Thank you for standing by. My name is Sydney. I will be your conference operator today. At this time, I would like to welcome everyone to The Cheesecake Factory 2023 quarter two earnings 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 one on your telephone keypad. If you would like to withdraw your question, again, press the star and one. Thank you. I will now turn the call over to Etienne Marcus, Vice President of Finance and Investor Relations. Good afternoon, welcome to our second quarter fiscal 2023 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, when discussing comparable sales, we will be referring to comparable sales on an operating week basis, unless specifically stated otherwise. We will also be presenting results on an adjusted basis, which exclude impairment of assets and lease terminations and acquisition-related expenses. 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. During the second quarter, we made measurable progress towards our stated objective of returning our profit margins back to pre-pandemic levels. Combined with our increased scale, we were able to deliver our highest adjusted net income dollars and adjusted earnings per share generated in any one quarter in the company's history. We believe this is indicative of the opportunity we have to enhance shareholder value through continued growth of both our top and bottom line. Despite a slightly softer sales environment, The Cheesecake Factory restaurants continue to generate industry-leading annualized unit volumes, averaging $12.4 million for the quarter. Comparable sales for the second quarter increased 1.5% from the prior year and 14.1% versus 2019. Comparable sales versus 2019 continued to outperform the casual dining segment, demonstrating the strength and resilience of our namesake brand. Our focus on menu innovation remains a key point of differentiation, contributing to our broad consumer appeal and high degree of relevancy. To that end, this past Sunday, we commemorated National Cheesecake Day by introducing our newest cheesecake flavor, Cookie Dough Lover's Cheesecake with Pecans, and are in the midst of rolling out our latest Cheesecake Factory menu across the country. Execution within the restaurant four walls was outstanding, with our operators delivering better-than-planned results across several key performance indicators, including labor productivity and wage management, driving solid flow-through for improved profitability. This, combined with favorable input costs, resulted in adjusted net income margin of 5% for the quarter, exceeding our expectations. On the development front, we opened a Cheesecake Factory and two FRC restaurants during the second quarter. While all of our sites in the pipeline remain active, we continue to experience some delays in opening dates due to various challenges, primarily beyond our control, particularly construction and permit approval delays. As a result, the company now expects to open as many as 20 new restaurants in fiscal 2023, including as many as six Cheesecake Factories, five North Italia, and nine FRC restaurants, including three Flower Child locations. We continue to anticipate two to three Cheesecake Factory restaurants to open internationally under licensing agreements. As we look ahead, we remain intently focused on delivering exceptional food quality, service, and hospitality, the hallmarks of our success, to drive long-term profitable sales growth. We will continue to leverage our competitive strengths, including the scale of our business, our differentiated brands, best-in-class operators, and balance sheet, to drive shareholder value and market share gains. With that, I'll now turn the call over to David Gordon to provide some additional details on operations and marketing. Thank you, David. Our people are our greatest resource and enable us to deliver excellent service and hospitality and delicious, memorable dining experiences for our guests. We believe we are uniquely well-positioned to attract, train, and retain high-quality staff members and our best-in-class operators, and we remain sharply focused on maintaining our competitive edge by investing in our people to support ongoing improvements across all three facets of staffing. Last October, we resumed our in-person restaurant management development program, held at our Southern California Corporate Support Center. Over the last 10 months, we have hosted over 9 training conferences, attended by over 800 managers. Our training investments are paying off, with our second quarter guest satisfaction scores at The Cheesecake Factory improving both sequentially and year-over-year. In fact, all key dine-in and takeout guest satisfaction metrics have surpassed the second quarter of 2019 levels. We also had another quarter of strong staff retention, with restaurant management and hourly staff attrition rates effectively returning back to our industry-leading pre-pandemic levels. Lastly, on the staff recruitment front, following our recent recognition for having made Fortune magazine's 100 best companies to work for list for the 10th consecutive year, we were also just named to Fortune's Best Workplaces for Millennials list for 2023. We believe these accolades support our position as an employer of choice in the restaurant industry, and our relentless focus on staffing will drive improvements in service, the guest experience, and ultimately, overall restaurant performance. Moving to sales trends, comparable sales across our portfolio of concepts remain positive, with predominantly stable guest purchasing behaviors. The Cheesecake Factory off-premise sales for the second quarter totaled 22% of sales, just below first quarter levels. Additionally, on-premise incident rates remained above 2019 levels, with no material change to daypart mix. North Italia second quarter comparable sales increased a solid 8% from the prior year and 30% versus 2019, resulting in annualized AUVs of $8 million. Four-wall margin for the adjusted mature North Italia locations improved to 15.4% in the quarter from 13% in the first quarter, with planned actions for further improvement. Other Fox Restaurant Concepts also continued to drive strong results, with annualized AUVs of $7.4 million. Turning to marketing, as David mentioned, on Sunday, we celebrated National Cheesecake Day. Our marketing team generated a significant amount of publicity and social media attention surrounding the exciting