Good day, and thank you for standing by. Welcome to The Cheesecake Factory First Quarter Fiscal 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be question-and-answer session. Please be advised that today’s conference is being recorded..

Thanks. Good afternoon and welcome to our first quarter fiscal 2021 earnings calls. On the call 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 facts and are considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

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

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

In addition, throughout this conference call, we will be presenting results on an adjusted basis, which reflects the potential impact of the conversion of the company's convertible preferred stock into common stock.

An explanation of our use of non-GAAP financial measures and reconciliations to the most directly comparable GAAP measures appear in our press release on our website, as previously described. David Overton will begin today's call with some opening remarks, and David Gordon will provide an operational update.

Matt will then briefly review our first quarter results and provide a financial update. With that, I'll turn the call over to David Overton..

Thank you, Stacy. Following an uncertain start to the year, given the impact of dining room closures and capacity restrictions, March served as a positive inflection point in our sales trend, as restrictions ease and consumer spending generally increased.

By mid-March, nearly all Cheesecake Factory restaurants as well as our other concepts had some level of indoor dining capacity open. We saw significant pent-up demand across the country, and also saw some benefits from the earlier spring break vacation timing.

At the same time, we continue to drive strong off-premise sales volumes, which equated to over $4 million on average per unit on an annualized basis at the Cheesecake Factory restaurant based on average weekly off-premise sales during the first quarter.

Our operators did a tremendous job managing the dine-in and off-premise sales levels, delivering delicious memorable experiences for our guests, and also exceeding our expectations across our key performance indicators. This drove a strong end to the first quarter and a solid start to the second..

Thank you, David. The playing field level for us in March and COVID related dining restrictions in many of our key markets each and in addition, vaccination progressed, we saw incredible pent-up demand for the experiential dining occasions, we provide our constant.

Cheesecake Factory restaurants, is reopened indoor dining rooms, generated average weekly sales in March that equated to approximately $11.5 million on average, per unit on an annualized basis, outpacing 2019 average unit volumes.

This compared to approximately $10.4 million on average for the entire first quarter, including the stronger March period. Strong sales trends continue to the second quarter, with quarter to-date through April 27 comparable sales at the Cheesecake Factory restaurants up, 7% versus 2019, including the most recent week at the same level.

Based on average weekly sales quarter to-date of approximately $222,500, this equates to approximately $11.6 million on average, per unit on an annualized basis. On average, Cheesecake Factory locations are operating at approximately 60% indoor dining capacity, with approximately two-thirds total on-premise capacity including patios.

We continue to believe the magnitude of these sales volumes, underscores the tremendous brands affinity for the Cheesecake Factory. Our continued strong performance no the off-premise channel has supported these sales volumes with off-premise comprising approximately one-third of total sales quarter-to-date.

On an absolute basis, this equates to nearly $4 million on average per unit on an annualized basis, based on second quarter to date average weekly off-premise sales. We curtailed our off-premise marketing, as sales significantly strengthened in March and April.

We believe the appeal quality and increased awareness of our offering has enabled us to drive the highest level of off-premise sales dollars and maintain the highest level of off-premise sales when indoor dining rooms reopen, relative to our publicly traded casual dining peers.

And our ability to sustain off-premise sales around these levels for over a year reinforces our belief as a meaningful increase in off-premise sales could be a longer term sales driver for the Cheesecake Factory, as we emerged from the pandemic. Turning to North Italia. Currently, all locations have indoor dining rooms open.

We've seen strong pent-up demand from guests wanting to return to the restaurants. But we have also continued to dry solid off-premise volumes second quarter to-date of approximately 20% of sales. North Italia second quarter to-date through April 27, comp store sales are up approximately 8% versus 2019 levels.

We continue to believe North Italia's performance during the pandemic reinforces the long-term potential for the brand..

Thank you, David. First quarter comparable sales at the Cheesecake Factory restaurants increased 2.8% year-over-year, relative to the 2019 period, comp sales were down 10.4% for the quarter, but just 2% lower in March. Off-premise represented approximately 43% of total Cheesecake Factory restaurant sales during the first quarter.

Revenue contribution for North Italia and FRC totaled $87.5 million. North Italia comparable sales increased 5% year-over-year, and we're down only 5% versus the 2019 period.

