The Cheesecake Factory Incorporated (CAKE) Earnings Call Transcript & Summary

Excellent. Welcome, everyone, John Ivankoe with JPMorgan. I want to thank The Cheesecake Factory management team for sponsoring an absolutely terrific dinner last night in North Italia. We didn't have -- hasn't had the opportunity to visit the concept yet. You know they do a great job with food and service, but I think even with high expectations, those expectations will be deemed as terrific. And Flower Child, which we didn't have a chance to eat in, but I have before previously, Austin, for example, an absolutely beautiful design concept. And I think everyone would agree is a next-generation offering that is very consumer focused in terms of food and service. So I thank you again for that. And it really does highlight how much creativity and capability there is in The Cheesecake Factory organization, both insisting within the legacy Cheesecake Factory Corporation, but also Fox restaurants, which was acquired in the fourth quarter -- first quarter, whichever you announced late 2019, early 2020 after you doing a joint venture and involvement with Sam Fox to be in the North Italia and Flower Child business. There's a lot that you have. It's interesting. There are different ways to approach multi-concept management within casual dining. Some like the [ Darden ] models are very scale-driven, business, other businesses or maybe more creative focused and really focusing on the capabilities within each individual concept, including allowing each concept to buy many of their own ingredients, many of their own products that are maybe similar but different than some of their neighboring concepts. So I wanted to just get a sense of how Cheesecake has managed? And if that -- and if your opinion that, that is optimal management, how this multi-concept approach, I think you have 16 concepts...

On a single location, a lot of concept.

Yes, absolutely. But still happens to be in some -- obviously, you have a hugely different revenue contribution in the company. But how that may evolve?

So I think that we have maybe a blended approach to the 2 that you talked about, right? We want to be able to leverage our scale as much as we possibly can when it comes to purchasing, supply chain, IT infrastructure, HR resources, human capital resources, et cetera. But the way we've structured the deal is unique and different than what may be typical. And that is that Sam and his team at FRC are running the majority of the FRC concepts out of Arizona with their management team. And then when something becomes what we believe could be nationally scalable and could be successful across the country, we take it under our Cheesecake Factory operational umbrella, and we start designing, building the concepts and then operating them. But early on we've put an operator from Cheesecake Factory in the concepts that we think can be growth concepts to learn them soup to nuts, and then take a little bit of what they learned to Cheesecake Factory in their career and perhaps help operationalize some parts of the business that we think can run a little bit more effectively, but being very careful to keep the unique culture of each one of those concepts intact. Like, going to a North Italia and going to a Flower Child should feel very unique. And we're not trying the cheesecake guys, all of these concepts. And having Sam and his management team in place, I think, is key to that success.

And I realized as I made the introduction and talked about your concepts, I didn't introduce David Gordon, the company's President, Matt Clark, the company's CFO, as we're talking just to make sure that we know who we have on stage. So is it at the point where even compensation, how managers are compensated are different, how store-level people are different? Is it down to that level where each concept really has their own human resource practice?

Well, we're careful. And a good example would be in North. We've taken some of the Cheesecake Factory practices such as the equity program at Cheesecake, right? Been very successful for our GMs and our executive chefs and kitchen managers to be on the 5-year equity plan. We decided at North that we wanted to do the same thing, that, that would be important to the long-term growth for those people that were at North. And we want each one of the concepts to be able to grow from within as much as they can. We don't want to really cross-breed and take Cheesecake Factory management at the lower levels and all of a sudden have them working as store managers in the other concepts. Because we think over time that will perhaps dilute some of that culture that's been created there. But things like a car allowance, some of the bigger programs that we have at Cheesecake Factory, where we can add them and have them work in the other concepts, we will. Probably not for Flower Child, right? It's a smaller concept, and it doesn't require the same size management team, perhaps doesn't require some of those same attractors to work there for that younger generation that maybe is working in North. So we take each one and make that decision based on the concept's identity.

We'll save Cheesecake for a minute. But North Italia, I think the total number of units, I think, is in the mid-30s, a fairly similar number at Flower Child, maybe coincidentally. North Italia is said to have a 200 unit potential, which is close to where Cheesecake is today. And how is Flower Child's potential? And are there other things, for example, like Culinary Dropout or Blanco or The Henry that you really have aspirations for at this point?