new flavor announcement. Today.com broke the news, which was followed by more than 90 media placements, totaling 2.5 billion PR impressions, including notable features on parade.com, Mashed, The Daily Meal, and msn.com, to name a few. Building on this PR momentum, last Friday, our founder, David Overton, was featured on the Today Show in recognition of our 45th anniversary and National Cheesecake Day. These are prime examples of our marketing strategy to tie our creative marketing campaigns to on-brand events to generate publicity and increase consumer engagement, to raise The Cheesecake Factory brand's awareness and drive sales. On June 1st, we launched our Cheesecake Rewards program nationally, and while we are in the very early stages, the program is off to a promising start, with member enrollment surpassing our expectations. In celebration of National Cheesecake Day, and as an exclusive offer for our Cheesecake Reward members, we offered a special any slice, half price promotion for our dining guests on July 31st and August 1st. As a reminder, our overarching objective is to leverage the data analytics and insights to engage more effectively with our guests and drive incremental sales while maintaining our restaurant level margins. With that, I will now turn the call over to Matt for our financial review. Thank you, David. Let me first provide a high-level recap of our second quarter results versus our expectations I outlined last quarter. Total revenues of $866.2 million were just under the low end of the range, although with sequential improvement on a year-over-year basis throughout the quarter. Adjusted net income margin of 5% was above our expectations relative to our sales. G&A and depreciation combined as a% of sales were in line with expectations, and we returned $23.1 million to our shareholders in the form of dividends and stock repurchases. Turning to some more specific details around the quarter. Second quarter sales at The Cheesecake Factory restaurants were $652.5 million. Comparable sales increased 1.5% versus the prior year and 14.1% versus 2019. Sales for North Italia were $65.9 million, a 17% increase over prior year, supported by comparable sales growth of 8% versus prior year. Comparable sales versus 2019 increased 30%. FRC, including Flower Child, average weekly sales were $114.7 thousand. Other FRC sales totaled $65.7 million, up 10% from the prior year, and sales per operating week were $142.3 thousand. External bakery sales were $15.4 million during the second quarter of fiscal 2023. Now, moving to year-over-year expense variance commentary. As we have seen our cumulative pricing catch up with inflation, we realized measurable year-over-year improvement across several key line items in the P&L. Specifically, cost of sales decreased 130 basis points, driven by higher menu pricing than commodity inflation, despite lapping favorable dairy contracts in the second quarter of 2022. Labor decreased 130 basis points, predominantly driven by pricing leverage, partially offset by higher management labor, driven by higher staffing levels. Other operating expenses decreased 10 basis points, mostly driven by pricing leverage, partially offset by marketing costs related to launching the rewards program. G&A increased 40 basis points, mostly related to higher staffing levels. Depreciation as a% of sales remained flat to prior year. Pre-opening costs were $6 million in the quarter, compared to $2.9 million in the prior year period. We opened three restaurants during the second quarter versus two restaurants in the second quarter of 2022. Delays in opening dates contributed to higher than expected pre-opening costs for the quarter. In the second quarter, we recorded a net expense of $0.6 million related to impairment of assets and lease termination income and FRC acquisition-related expenses. Second quarter GAAP diluted net income per share was $0.87. Adjusted net income per share was $0.88. Now turning to our balance sheet and capital allocation. The company ended the quarter with total available liquidity of approximately $330.1 million, including a cash balance of about $91.6 million and approximately $238.5 million available on a revolving credit facility. Total debt outstanding was unchanged at $475 million in principal. CapEx totaled approximately $25 million during the second quarter for new unit development and maintenance. During the quarter, we completed approximately $9.3 million in share repurchases and returned just over $13.8 million to shareholders via our dividend. 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 Q3 and full year 2023 for revenue and net income margin. For Q3, based on our quarter-to-date performance, most recent trends, and assuming no material operating or consumer disruptions, we anticipate total revenues to be between $835 million and $855 million. This essentially assumes a continuation of the trends from the second half of Q2, which on a year-over-year basis, sequentially improved as we lapped more favorable comparisons. At this time, we expect effective commodity inflation of low single digits for Q3 as our broad market basket continues to stabilize. We are modeling net total labor inflation of about mid-single digits when factoring in the latest trends in wage rates, which, similar to our commodities, continue to normalize, as well as channel mix and other components of labor. Based on these assumptions, we anticipate net income margin of approximately 2.75% for Q3 at the midpoint of the revenue range I previously outlined, which also reflects planned higher than average G&A of about $2 million, mostly related to our annual general manager conference, which takes place in September, and the pre-opening expense we expect of approximately $9 million in the quarter. For the full year. Based on our year-to-date performance, more recent trends, and assuming no material operating or consumer disruptions, we are now anticipating total revenues for fiscal 2023 to be approximately $3.5 billion. This reflects our second quarter results, our perspective on seasonality post-pandemic, as well as the impact related to timing delays in new restaurant opening dates and any impact from the launch of the rewards program. For the back half of the year, we now estimate year-over-year inflation for commodities to be in the low single-digit range, and labor in the mid single-digit range. Given our unit growth expectations, we are