Sales for operating week at FRC, including Flower Child for approximately $80,700, and including $16.7 million in external bakery sales, total revenues were $627.4 million during the first quarter of fiscal 2021..

We have our first question from the line of Sharon Zackfia from William Blair. Your line is now open..

Hi, good afternoon. Congratulations by the way on the return to positive concepts on, great. It's making me hungry. So I guess the question on off-premises. I think if I'm doing the math correctly, it seems like off-premises average weekly sales were actually up in April relative to the June quarter of last year.

I just want to confirm if that's accurate, and only down kind of slightly, actually from the March quarter, even as restaurants have really rebounded on premises?.

Hey, Sharon. This is Matt. I think you're doing a quick math here looking at it, too. I think that that's pretty close. I mean, we'll double check for you. But I would say that for us, the key is it's been extremely consistent. You know, we're right around that $4 million mark on an average unit volume per year. So I think your math is probably right.

And it's definitely moving in the right direction..

Thanks for that. And then a follow up question on labor. I mean are there any catch up investments on the labor side that we should think about for the remainder of this year? I mean, it seems like your labor, if you look at a per operating week, is kind of well, under the improvement you've been seen in sales, even on a two year basis.

So just wondering, if there's some sort of big catch up there.

If you're seeing some sort of extended wait times, and the locations, that maybe wouldn't be something that would be sustainable, longer term?.

No, I don't think again, Sharon, this is Matt. I don’t think there’s any specific investments. I mean, we definitely are seeing sales increase, which means that we're hiring and we'll need to do training, as we normally would actually running into the spring season. So I think that that's relatively consistent.

I think, you know, oftentimes, when you see a surge in sales like this, you get a little bit more leverage initially than you think you do. And you might end up with some very favorable labor metrics.

But I think in general, we're, you know, happy with the productivity that we have, and it's reflective of our historical productivity as much as anything else..

Okay. Great, Thank you..

Next question is from the line of Nicole Miller from Piper Sandler. Your line is now open..

I think I heard this properly, because you say you curtailed marketing around off premise and if so you know, do you can curtail at the marketplace level, where they were doing that on your behalf or some marketing that you were doing yourself?.

Hi, Nicole, it’s Dave Gordon. We curtail the sort of the end of March, April. And, as we elaborated, really didn't see any impact to sales at all, and saw some very strong sales here just in the past few weeks.

When it comes to the DoorDash marketing, things like top of app preference and some of our normal considerations we get as an exclusive partner haven't changed. But any promotional activities, meaning discounting off of cakes or anything like that, those are the activities that we stop..

All right, great. And then within spur level margin, what's the marketing percentage I guess, kind of embedded? What was it in 1Q and what might it be for this year? And is that amount more or less than the last year? Thank you..

Well, as you think about for direct marketing Nicole, this is Matt, you know, it was just sort of overall marketing. There's obviously some of the commission's that we include in that for the delivery piece of it.

But for the direct marketing piece, you know, we're really pretty much in line with where we have been historically, and that 0.5% to 0.6% range overall, for the first quarter. That was sort of our plan for this year.

You know, I think that we'll evaluate the sales trends, and we'll adapt, but that's consistent with where we've been, and where we were in the first quarter..

Thank you very much..

Next is David Tarantino from Baird, Your line is now open..

Afternoon. Matt, I was wondering if you could give us a little bit of context on what margins could look like in the second quarter, if this positive trend you're seeing in your business continues. Any sort of framework you could offer would be helpful..

Sure. This is Matt. I think we've always taken the sales first approach during the pandemic. And I think, while a lot of companies were targeting getting margins back faster, our goal has always been to get back to 2019 margins at 2019 sales levels. So I think that is still a very good initial take.

And what we've talked about historically is, when you get to that level and you go above that with sales that a flow through of about 30% is probably within the range that we perform that historically. So I think, depending on where the sales levels are, that will give you sensitivity as to where the restaurant level margins could be.

And then I think we tried to give very specific G&A guidance. And roughly, you're going to have pre-opening in the same ballpark that it was. So, I think you can kind of get to a total from there..

Got it.

And then David, I was wondering if you could comment on the current staffing environment that the industry is seeing and what you're doing to make sure your restaurants remain fully staffed and operational the way, the way you want them to be treated?.