Yes. So we have stated publicly that we think there can be the 200 north domestically. We haven't talked how many we believe there can at Flower Child, but we do believe it will be a national concept. This year, we're taking it under the Cheesecake Factory, operational umbrella, and we'll be, again, designing them, building them and growing them. And the other concepts, we're going to continue to evaluate them. Culinary Dropout is probably the next lead horse in that race. We'll be opening 3 this year, expanding into Georgia, going to be in Charlotte. So in some new markets, where we'll really test to see if the high sales volumes we've seen in Arizona and Texas translate into some of the new geographies. And that's really the litmus test for us. If these concepts work in many different geographies, that allows us to feel like, and of course, the margin structure and all those other things are in place, they can be a national brand. So Culinary Dropout and Blanco, as you mentioned, is another one that we're pretty excited about.

Culinary Dropout have been in North Scottsdale, fantastic, very large format restaurant. Cheesecake Factory large -- everyone knows large-format restaurant. Flower Child kind of more typical for casual dining in North Italia kind of in the middle. So it's interesting, it's like do you consider that you have specific expertise in large format? Or is your business to the point where, hey, you can scale brands based on the available square footage of a site that you like?

I think B, right? So now that we have this portfolio, whether it's a 3,500 square foot Flower Child, the typical older -- old school 10,000 square foot Cheesecake. But we're opening Cheesecakes today that are 7,500, 8,500 square feet more typically than the old days when we're opening up 10,000 to 12,000. And North at around 6,000 square feet sort of gives us something really nice in the middle. And Culinary Dropout, if you go to the Domain as an example, that one there is 7,500 square feet. So it, too, can flex from probably 7,500 all the way up to the huge large format that's in Tempe as an example that's close to 10,000 square feet.

And we're working through Sam and his team on additional opportunities, that we have a concept called Dilbert, and it's more like 4,000 to 5,000 square feet. So we really want to have the ability to flex in the occasion, the type of the restaurant and the real estate, and we think that, that's competitive, we're going into development and they want 2 or 3 of our restaurants, right? So that critical mass, that scalability, we think, is a competitive advantage.

It's -- and we're obviously talking about it professionally within JPMorgan, how -- like what we return to office or a lack thereof, office occupancy, what have you, cities versus suburbs? I -- gosh, 20-plus years ago, I think you were looking at a unit in Columbus Circle. I don't know, like late '90s, tell me if I'm wrong about that.

There was a couple of Manhattan sites.

And maybe like Time Square is always kind of like, "Can we do it? Can we do it?" You guys were a much smaller company, obviously then. But the cities are, hey, this is interesting, and this is starting to open up and you can now get sites that 5 years ago, you couldn't, and perhaps a little bit more expensive, those were my guess.

Our real estate strategy is always, if it's an A site, we're going to look at it no matter where it is, whether it's deep in the suburbs now because we have the smaller footprint of a Cheesecake Factory or if it happens to be in "urban" market, if it's a great location, we're going to look at it. We're not going to be sitting back and saying, no, it's too urban. Some of the urban markets have certainly been challenged throughout COVID. But to your point, people are coming back to work, some parts of the country, a little slower than others. But if it's a great site, we have a large portfolio, and maybe it's not a Cheesecake Factory, maybe something else will work in the bottom of an office building a little bit better than the Cheesecake Factory may have.

Well, you have your Cheesecake Factory Michigan Avenue went in the 90s, right? I mean, that's a...

A long time ago.

Yes, as we say, like that's -- yes, so it's shown that it's kind of worked in a number of different ways. And of course, I ask this question in the context, 7% square footage in an industry where people say, casual dining, full service is mature, full service is built up. It's easy to kind of say that from the outside. But as you kind of think about just your company, 7% is certainly on the higher end of where your peers maybe, even I'd have to look we're a Texas Roadhouse, for example, will grow, that has its own kind of site profile. But talk about kind of the placement of that 7% top-down number, bottoms-up number. How did you arrive? Like why 7% is the right number versus 5% or 10%?