estimating pre-opening expenses to be approximately $26 million. As we have said earlier, our goal is to effectively offset inflation with menu pricing to support our margin objectives. Assuming we do so and consumer trends remain consistent, and there are no other material exogenous factors, we continue to expect full year net income margin of approximately 4% at the revenue level I provided. With regard to development, as David Overton highlighted earlier, we plan to open as many as 20 new restaurants this year across our portfolio of concepts, with 4-5 openings in the third quarter and the remainder in the fourth quarter. We now anticipate approximately $160 million-$170 million in CapEx to support this year's and some of next year's unit development, as well as required maintenance on our restaurants. In closing, as David stated earlier, in the second quarter, we took another step towards recovering our four walls and enterprise-wide operating profit margins. While comparisons continue to be inconclusive due to lapping of various stages of the pandemic, and the environment remains somewhat uncertain due to potential shifts in consumer sentiment and behavior, we are pleased with the stability and predictability of our overall financial performance so far this year. As we have previously noted, our key objectives this year are to rebuild our profitability and to ensure we have the appropriate levers in place to drive future sales growth. As we look ahead, with cost input normalizing and the macro environment starting to stabilize, we believe we are well positioned to once again generate our historically consistent operational and financial results. With that said, we'll take your questions. At this time, I would like to remind everyone, in order to ask a question, press star, then one on your telephone keypad. Please also follow a limit of one question and one follow-up question. Your first question comes from the line of Brian Mullan from Piper Sandler. Hey, thank you. Just a question on the same-store sales result at the core Cheesecake brand. Could you just take us through the traffic, the menu price, and the mix leaves for the quarter? On the menu price piece, you know, how do you expect the rest of the year to progress? You know, strategically, are you gonna continue to solve for margin recapture, or conversely, you know, do some of the industry traffic trends maybe give you any pause about taking more price? Just any thoughts would be great. Sure, Brian. This is Matt. It's a good, it's a good question, probably top of mind for most investors. Just on the, the actual data, the pricing was about 10.5%, roughly for the quarter. The mix was a -5.4, then the traffic was a -3.7. As we talked about before, the, the mix has some to do with the change year-over-year in, in the off-premise, while being very stable. It was still a little bit heightened in Q2 of last year, and the way that we count guests causes some of that negative mix impact. The other part really was the higher purchasing behavior in Q2 of 2022. We're still running above pre-pandemic levels of what we call incident rates, was how much, you know, alcohol, dessert, or appetizers guests are buying. Obviously last year, the so-called revenge buying was in place, we saw heightened levels. For the remainder of the year, we're contemplating lapping our summer menu pricing with a 2% level versus the 4.25% we had. We'll see it diminish from the 10.5%. I think it'll go to, you know, I don't know, at 10.9%-ish in the third quarter and then 7.5% or so, weighted in the fourth quarter, 'cause remember, we did the catch-up at the beginning of December. The balance of that will go into next year with more like 5%, because we'll, we'll lap over some of that, that catch-up pricing that we had in the fourth quarter and exit. I think, though, importantly, you know, to your question, Brian, and maybe this is the most pertinent part of it and how we're thinking about it, certainly, there was just a very difficult optical lap in the second quarter for Cheesecake. I mean, we had exceptional sales volumes in the second quarter of last year, driven by some of that post-COVID surge. As we look at, at the quarter, kind of how we came out versus our expectations, really, May was a little bit softer, maybe a couple of% in terms of the timing and trying to figure out that seasonality of the, of the new normal. Then we had a couple of delayed openings, obviously, that contributed to it. Really, June looked good. You know, as we think about how we performed, we exited the quarter closer to mid-single-digit comps, most of the difference there being in traffic. We actually think our traffic is in pretty good shape going forward, and, and that's what we're expecting to see as we go through the third and fourth quarter. We are taking less pricing than we have been. I think that will support it, but I think the underlying business trends going into the third quarter are very strong, and we're, we're pleased with that, and we're gonna keep doing what we're doing. Okay, thank you for this. All very helpful. Just to follow up on the development outlook, you know, the release mentions, you know, some construction challenges, some permit approval delays. I know that's not unique to you, but I'm just wondering, is one of those two dynamics a bigger factor versus the other, or one might expect, would you expect one of them to improve more quickly than the other? I'm kinda asking in the context of, you know, understanding this year has been impacted. Do you want investors thinking that next year you could potentially get to that 6%-7% net growth in 2024, or will these issues be with you a bit longer? Hi, Brian, this is David Gordon. Great question, as David Overton mentioned, the up to 20 for this year puts us, I think, at about 6.3%-6.5% unit growth for this year. We still feel confident in that 7% number for next year when we look at our pipeline for next year. Most of the delays are not really on the construction side for us, a little bit more on the permitting, whether that's a local permit in a city, or something more broad. As far as equipment, as we've stated in the past, I think we've done a terrific job of ensuring that we have what we need for the openings and for the pipeline next year. It's more about cities being a little bit slower, more new people in jobs than previous, and them just being, you know, a little, a little less quick to, to