we wanted to. As far as the relationship with DoorDash, we do have an exclusive agreement, and we're still very happy with that agreement. Some of the marketing and our ability to pull the lever on that marketing as quickly as we like is because of that relationship, and their nimbleness in working with us to get promotions launched, and then communicated out to the consumer. So we're still very happy. As you said, the economics are very favorable for us, and we like the relationship. Our continued plan is to stay down that path for now. All right. I will pass it along. Thank you. Your next question comes from the line of Andy Barish with Jefferies. Your line is now open. Hey, guys. I hopped on a little late, but I heard David Gordon's comments just on food and labor efficiency, yet obviously some of the margin shortfall. Can you just kinda match that up? Is there something additional that could be worked on, you know, from a productivity perspective? Was it just the input costs higher than expected with less pricing? It is, Matt. It was 100% related to the input costs versus the pricing. The spot market and dairy and produce kinda went through the roof, and natural gas and particularly some of the R&M services, you know, the supply and demand imbalance is so significant right now to get someone to come out and take care of the equipment. It's just costing that much more than what we had. Gotcha. Just following up on the logic beyond, you know, call-outs and the virus surges. Last year, obviously around this time, Delta was surging, which did cause some sales issues and increased call-outs with less staffing. How are you kind of baking the comparison into the projections here? I know there's a lot of noise obviously from the last couple of years, but just thoughts on that. Yeah. I mean, I think that's why, and, you know, Andy, it's Matt again. It's been a sort of back and forth debate over the past six to nine months of that benchmark. You know, what we have really seen mathematically now is that 2019 is the best benchmark and then adding the pricing to that. You know, using that sort of eliminates the up and down last year and this year and those comparisons because you're exactly right. I mean, you know, what we saw last year and some of the lapping, if you think about just purely the year-over-year comp, is that June and July were probably the highest months of the year. You know, they were kinda through the roof. Then Delta hit, and it came back. It probably dropped from the peak of early July to the trough of late August. It probably declined 5% or 6%, you know, just in that period of time. You know, we're really looking at sort of 2019 plus pricing as being the best way to evaluate it. Okay. Thanks for the call. Your last question today comes from the line of Brian Mullan with Deutsche Bank. Your line is now open. Hey, thanks. Just a question on capital allocation. Just wondering if you could speak to the current parameters you're looking at when executing on the share repurchase program, if anything is different versus perhaps the pre-COVID philosophy. Just wondering if you wanna be opportunistic when you think of the stocks when they're valued or maybe just more programmatic and consistent. Hey, Brian, it's Matt. I mean, I think it's both, right? I mean, you know what? I think we're sort of putting our toe in, but we also believe it's you know, a very opportunistic time to do it with where equities have traded based on our conviction on the long term for the brand. I would say we have your typical type 10b5-1 of that we put in place, and it's gonna perform where you buy more when the stock is lower, but also that we do it a little bit over time 'cause we can't figure out the market, right? That's not our jobs. We don't wanna be in one month and out the next month. We wanna be able to sort of build it over time. Certainly we're, you know, we're buyers in this market. Okay, thanks. Just as a follow-up, wonder if you could just give an update on the Flower Child brand, the, you know, the key priorities there over, say, the next year or two. You know, what factors are you watching most closely or looking at to see before you might wanna accelerate the unit growth there or maybe separate it out like you have for North Italia? Hi, Brian, this is David. We continue to be very bullish on Flower Child. The recent openings continue to perform well. I'd say that that's our priority, is to continue to move into some newer markets and see what the guest reception is in different geographies. Thus far, it's remained very positive. The team there has done a good job moving their margins in the right direction. We're focused on trying to leverage continued supply chain capability at The Cheesecake Factory. On the people growth development side, we wanna ensure that we have the right leadership in place if and when we decide to pull that lever and grow it a little bit quicker clip. All signs for now remain very positive, and we feel good about the future of the brand. Thank you. This concludes today's question and answer session and conference call. Thank you very much for attending. You may now disconnect.