No, I think it's probably an average, right? I mean, as David said, we're site-specific when we built that up, if you think about it from both, bottoms-up, we're thinking about each brand, where it's at in its life cycle, how many units can open. So like North Italia, we have a huge runway. But operationally, you're only going to get to maybe 20% to 25% unit growth annually to support that to hire the managers, to hire the staff, et cetera. So that puts that brand in a 6% or 7% unit growth right now, right, for example. Cheesecake Factory is a much more mature concept. We're at 2/3 of the unit build out. It's probably going to grow at that 2% to 3%. So that puts it at a 5% to 6%. So we took each brand and we're kind of where are they and how much can we grow. On the flip side of it, too, we looked at it and say, in aggregate, we think that there's a lot of opportunity to gain market share in experiential dining. So if we could grow at 8% or 9% because the brands take off and we could fuel that, I think that's a potential, too, right? So that isn't a limiting factor. Even if we think about full service being mature, it's not getting easier for independents to maintain their positioning. And that's what a North Italia feels like. It feels like you're independent local Italian restaurant. So we think that runway is actually much greater. It's more that, that's where we sit today in terms of our scale and the life cycle of each of the brands.

And it is interesting, I mean you think a Cheesecake Factory growing 2% or 3%, the amount of cash it generates. I mean, you guys have always done a good job of keeping the asset up and other businesses at a truly venture stage, I mean, even like incubation kind of ventures stage. I mean it's -- how do you -- you say, okay, it's a like a CPG company with a venture portfolio in it. This is like, what you're doing is unlike what anyone else is doing. And certainly, from a modeling perspective, and you know this, it's hard. And so like how do you -- I mean, from a CFO and expectations and the fact that even the timing of restaurants and when they open, like unit on Lincoln road that, no fault of your own, is 6 or 9 months later probably than what you wanted. Like in terms of hitting your algorithm on an annual basis, is there a way to kind of reduce -- "reduce" risk, reduce volatility, have more predictability in these results, given the fact of, as we said, 16 brands, some are mature, some are big kind of ventures, like they're just hard to the business that are just beyond your control in any given quarter, and even any given year.

I think it's interesting. I'd kind of separate into 2 parts. On an internal perspective, just to help people with that, the unit economics for FRC North, the margin profile should be similar to Cheesecake Factory when we get to the level that we want to be, right? So -- and maybe 1% or 2% better. Italian is a little bit simpler. But if people simply modeled the entire portfolio at The Cheesecake margins, and then we do provide sort of that $1,200 a square foot sales perspective, you're going to get pretty close. The big piece on the predictability, which I think is really sort of a linchpin for us, is on the aggregate margin piece. Not so much about the portfolio, but about the timing of the input costs over the last year and the pricing actions. We actually kind of have the same philosophy with North, with Flower Child, as with Cheesecake Factory, and there was a little bit of catch-up to do. I think if we see the input cost, we've seen labor over the past couple of months be much more stable. If that continues, and we don't have another big factor like a war, that alone, I think, gets us back into the -- a narrower range of expectations more so than when the openings happened or the portfolio itself.

So let's talk about as reported, now I'm just trying to find my numbers here in front of me. Fiscal '22, Cheesecake Factory brand of just 77% of revenues, and Matt please correct me, 12.5% store margin; North Italia, which is meant to be the higher-margin business, 10.5% store margin; and FRC ex Flower Child is 14% store margin. And Flower Child is in with your bakery, and so that kind of gets a little confused. So which is -- so here we are -- and again, I'm just going to kind of take your -- kind of point maybe away from your step. We're talking about a mid-teens margin business and still, 100 -- I mean, one, is Cheesecake Factory's 300 basis points away, North Italia relative to what it's meant to be is 800 basis points away. So this is the opportunity in your story and your stock, and I think what you spent a lot of time talking about, when do we get to these -- let's talk about Cheesecake Factory, let's talk about North, when is like the point where you switch on model mid-teens, because that's where we're getting at.