be able to do what we need. Over time, we would continue to hope that that's only gonna get better, and there's nothing internally that'll keep us from hitting those targets. Thank you. Your next question comes from John Park, from Wells Fargo. Hey, good afternoon, guys. Just looking at the restaurant margins by banner, it looks like Cheesecake newly, newly outperformed in terms of the recovery this quarter, I guess. You know, what's kind of driving that outsized growth? Can you kind of help us think about how much North Italia other FRC are kind of being dragged down by the growth that you're seeing? Sure. Yeah, we were pleased, really pleased with The Cheesecake Factory margin recovery. You know, if you think about the timing of the pricing versus inflation, we took that extra 3% at the end of last year, you know, we're, we're seeing that flow-through. I think year-over-year, Cake was up 330 basis points, so pretty much 100% flow-through on the pricing. I think that's, that's great to see. Part, part of the difference between the concepts is growth, as you noted. Usually, that's about a 2% or so delta, you know, depending on how many openings, but that's a good sort of rule of thumb. I think the other component of that for North was that we did some of the, the catch-up pricing actually in the second quarter, so we didn't even get the full benefit of that yet. There's even another probably 1% lag, I think, just on the pricing front. We, we think all of our concepts are really well positioned on the recovery front. You know, we're, we're still building on that. You know, it's not like we're declaring victory 'cause we want to continue to increase it, but we think that we're making the right decisions, and we've made a lot of progress. Got it. Can I guess you just remind us what pricing was on North Italia this quarter? As in what we do, 4%. Got it. Thank you. Your next question comes from Dennis Geiger from UBS. Great, thank you. First question, if I could, I wanted to ask a little bit about delivery and, and sort of what, what you've seen there, from a mix perspective, how that's changed, any, any change with demand, and any other opportunities that, that you've identified within that, that channel? Thanks, Dennis. This is David Gordon. We continue to see very stable activity. You know, the off-premise at 22% in Q2, just 1% below where we were in Q1. Delivery still makes up about 9%-10% of that mix. 7% of it is phone or walk-up, and then the remainder is made up of online ordering. So, as we said, I think we may have said last quarter, we did extend our exclusive agreement with DoorDash, which continues to give us a really preferential marketing position, as well as a very strong commission rate. That means that all of our off-premise sales, including the DoorDash sales, are not in any way margin dilutive. So we feel good about the fact we've been able to hold on to those sales. We'd continue to see that remain. The summer tends to be the slowest time for delivery sales overall, so that, you know, 1% down from where we were last quarter is the same type of behavior we would have seen last year. We feel really good about the ongoing partnership, and also the integration we have with DoorDash on the reward side, which has allowed guests to go ahead and use the incentives, the rewards also at, on DoorDash. I appreciate that, David. 1 more, if, if I may. Matt, just wanted to, to follow up on the, on, on the mid-single June exit that you, you spoke to. Definitely a, a solid number, and it seems like that's maybe a, a good run rate that you're thinking about going forward. Just as, as you talked about some, some seasonality in, in, in earlier months, just curious, I guess, maybe on a, I don't know, on a multi-year basis, if you guys still think about that anymore, just how to think about, you know, that over the coming months and if, if just kind of that, that June exit, you know, on a 1-year basis is, is a good way to think about the, the go forward as we, as we think about those, those, those trends. Thank you. Dennis, it's Matt. Yeah, it's, and, you know, as I said in the prepared remarks, I mean, it is still a little bit inconclusive, right, with any 1 data point, and so we always, I think, have cautioned against that. We continue to try to triangulate against 2019 and prior year absolute run rates. There is some variability, right? There's been changes in holidays. You, you have, you know, 5-day differential now when you're comparing operating weeks. So it's a little bit tricky. I think that that, you know, reinforces the need to be agile, and the great job that our operators did managing with their forecasting of sales and driving flow-through was exceptional. I think that the beginning of the stability started last year, kind of in the August, September time frame, you know, if I remember correctly. So we feel like, you know, that mid-single-digit run rate is appropriate. You know, that's what, that's what we've been seeing, and, and that's what, you know, I think our outlook kind of encompasses, if you will. It's great. I appreciate that. Thanks, Matt. Your next question comes from Joshua Long from Stephens Inc. Great. Thank you for taking my question. Curious, if we go back to your comments, Matt, on the predictability of the financial performance, it sounds like as you kind of get away from maybe some choppier periods, whether that was early in the quarter or maybe, you know, Fourth of July, as some of your peers have talked about, the traffic sounds to be, you know, relatively falling in line with your expectations. To your point, even though you might have had some one-time items in there that maybe lowered the absolute revenue, it feels like the actual store-level performance is kind of falling in line. Am I understanding that point right, in terms of just how you're thinking about the predictability of the model? I think that's right. You know, I mean, there, again, there continues to be some potential abnormalities in, in lapping numbers, right? I, I think that exists, but in the absolute terms, I think the last quarter was the most predictable that we've seen in the cake business in 3 and a half years. That goes for both, I think, the top and the bottom line. You know, the input costs are not as volatile as they have been. You know, thinking particularly about the COGS and the labor inflation and the moderation that we've seen, and the fact that that