Sure, David. Well, I think historically, as you know, we've -- our culture has always been what we believe a competitive advantage for us in a reason that we're an employer of choice. And once again, three years in a row on the Fortune 100 Best Places to Work.

Fortunately, we made the strategic decision on the management staff inside to keep all of our managers in place, which is enabling us to be able to execute, I think, as well as the operators are executing today. Just purely from a metric standpoint, we're at about 90% -- 96% of our staffing levels, pre-COVID.

So, I don't know that we have as much catch-up to do, perhaps as some others in our space. We've always paid a very competitive wage. We have a very strong career continuum that shows advancement opportunities.

We've also taken this opportunity to bring back a couple of our recruiters to help at the hourly level, the restaurants so they can stay focused on operations. So, really good about our plan in place. We don't really feel like the current staffing situation is going to have a negative impact on sales moving forward.

And our operators are doing a great job, I think of retaining the people that we have. And that's been something that we've talked about since the beginning of COVID that retention will be key once we get to this point.

And so, that will continue to be a focus and the strong retention we saw in the first quarter, we were hopeful and anticipate we will move through the rest of the year..

Thank you for that. And do you think this dynamic is going to lead to an escalation in labor costs in order to retain or attract the right talent? Are you considering chasing this with more dollars? Or do you think that will be required..

I think we'll always be smart about how we chase it. If we're in a competitive place, we're certainly not going to lose our people, our really good people over some small incremental increase that a restaurant has to pay somebody. But we're going to be smart and competitive about it. We have a lot of analytics that allow us to see the market is paying.

So that individual restaurant in any particular market knows what's happening right around them, and they can be appropriately competitive..

David, this is Matt, I would just add to that, one of the things that's really important about how you measure the pay at the hourly level as the total paycheck, that's being brought home in addition. And obviously, with ourselves, we're in a fortunate position to fully employ people for the hours that they wants to work.

And so certainly that is going to help us with people as they're able to get more hours and sort of be fully staffed, if you will. And the other thing we've seen as many have in the industry, a slightly higher check average, it also helps from a server productivity, and their tip amounts relative to the hours worked.

And so I think that that helps too..

Right. Thank you very much..

Next is Brian Mullan from Deutsche Bank. Your line is now open..

Just a question about North Italia. I know you've spoken about the potential for 200 units or so over the long-term, if you were to assume that the brand can go in every market where there's a Cheesecake Factory.

So, my question is can you talk about your degree of confidence today and that 200 units potential, is there some threshold number of units or even some threshold number of successful launches in certain geographies where your confidence goes up or down relative to where it is today? Just any thoughts on that would be great..

Thanks Brian. This is David. Our confidence remains very strong and very high on North -- in all geographies. We opened here in Birmingham, Alabama. We opened in Miami a second location and we continue to see great guest demand and great reviews.

So, there hasn't been a market that we moved into yet where it's caused us to pause and say perhaps that 200 number is not realistic. We think it certainly is realistic. We'll could continue to grow North at about a 20% growth rate. And we've seen that guests are responding to it in a very favorable way. So, we're very, very bullish on the future..

Thanks. And then a follow-up question, which is similar as just about our Flower Child in North Italia, confidence is very high to scale nationally.

How do you -- how would you define your confidence with Flower Child's ability to scale now nationally, maybe relative to how you feel about North Italia? And what are you looking to learn from your openings over say the next one to two years?.

I guess very similar. We've seen again, Flower Child open in Oklahoma City of all places. One of the busiest openings they've had since Flower Child's inception. So, we feel good about -- again, consumer, guest demand, and have been a little bit more of a lifestyle brand.

It's done well outside of Arizona, whether again, that’s Texas, Oklahoma City, Florida, California, you name it. So, we think that it will continue to grow and is working in different geographies.

As I stated earlier, some of the learnings from the pop-up that happened in Arizona a few months ago, are the type of things that we'll continue to look at employing if that makes the guest experience easier, faster, more convenient, along with the, obviously, delicious menu thus far continues to do very well.

We're launching new menu items, Flower Child on a relatively regular basis and they continue to resonate with guests as well..

Thank you..

Next is John Glass from Morgan Stanley. Your line is now open..

Two on that to build business just first, in the markets that are most -- as you got portfolio across different markets that are in different stages reopening. So, in the most reopened markets is that to-go business the same percentage or the same dollars that is in like a California where it's been slower to reopen.