No, it's a perfect lead in because you said 300 basis points for Cheesecake Factory, we took about 3% incremental pricing in December, right? So we had done -- I mean that math was pretty clear to us is purely driven by the inflation in the second and third quarters of last year relative to the pricing that we had taken. So now the key is what's inflation going to look like in 2023 and just keeping up with that. But in December, we were slightly ahead of the 2019 Cheesecake Factory margins, right? So we feel like we've done that catch-up, and if the input costs are more stable, we're going to see a lot more stable results from our end. Same thing actually with North Italia. So we actually took some significant pricing in the fourth quarter and have another round there. And we took the same philosophy. I mean nobody knew exactly what was going to happen when we went from 2% inflation in January of '22 to 9% in June. And our commodities for last year were 15%, 16%. I mean, I would have never guessed that could have happened. So when we look at the pricing, this puts us even still a couple of percent behind the market. So we feel good. We have some latent pricing potential. And we're going to close that gap. And so we feel like, look, long term, if you look at the sales from last year, you can see that the brands are thriving. This is not a problem with the brands. And as long as we're at or below the market level of pricing, then we should be good.

Discuss first quarter, second quarter pricing plan. I mean you mentioned North Italia, I think you have something coming up, if not already, at Cheesecake Factory. And is that increase enough? As we kind of look for fiscal '23, is that enough to kind of get us to those?

So we think mid-single digits total inflation, right, where we're talking about the entire basket of commodities, labor and other OpEx. So we took about 3.5%, basically married the last year Q1 pricing for Cheesecake Factory. And so that would say if we get to the summer and things have continued the same, you're in a 1% to 2% level, you're back to kind of a normal cadence because that would get you around the 5% to 6% total pricing necessary. So we feel like that's realistic. The commodities outlook for us, you've got the 10% to 12% in the first quarter because you're really lapping pre war, right? And so there's a big hurdle there. But for the back half of the year, we think it's 3% to 4% if things don't change. Wages are at the lowest level of inflation for us in 5 or 6 years heading into the year. So those indicators to us are saying that the business is heading to a better, more stable environment.

So the economy is not at the lowest level of wage increases in 5 to 6 years. Does that just mean last year was just so extreme. And like do they -- they're like, "Hey, I don't like my 2% to 3% wage increase. I want to be 7%." I mean do they look at it year-over-year? How do they feel about something you don't know about?

I think there was a lot of catch-up that happened in the market, and you're talking about 10% to 12% wage increases over a 1-year period in the middle of the pandemic, right, to kind of rightsize things. But keep in mind, what we're seeing too is for Cheesecake Factory, we have 4 times the number of applicants per open position as we did last year. There's definitely a flight to quality. So you have some concerns about the environment. And what we've learned over 4.5 decades is employees look at their paycheck. How much money did I take home, not necessarily the actual percent, no. So if you're a server, you're making really good money at Cheesecake Factory the way tipping is today. If you're a line cook, you want to get your hours. And so we provide those hours, and so they look and say, I'm making what I need to make. And if I go to an independent, I may not get that. They may close Mondays and Tuesdays, right, they have to work a second job. So I think we're seeing some of that play out to our benefit as being an employer of choice.

And your quality of your workforce is back to '19? Or how is it -- applications -- applicants are one thing, but quality of applicants is another right now.

Over the past 6 months dramatically improved. So in the middle of the pandemic, we're hiring people with no experience. I think everybody was hiring people with no experience, right? This is how you hold a knife. This is how you work in a restaurant. Today, I think there's a lot of people that move back into the hospitality industry. People that had left, they were working in an Amazon warehouse. They're trying to sell insurance or just thought they were going to do something different. We're seeing much more strong experience-based people that are applying today.

Okay. Understood. So the price increases that we're taken, so they're very cost-based, but obviously, there is a, hey, what the consumers feel good about, what the consumer can bear, but there's obviously a demand component to price as well. How are you seeing your current elasticity? Because the consumer, just like with wages, not just looking at it year-over-year, they're looking at the absolute tickets of managing their ticket, looking at say, hey, it's what their total take-home pay is. What you said on labor is almost the exact same way that maybe customers look at the ticket is, I love Cheesecake, but this is a big ticket, I'm going to come one less time a year. Well, if that happened, that would matter to you, especially for core customers. How is the consumer -- when we're talking about pricing, if it's just like a number, how is the consumer feeling about the relative value of the brand?