gives us some confidence that continued improvement in core costs, with the stability of the top line is, is very achievable. I think that that's the, the variability has narrowed dramatically over the course of the last 6 months. I think that's a, you know, a real testament again to our teams benefiting from the environment. You know, we're just hopeful that that continues. That's helpful. Thank you. When we think about trends by geography, day part, or kind of maybe from a mix basis, it sounds like those are also pretty consistent as well. Anything to call out there that's either surprising or maybe that you've noticed within the context of the overall results? Yeah, I mean, when we look at things like day part mix, it's within, like, 0.1%, each of them versus 2019, for example, right? It's, it's really close. We continue to see sort of that movement back to consistent historical trends. You know, I don't know, it's possible that some of the heat has been a negative in some areas. I know I've heard some other commentary around that. That's kind of unique and, and, and challenging. Obviously, you know, there's no patio usage in about half the country right now. You know, given our results and, and, and those factors, I think we feel even better. Thank you. Your next question comes from Brian Vaccaro from Raymond James. Hi, thanks, and good evening. I just wanted to circle back on The Cheesecake Factory comps, and I think you said you saw a little softness in May. Curious what you'd attribute that to. I appreciate the mid-single-digit comp comment exiting the quarter. I'm curious what that looks like on a comp versus 2019 basis. Is that an improvement versus the up, you know, 14s versus what you saw in the 1st half of the year? Yeah. I think, Brian, this is Matt. The first point, really in May, it was around our expectations. I mean, trying to sort of model, like we were saying, you know, year -over -year, there was a certain cadence last year, there was a certain cadence the year before, and the year before, and they've all been different. I think mostly that was around our internal expectations about how do you figure out this new, you know, second quarter pattern. I don't know that on absolute terms it was better or worse because that's just hard to say, but I think versus our expectations, we improved as we went through the quarter. I think, you know, roughly the, the sort of 14%-15% versus 2019 is kind of our thinking still, right? I mean, I think it's the, the stability of that, is, is sort of back in line, and I think it just represents mid-single digits as compared to prior year. All right. Thank you. That's helpful. You know, on the margin front, you expressed confidence in recovering sort of your, and recapturing, pre-COVID margins, and certainly good to see some of the improvement at North Italia. And I hope my quick math is right on this, but it looked like Cheesecake segment margins may be still down about 90 basis points versus 2019. I guess the question is: what are some of the key drivers from here that would allow Cheesecake segment margins to fully recapture pre-COVID levels in your view? Well, Brian, first of all, I think your math is correct, right? That, I think that is true in the second quarter. I think that there are a couple of areas that we believe will help us continue to close the gap, maybe not as fast as we've seen in the last quarter or two with that, that level of incremental pricing. As we continue to carry, I mean, taking 2% in the summer is probably a little bit more than we might have historically. That might have been 1.5%, but we're seeing also wage inflation rates that are below pre-pandemic levels. Again, I think we see the opportunity to be able to re-leverage a little bit in the labor and the COGS line items as we move forward. The other comparison piece here is in the marketing and rewards. There is a little bit of expense there associated with the launch that we incurred. Both it incurred in the second quarter, we anticipate that will also be the case in the third and fourth. I think, you know, longer term, as David Gordon mentioned, we believe that it'll be margin neutral, obviously, the initiation and the customer acquisition costs, and that's probably in the 30-35 basis point range for the second quarter and the back half of the year. All right. That's great color. Then, Matt, I just wanted to ask about the labor line specifically, and sales were a little light, but labor sort of came in line and looked like it was quite a bit below versus the first quarter. Are there any, you know, one-time items or non-recurring adjustments that are worth highlighting? Just more color, kind of fundamentally on what drove that favorability. I'm guessing you're seeing improvements in overtime, improvements in hiring, except, you know, hiring costs and training costs, et cetera, but any color you could provide there would be great. Thanks very much. Well, Brian, first of all, you did a better job selling it than we possibly could because it took all of those improvements that you noted. But really, the predictability of the sales component, the stability of that, we did have better productivity year-over-year. One of the things we've been really focused on operating-wise is on the forecasting and templating of labor, and the team has done an exceptional job improving upon that in this environment, and so we've seen a lot of efficiencies. I can tell you there, there are no one-time benefits that we have in there. Our group medical is basically on plan. You know, all items were pretty much normal. I think that we were just in an opportunity to take advantage of the better staffing and execution that David Gordon talked about. Yeah. Hi, Brian. This is, this is David Gordon. you know, our, our continued improvement in retention is certainly part of that, and it's paying off. as we look at Q2 of 2023 versus last year, we continue to have improvements, and we really are back to sort of our pre-pandemic best-in-class at staff, and most importantly, I think at the management level. That leads only to better operations over time, which leads to improved productivity. Our applicant flow continues to get better quarter after quarter. I think last reporting period, we had about 29 applicants for every hiring need. That's up to about 34 for every hiring need today, and the quality of applicant continues to be people that have previously been in the