And I think I asked this before, but how do you think about the headroom to grow that very strong off-premise business of $4 million? Is that kind of where you want it to be so you make sure you've got capacity to serve those dining guest that are coming in faster or do you still think there's headroom to grow that even from these very high levels?.

Well, I start John by saying that it is stable across all those geographies. So even in the markets that have expanded capacity, whether that's 50% or 75%, they're still seeing the high off-premise volumes. And we'd be happy if that's where it stayed.

I don't know that we're looking to grow that exponentially outside of what we're doing inside of the restaurant. We know that we can handle the capacity of the way it is today. And as the restaurants are even at almost 100% capacity maybe in Texas or in Florida, it’s their ability to handle the off-premise business gives us confidence.

As we said before because of the design of the restaurants, our ability to easily execute that off-premise business and that's why we're keeping as a part of it. The teams are doing a good job, and the guests are having good experiences. So I would anticipate the moving forward, we're hopeful that we'll keep what we have.

And we'd be happy if that was the case..

And then just as a follow up on the unit development pipeline across the portfolio, I think you talked historic about a 7% growth target.

Do you think you'd get there in '20? How soon do you get there? Do you think that’s the '22 event? It's a real estate developer, you're ready for that or maybe direct side to that given the target so far?.

I think, John was imagining 2022 that's what we're targeting. They have opened the real estate team, outsourcing sites right now towards that target. I think we feel good about that and then growing from there.

I don't think, we really look for upside to that number because there is a rate of growth that's appropriate for each of the brands and so we want to make sure that we're sourcing at top sites as we always have and sourcing the right people for those locations and growing at the rate operations can handle.

So that feels like the right number to us today on a future basis..

Got it. Thank you..

Next is Andy Barish from Jefferies. Your line is now open..

Yes, I wanted to just talk a little bit about your diamond business with patio is about 66% I think you mentioned and diamond sales just doing the quick math seem to be at about a similar percentage today than they were pre-COVID.

Can that number -- can that sales number for diamond goes significantly higher as we sit here today or the actions you're taking with spacing and things like that do put a little bit of a governor on it?.

Andy. This is Matt. Just when we look at the math, the simple math of those restaurants that go from say 50% to 75%, the absolute comp increase can be 10% or more. So definitely there's room, right? Because right now, roughly speaking, we have a handful that are 25%, maybe nine or 10 locations, but we're kind of 50-50, almost 50% and 75%.

So we notice going from 50% to 75%, you're going to pick up a good amount. And then as we continue to grow from 75% -- from there, I would imagine there's a little bit of a diminishing return, but still some positive level..

Great, Thank you for that color..

Next is Jon Tower from Wells Fargo. Your line is open..

Kind of, following up earlier to the marketing question. I know that I think you're -- when you look the idea that the discounting that you've been at for the off-premise channel is gone temporarily. But is that the case, first and foremost, that it's temporary? Then second.

How do you view using the marketing channel going forward? Is it more about building brand awareness and continuing to keep awareness levels high versus discounting? And then, I got a couple more if you don't mind?.

Sure, Jon. I think you nailed it. Yes, it's about brand awareness. It's about making sure our social presence remains strong, our search engine optimization remains strong.

And as long as we are not in a position where we're going to need to be doing that type of promotion, it will be about brand awareness for Cheesecake Factory and for North as well, to continue that brand awareness as it continues to grow..

Okay. And then just on the G&A front. And thanks for the quarterly guidance here.

But how should we think about growth going forward overtime, as unit growth ramps, this step up, roughly $47 million a quarter in 2021? Is that the first step up, a few more ahead, as you kind of reach that sustained level of 7% growth? Or are we kind of thinking that this is a slightly modest level of growth going forward? I think you've given guidance in the past as a percentage of sales, but it escapes me, at the top of my head..

Yes. This is Matt. Jon, I think, although, that's probably how I would talk to it for the future, right? I think, given kind of the uncertainty in our sales level, we thought it was better to be a little bit more prescriptive on the dollars.

But, really, in the backup, we think that gets us to, and depending on what the sales levels are, a run rate that is consistent with our target. So if I extrapolate out, originally our target was about 6.5% and then improving a-tenth a year from there that will put our target for 2022 at 6.4% of sales.