industry, versus at this time last year, when we were probably still hiring people who didn't have experience. The longer those staff stay with us, gives us the ability to continue to cross-train them, make them more productive in the restaurants, and you take that, combined with the more predictive sales environment, it allows our operators to really maximize productivity, and maximize labor, and as you pointed out, reduce overtime. Thank you very much. Your next question comes from Sharon Zackfia from William Blair. Hi, good afternoon. I, I wanted to circle back to the rewards program, and I, and I know it's early, but can you kind of give us your game plan on how you expect that to evolve over this year? You know, clearly, I, I'm assuming the goal is to incent frequency. Given others' experience with, with other kinds of programs, when do you think that would start to become manifest? Sure, Sharon. Hi, it's David Gordon. As you, you probably recall that the program's design is really around published offers, unpublished offers, and then marketable offers. Our, our longer-term goal is to be able to leverage the, the data and the insights to engage with guests and really drive incremental sales while maintaining those restaurant-level margins. Since we only launched the full program in June, I would say that we're taking time now to really analyze that data, and we'll be doing that all throughout Q3. Then we'll look at where we might want to start some pinpointed marketing to drive some incremental visits in the fourth quarter. More likely, it's really next year that we would start leveraging it completely, and have enough data, that we think it would be very meaningful, to be able to drive the, the right type of offers into the right channels at the right time, to drive some incrementality, whether that's day-part occasion, or incident occasion. We're looking forward to be able to do that fully next year. Is it kind of an omni-channel model where, you know, somebody can get recognized if they order through DoorDash, or is it just if they come in or get to go in the brick-and-mortar? No, it's also through DoorDash. That was one of the. Okay. T hings that we, we put together with DoorDash, with, was the ability for somebody to be able to participate, and, and drive value through DoorDash. It's omni-channel in any way guests would want to use it. Okay. patio utilization was actually gonna be one of my questions, given how wacky the weather has been over the spring and summer. I mean, is there any metric you can provide on kind of how patio utilization has looked more broadly for The Cheesecake Factory this year versus last year? You know, we I don't have it right in front of me. We've been talking about how to measure that in the heat and sort of side of things, right? Because it's a little trickier. I mean, we're better at measuring it when it's raining, because that's a clear closure. I mean, we, we know, in, in sort of the absolute perspective that the, those locations that typically drive greater patio sales have been impacted. I don't have a specific number that I think we're ready to quote on that. Okay. Thank you. Your next question comes from Brian Harbour, from Morgan Stanley. Yeah, thank you. Good afternoon. Matt, Matt, some of the mix drivers that you explained earlier, do you think those will kind of start to even out in the second half of the year or, you know, do you see those continuing? Yeah, the planning team and I were talking about that quite a bit, to, to, you know, make sure that we have good perspective, because obviously, that's, you know, a component of revenue that is, you know, historically extremely stable. Yeah, I, I think whatever variability there is in off-premise will continue to be a funny thing for us because of the way we count it. The other components of it, as we look at the last year, sequentially continued to move together to sort of historical levels. I think that piece was around 3% in the second quarter. Based on the current trend, it was about 4% in the first quarter. We think it'll be probably 2 and 1 in the 3rd and 4th quarters, sort of variance versus historical patterns, and then kind of be back to a more normal perspective next year. Okay, sounds good. Maybe just on North Italia, too. You know, you had strong same-store sales there. Could you comment just on some of the newer units, how they're doing from a revenue ramp perspective? Also, maybe just from kind of a margin perspective. Then you alluded to other actions to address North Italia margins, which it sounds like part of that is just price, but was there anything else there that you were doing? Hi, Brian. This is David Gordon again. I think that what we see at, at North is more typical of the rest of the industry versus what we see at Cheesecake when we open up in a new market. It's more of a gradual ramp-up, and we really look to be at our full sales potential, probably by the third year in a North Italia. Whereas Cheesecake Factory opens up generally some of its highest volumes, and then over time, settles into where it would be in the long term. On the margin side, as Matt mentioned, we have another price increase in October, right at the end of October, for North Italia. More importantly, I think the margin progress we've made thus far has been through supply chain, and we have more work to continue to do there to leverage the scale of Cheesecake Factory supply chain and distribution in North Italia. We've also started incorporating at North a lot of the analytics that we use at Cheesecake Factory and dashboards for operational trends to allow them to increase productivity and also seating capacity to make sure that they're leveraging. They take a lot more reservations at North Italia than Cheesecake, but to ensure that they're balanced in their reservations percentage versus walk-in guests. I think that's gonna continue to help over time. Brian, just to add on one thing to what David was talking about with the sales. One of the things we see, too, is when we go into a market, maybe open two or three, it really helps that, you know, in three years later, kind of all of it starts to coalesce. When we were doing a business review recently, we were looking at some of those just pre-COVID openings in the Washington, D.C., and Virginia area, and we have three restaurants there that, you know, two years ago, we were saying: "Boy, we need to do some work." You know, and then because we're used to Cheesecake Factory, we look at that now, and, you know, they're practically at the same unit volumes as the rest of the North system, and their margins are great. It really is, I guess, tracking to that pattern that David talked to, right? I think that's what gives us confidence to keep opening, as we've seen kind of market to market, those growth opportunities, really start to pan out as we stabilize post-pandemic. Okay, thank you. Your next question comes from Andy Barish, from Jefferies. Hey, guys. Just circling, or, or adding on to that, actually, it sounds like Flower Child is kind of, by year-end, gonna come, you know, in-house as well. I know it's not as big as North, but do you expect that to, you know, kind of have, some noticeable benefits as you, you know, work your way through 2024? Hey, Andy, this is David. We do. We've been working this year on incorporating more aspects of Flower Child under The Cheesecake Factory umbrella. Made some really strong improvements there on supply chain integration as well. We're actually building the next two Flower Child and designing the next two that will open this year. We feel very positive that by the end of the year, it would be fully under our umbrella, and our development teams and new restaurant opening teams will be leading the charge as we continue to grow Flower Child. We continue to think it has great potential as a high-end, fast-casual concept that's very uniquely positioned out there in the marketplace. Thanks. Then, just touching on, on the labor side again, I know, there's been a couple of questions on it, but in terms of the, the mid-single-digit, guide for, you know, for, for labor increases in the 3Q, is that all wage, or are there still some hours being added or-? Is there productivity that's kind of, you know, netting out some improvements against, any of those factors? Just, just a little bit more color on that would be helpful. Andy, it's Matt. We're really talking about wages. I mean, that makes up the preponderance of the inflationary impact. I think, you know, there's always opportunities to offset some of that with productivity. Just from a pure inflationary environment, you know, we're saying wage inflation is mid-single digits. Is there, is there a component of that, Matt, that you have off the top of your head on, on state mandates coming up in, you know, July, September, those kind of things? Yeah, it incorporates... I mean, California, I think that there's some jurisdictions here that have some of that, maybe L.A. County. It, you know, I think one of the promising things on the wage inflation, though, because, you know, I mean, obviously, we've sort of said mid-single, you know, from the beginning of this year, is it has ticked down, right? I, I would say that it went from more higher mid-single to now lower mid-single based on the, the actual realized wage inflation that we're seeing. It, it is improving, Andy. I think, you know, that is important to note, but it still kind of sits within that, that mid-range. Very helpful. Thank you. Your next question comes from David Tarantino from Baird. Hi, good afternoon. First, I, I wanted to clarify, just the traffic trend that you're, you're seeing exiting... I guess, you saw exiting the second quarter and, and in the early part of this quarter, that corresponds with the, I guess, the closer to mid-single-digit comment that you made, Matt. I guess, is traffic still negative? I guess, how would you frame up what you're seeing more, more recently over the last, you know, month and a half or so? Well, I'm only gonna comment on June, but you can extrapolate. Our sort of our guide is kind of based on these theories. You know, we don't, we don't talk about the interquarter, but in June, we were at a mid-single-digit comp, and really, the just the difference between the rest of the quarter was predominantly driven by traffic. Traffic was - 3.7% for the quarter on a 1.5% comp. It's getting pretty close. You know, I mean, week-to-week, there can be differences based on holidays or if we're gonna run National Cheesecake Day promotions or things like that. You know, we'll, we'll see where we get to, but it's getting pretty close to, to break even. Okay, great. I guess my questions on your, your decision on pricing. I mean, your, your pricing levels currently are among the highest in the industry year-over-year, and I, I know you were kind of late to, to catch up to the industry, so understandable. I guess the, the decision to take more in, in August and, and even more than you've done historically, I guess, why, why do that in a, in a, in a market that seems like traffic's pretty fragile? I guess, what's the, what's the objective there? Is it, is it mainly just to recover margins? I guess, how do you think about the risk to traffic in doing that? Yeah, I think it goes, David, part and parcel with what I just said. I mean, when we look at sort of the underlying traffic, it's pretty stable in our business. The underlying purchase behavior is, is, is very stable and in line or better than historical rates. I, I feel like sort of our objective this year is to rebuild our profitability and to develop the sales levers to grow off of this base. Really, if you think about the, the rewards program and the operational execution, you know, we're, we're, we're gonna accomplish those things. We're still, in our math, probably 2% below the cumulative pricing of the industry since 2019. Year-over-year, as you noted, it's a little bit funny because of the timing of when we did pricing. You know, I still feel like the inflationary impacts over the course of those four years has outpaced what we've done. You know, I think this helps us just get that last leg back and in a, in a situation and during a time period where we feel like the business is very stable. Great. Thank you. Your next question comes from John Ivankoe from JP Morgan. Hi, thank you. I think I calculated something like 25 new units next year, and I wanted to get a sense of how you felt about the current pipeline. I mean, what, what you're seeing in terms of location quality. I mean, is, is it more competitive to get some of the best sites? Are you actually getting access to some of the best sites that were challenging, you know, from some time ago? I'm curious, you know, for the types of landlords that you have, is your balance sheet even more coveted at this point? In other words, if