So I think that's an easier concept to work with, and then improving a-tenth a year from there and ultimately getting to 6%..

Great. And then, just lastly, with demand being so high in the off-premise channel and remaining very strong.

What are your thoughts in taking incremental pricing on the delivery menu specifically? Today, I think your run about low single digit, 2% to 5% or so, why not make that transaction itself, either margin or penny -- profit creative, or even margin neutral to accretive to an in-store transaction?.

Jon, this is Matt. Again, I think, the way we think about it is, is agnostic to the guests experience. I mean, I think that David has grown this company, targeting absolute guest satisfaction. And we think that if it's basically margin neutral is a fair proposition and will drive the business and we'll make our money that way.

And that's where we're at today. And so, the more that other companies take more pricing, the better off we're going to be actually, is where we sit. So I think it's a little bit of a contrarian view, but it seems to be working pretty well for us..

Got it. Thank you. Appreciate it..

Next is John Ivankoe from JPMorgan. Your line is now open..

Hi. Thank you. A slight follow up on the pricing question and then a second one if I may. On the pricing side, I mean, have you looked at your overall commodity basket? I mean, there's pressure in a number of different places, both on the raw commodities and I guess the cost to distribute them and process them as well.

Looking at 2021 versus 2019, for example, if there's anything that's catching your attention here that might necessitate filling up your pricing, that, in the previous questions, that you might not need to take..

Yes, John. This is Matt. I think it's a good longer term question. And we'll monitor the environment. It's so hard to tell. You know, a lot of the commodities markets remain highly volatile, and that heightened levels today, but the futures curves look like they're going come back to sort of, more normal levels.

You know, fortunately for us, we've done a great job. Our supply team has been amazing in the past 12 months keeping things at a very consistent and predictable level.

So as I sit here, and I look at our baskets, whether its produce or dairy or meat or seafood or fish, they're all somewhere between plus 5% and minus 5% year-over-year and that gets us to the weighted average of about a 2%. So we're in really good shape with about 75% contracted for the year.

And, you know, as you know, what we take pricing twice a year. We'll look at it -- we'll see where, you know, the contract starts to build for next year..

That's perfect. In the past, you guys have given -- very specific comments on relevant supply in your specific trade areas or maybe your specific centre that you're in.

Could you update those? I mean, has -- the number of relevant supply or competitors closed? Round you in other words, are you seeing less relevant supply in the near-term? And -- if you can comment, you know, whether you think those spaces will be filled with restaurants over the next 12 months or so if there's activity from a lease perspective in those sites? And how many of those sites maybe you can fill -- with your own brands?.

John, this is Matt. It's good question. Just to be honest. We did do, sort of, a quantitative study in the fall. We follow it back up more anecdotally with our boots on the ground.

And indeed, it is a little bit of a mini wave of closures in January, right because of the just didn't make it, sort of, out of the holiday season, but it was not a big, big number. And there are a lot of locations that we might look at or getting calls about those today.

So if anything, there was a little bit more relief on the supply side near us, but we don't have that quantified..

Thank you..

Next is Jeffrey Bernstein from Barclays. Your line is now open..

Great. Thank you very much. Two questions. Just the first one a follow-up on the to go business or off-premise. I think you mentioned in the first quarter was, I think, 43%. And then I believe it's now down to a third of sales in April. So I'm just wondering, I know you mentioned you're obviously hope to hold those levels.

I'm just wondering what level were referring to because it looks like as things reopen, you know, the premise slipped, and maybe you can talk about it in terms of dollars. I'm just curious where you think it settles, relative to where it was before.

Just try to figure out how much incremental sales you think you can hold on to from to go even if you got the in store back to 100%?.

Sure, Jeff. This is Matt. And we are really talking about the dollars piece of it to be fair to your question there. And so when we think about -- really from Q1 to where we are now today, we've gained a significant amount of business in over 10%. And that's been on-premise, while we've kept the off-premise basically at the same levels.

And so you get that that mix shift is what was occurring. But what we maintain basically the $4 million annualized AUV off-premise number and recaptured on-premise, while we have been doing that..

Got it. What was the number of pre-COVID relative to that 4 million, I believe it was sub 2 million or.....

It was one-seven is, one-eight is depending you know, sort of, in that range and then growing by about that..

Go it. So if you were to maintain that extra like north of $2 million, obviously, it would be huge on your CV base. But you could talk about maybe the margin opportunity on that.

I would think that off premises was a slightly lower margin because you have less apps and desserts and drinks and stuff, and some fees for delivery, but obviously you were levering your fixed cost. I am just wondering where the margins could go, if you were to hold onto that extra 2 million or so of incremental to go sales? Thank you..

It's relatively neutral margin for us, right? So we -- we've got a great relationship on the delivery front and that continues to be a very consistent 40%, online ordering 30% and pick up 30%. And we do take a little bit of extra pricing as was referenced low single business for delivery.

So when you put all of those pieces together, the off premise business, it basically ends up around the same margin as on premise. And so we're pretty agnostic about where we drive the sales as long as we're getting them..

Great. Thank you..

Next is Brian Bittner from Oppenheimer & Co. Your line is now open..

Thank you. With your Cheesecake units trending 7% above ’19 levels, it is showcasing just incredible demand out there.

And just curious how you want to thinking about what, if any stimulus impact may be in there or maybe perhaps there's evidence that you are seeing like off premise or et cetera that suggests this strong trend that you're seeing for same thing is actually sustainable.

So just your thoughts there?.

Yes, it's a difficult question. And you know, nobody has that crystal ball, I think, you know, we typically get a little less benefit from stimulus than sort of lower down in the price ticket.

It does feel when we look at the trend, the last four weeks have been remarkably consistent which is a hallmark of the Cheesecake Factory and is really good leading indicator for me and I'm into the statistics and look at the day part the day of the week, the geography.

When I start to see aggregated numbers behave in a very normalized fashion, week over week, I think that that's a very positive signal. I don't know that -- that's permanently sustainable, but it certainly feels like the momentum is there outside of the stimulus money..

That's great color. And my follow-up is just going back to the differences in capacity in Cheesecake Restaurants like in California versus Texas and Florida.

Are you in fact seeing really big differences in same store sales verse ’19 levels across your portfolio, simply based on capacity differences on the indoor dining or are you actually seeing pretty similar trend across your asset base?.

You know, certainly when there's capacity differences, the difference between 50% and 75% you know that comp difference is high single digits, right? So there is a big difference, right? And there was no question. Well, we opened up a little bit more particularly on the busy for say, Friday night through Sunday brunch.

We're absolutely able to capture more business..

So what is kind of the average comp, if you can tell us for, you know, the store base that's in that top core tile on capacity?.

It's been -- to be honest, I think it's been moving so often. So we -- we haven't looked at it over a sustained period because you'd have to take a sort of a vintage, if you will. But again, I would just say that the difference between we're roughly 50/50 right now, between 50% and 75% class extended, and the difference is high single digit.

So you can kind of extrapolate from there..

Yes. Thank you so much..

Next is Dennis Geiger from UBS. Your line is now open..

I wanted to ask another one on the dining business. I think Matt, you just spoke to dayparts, days of the week consistency very recently, and maybe I missed it.

But I'm curious if kind of the last couple of months, if you've seen different behaviors around dayparts days of the week than you saw maybe six months ago, or then you've seen historically and if that's the case, how you think about that going forward, and maybe what that can do to the to the dining business, least kind of over the medium term, if you're getting folks to come at a different dayparts and have different days of the week than they normally would?.

Yes, I mean, I think, first and foremost, as we reopen, you just see that the weekends, the numbers get stronger, because that's where the on-premise demand has always been and what produce capacity, it does limited.

One of the things that I would point out that I think is good positive for us is the biggest growth we've had in dayparts, if I look at the most recent trends is the mid afternoon. And so, lunch was even slightly bigger than dinner too. And so those have been two areas rebuilding the shoulders, right.

And then the other thing I would say is that from a comp perspective, we are seeing outsize performance in the middle of the week. So that's also positive, right, because we're the areas of pressure have been found for us at the middle of the day in the middle of the week. And we are seeing outsized gains there recaptured. So I think those are both..

That's helpful and one more if I could.

Just curious in your perspective on sort of mall traffic, competitor restaurants located within malls around your locations, if there's anything to share recently on what you've seen and the implications for your brands, and then kind of your thoughts on the go forward and the implications there for your brands?.