you take less TI money, are you actually getting it back the other end, and then better overall lease terms? Thanks. Hey, John. I'll let Matt touch on the, the balance sheet, but as far as the site potential, we feel good about the pipeline, as I said earlier, for 2024. The types of sites, the type of projects, the high-end projects, if it's a mall, being in an A mall, still, we're gonna let the best sites, you know, the A sites drive our decisions. I would just say our portfolio of concepts really allows landlords to come to us and say, "Hey, we have these opportunities. What would be the best fit for this particular project?" Between Cheesecake Factory North and now a 3,500 sq ft Flower Child, or even an 8,000-10,000 sq ft Culinary Dropout, we have a lot of options. I think we're sitting in a really comfortable place to be able to hit that 7% unit growth for next year and then as we look forward. Y ou know, I think, John, this is Matt, on the, on the balance sheet, I mean, certainly it helps, right? I think that the, the name Cheesecake Factory is even more important. So I think it's all of those attributes, and we're bringing to centers the types of activities, the entertainment sort of quality that, that the landlords want. I, I would say that generally, the leasing environment is similar to what we may have expected historically, though, in terms of terms. you know, everybody asks that question. For A properties, it's basically around the same as we got before, which is still best in class, but it's not like it's, you know, uniquely better, than, than it ever was for, for the top properties. Thank you. Your next question comes from Jeffrey Bernstein from Barclays. Great. Thank you. Definitely encouraging to hear that the traffic trends, it sounds like, are approaching flattish to demonstrate that the namesake brand is still driving the same consumer frequency. I'm just wondering whether you, just because you are running or were running that north of 10% price, just wondering, you measure the value scores on a regular basis? I know you talked about guest satisfaction, just wondering how you think about the value scores and how you measure them, what your most recent learnings have been, just to make sure that the price hasn't intimidated the consumer. Then I had 1 follow-up. Thanks, Jeff. This is David. Actually, we do an annual attitude, usage, and awareness study, and we just actually completed that with our guests, and I'd say that our value scores are pretty stable. We also know that there's still a portion of guests that haven't come back yet, you know, post-COVID. I know we've talked about that before. In the study, we saw that about 60% of our lapsed guests have stated that they have interest in coming within the next 6 months. We're hoping to build upon some of those guests that still love us and maybe weren't comfortable, come back, to come back and dine yet. And we feel good about that, but we haven't really seen... As Matt said, when you look at incident rates or, or desserts as a percentage of sales continue to be 17%, we don't really see anything in scores or behavior that would give us pause. I would just remind, remind you, too, that the breadth of the menu is just so strong, and the breadth of price points continues to be so strong, that it allows guests to really navigate that menu and use it in a way that makes sense for them from a consumer choice of menu item, but also just from a pricing standpoint and how they want to use the menu as well. Understood. That was actually my follow-up question. Just because you now operate such a broad portfolio or are involved with such a broad portfolio of brands, and you're servicing such a broad demographic, just wondering if you've seen any signs of change in behavior. I mean, actually, it sounds like you believe trends have actually strengthened to close the second quarter. I'm just wondering, across your portfolio, have you noticed any leading indicators to demonstrate any sign of a slowdown across the portfolio, or are you really just not seeing anything to demonstrate that across the portfolio just yet? No, I think generally all of the concepts, you know, kind of trade slightly higher end, but a broad array of locations and occasions. What, you know, what I think we've seen for cake has been consistent across all of it, Jeff. Like, really looking at Flower Child, as David Gordon mentioned, you know, the sales continue to improve quarter-over-quarter. You know, so that's a primarily to-go business, right, and fast casual, but we're seeing sort of the same resiliency and positive guest reception. I mean, I just think that generally, the consumer is in pretty good shape. Interestingly enough, right, the sort of talk in the news has switched in the past month as well, away from doomsday to maybe soft landing. You know, you look at the Michigan survey, and it's up significantly over the past couple of months. So, you know, I do think generally consumers are feeling better, and it's showing up. Great. Thank you. Final question comes from Jim Sanderson from Northc oast Research. Hey, thanks for the question. Wondering if you could walk through for North Italia, the breakout between traffic and check, and what type of price do you expect to carry through into the back half of 2023? The traffic was + 2%, price was 8%, and the mix was - 2%. Okay. I think we would expect probably to carry about 8% pricing throughout the rest of the year. Great. Any feedback on any change in alcohol mix that you would want to call out, indication that the consumer might be trading down? Jim, this is David. No, we really haven't seen that at any of the concepts, Cheesecake or North or the other, FRC concepts that have a heavier bar mix to begin with. Yep. We haven't really seen any trade down at all. What is your alcohol mix on average, just across? Well, that's a pretty broad question because it can be very different. I think, you know, Cheesecake historically is around the thirteen-ish range. Yeah. B ut it can run all the way up, you know, a Culinary Dropout might be in the low thirties or so. It, it, it runs the gamut. I would say probably Flower Child is the lowest. That's in the low single digits because it's really just some sangria and, you know, things like that. It, it depends on the concept, Jim. All right. Thank you. There are no further questions at this time. This concludes today's conference call. You may now disconnect.