We you know, we haven't recalculated that, but we did see some closures right after the holidays. And certainly, there is a little bit less competition near us. It seems to be quickly stabilizing, obviously with the trends.

I would say just to comment on the mall traffic, I think there's a recent Wall Street Journal article that talked about the positive momentum in A property's for foot traffic.

And so, I think if anything, look, we've proven that in without them all being open, we can get the business and so if they return some of their foot traffic, that's only going to be a net benefit for us..

Dennis Geiger:.

We have the next question from the line of James Rutherford from Stephens Inc. Your line is now open..

Thanks for taking the question. You saw some leverage on your cost of sales line. I think you called out mix bakery sales in price, if I heard correctly, as the three drivers and there's been a few questions around commodities and menu price already.

But when you put all that together, just how should we think about that cost of sales line, the P&L going forward? And I have a follow up please..

Yes, it was probably -- it's probably slightly more beneficial than it will be over time because you do see some mix normalization. The pricing leverage is permanent. So we've had on that line item, right, because we've been balancing out the labor versus the commodity piece. And so, you're going to get that permanently.

And we do maintain some degree of elevated dessert sales. And so, I think in aggregate, we'll still see a favorable trend on commodities, maybe not quite as positive, as we saw in the first quarter..

Okay. Thanks for that.

And then, for follow-up on Brain's question for a moment ago back, near-term or recent trends, I notice that you called out in prepared remarks the most recent week is also running 87% above 2019 levels, implying perhaps the results you are seeing are not so much one-time stimulus, but the same time kind of week upon week you are seeing more say open up capacity which is propelling the overall comps.

I'm just curious if you could share even just curious if you could share even qualitatively looking at a specific geography or geographies, are you seeing the sales volumes hold up week-to-week or even build after opening? Or is the kind of, stability or comp through April more a factor of, more states are opening up fiscal? How that makes sense? That's kind of a question on the durability or recovery here..

Yes. Sure, sure. From a capacity standpoint, it doesn't change too much in April, right. So, most of the California reopening occurred in March and that's obviously the point of inflection for us. But the demand piece of it there. So, mostly what we've seen is a very stable trend after reopening.

And, we typically build slowly during this quarter with seasonality. And then, just from our consumer perspective, it looks and feels like people are going to want to get out and celebrate graduations and do some things like that. So, I wouldn't be surprised if we're from here, we followed a relatively normal seasonal pattern.

But again, these trends are still developing. And April has been very consistent for us and that at least helps us manage and plan the business..

That's great to hear. Thanks, and Congrats..

Next is Lauren Silberman from Credit Suisse. Your line is now open..

Thanks. Matt. I believe you might have mentioned, you're saying higher average checks.

Can you expand on what customer behavior changes, you're observing as restaurants reopen? But it makes more premium items, alcohol consumption, higher intrinsic, appetizer and dessert?.

Sure, it really is not necessarily the reopening per se. I mean, it's been going on since there's been the ability to dine in at all or even if that's been on the patio. And the guests are looking for experiences.

And I think we're just obviously, -- we are the experience or dining leader, specifically in the Cheesecake Factory, North Italia, all of all of our concepts. And people are just looking to have maybe a little bit more. Dessert sales have generally trended a little bit up. The amount of intrinsic rate on food items is slightly higher.

So it's just kind of a little bit across the board that people are looking to have this whole Cheesecake Factory experience..

Great.

And then, the just another on off-premise, do you have sense for the overlap between the on-premise and off-premise guests? And how customers are using those occasions differently? Are you seeing any diff in dayparts, peak periods or personal menu for on-premise and off-premise transactions?.

Hi Lauren, this is David. They're very similar. So I think that was stated a little bit throughout the pandemic that the increase in some of the lunch business that we've seen in our off-premise promotions was very, very strong. So we saw a lift from that.

But as far as ordering patterns, that high intrinsic rate of desserts as Matt mentioned, we certainly see that, when it comes to the off-premise guests, whether that's delivery, online ordering, or calling in and picking it up. And that average check is very similar.

The average check is calculated a little bit differently, but it's maintained around 45 $48, on the off-premise, throughout COVID, and those elevated experiences around deserts have continued to stay strong now for 15 months..

Great. Thanks so much..

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