Yes. I mean I think that when we look at the -- particularly the government data where our pricing is 3% to 4% less than average. So I think our value proposition is holding up well. But we never direct people when they come into The Cheesecake Factory, I mean that's sort of been one of the pieces that David Overton has been so strong. We don't put table times. We don't do anything like that. So people are going to come in and choose. We have so many price points. If you want to get an appetizer for $12.95 is probably enough to feed you, right? And so that to us is part of the magic. So we look at incident rates. They are the same as they have ever been. In fact, dessert is 1% higher than pre-pandemic. And in the fourth quarter, year-over-year, with 9% pricing, we had exactly the same purchase behavior as we did in '21.

Your -- I think this is out of your K. Your -- gosh, correct me if I'm wrong in this, your Cheesecake Factory ticket as reported, $29.40 in'22 , $29.30 in '21, $28.90 in '20. Is that right that it's been flat over a couple of years? Or do I have my table wrong?

So that's a total and to what happens, and we've had this question with the whole mix of the off-prem, on-prem...

I mean, because [indiscernible] they're like, "Hey, listen, their effective price is..."

So the on-premise is a couple of dollars less than that, but the off-premise when it was 32% was weighting the average ticket higher because of the way that we calculate it. So it has been, yes. But if you were to say on-premise, I mean it was $23, $24, now it's $26, $27 after the past couple of years.

Again, getting back to the art of the restaurant, which you guys really do so beautifully and again, it's especially how you see the kitchen staff all interactive, mean it's really a beautiful thing to see. I wouldn't -- I've heard things last night like, "Oh, Cheesecake Factory has 1,500 SKUs and 230 menu items and 70 sauces made on-premise." Of course, it's very easy for me to be an analyst and say, listen, this industry has benefited so tremendously of focusing on efficiency, of doing fewer things better, of focusing the 80-20 rule. It's like, hey, listen, let's like do that, really focus on the -- on maybe the 20% of items, that 80% of customers order and just do a better job with those than anything else. So there's -- you guys are different than the rest of the industry in terms of what your approach has been. And I like -- what I'm saying, it's got the right one, but it's just kind of a statement of fact. Are we -- like the technology and what can be done on off-premise and just how -- there's been some capabilities that have been added overall in food service that didn't exist in the '70s, and '80s and like the '90s and what the business is built on, I mean, you guys really -- you are a scratch kitchen, really, chopping. But cases of uncut and unclean produce come in, and you guys are like, it's serious, I mean, of any fine dining restaurant.

Yes. I think when you sit down and you taste it, that's the reason that we have the highest average unit volumes in the industry. And that's the reason that, that choice across that menu and the [indiscernible] that we've talked about for so long is the reason that sales volumes are what they are in Cheesecake Factory. And so we're, at the same time, though, not going to -- not look for opportunities to increase productivity, right? An example we get frequently is that we pound a lot of chicken in our restaurants, right? Chicken comes in. We got a -- comes in with the breast, and we have to get it down to an inch, right? So we've actually now pushed that down to our supplier and said, how do we find ways to take some of that productivity challenge that's in the restaurant, reduce some labor cost and make sure that, that offset on the cost side of that poultry doesn't inflate the overall cost of sales and we get a benefit in the restaurant. But that complexity also keeps competition at bay, right? We can all name the competitors who increased to 150 menu items over the past 10 years are now talking about getting back down to 50. And in the long run, that's probably going to have an impact to their overall sales.

Yes. I understood that. And in terms of the people that are attracted to the kitchen, in some cases, that simplification is making the job easier for the staff and allowing them to do the most value-added activities, for example, there's any like coming out? I mean, as we -- as that's kind of been a top-down approach, I mean, is there like any upflowing from some of the operators that exist at the store level, say, "Hey, listen, I have ideas of how we can be better, faster, more consistent, maybe even put something better on the plate."

All of the systems at Cheesecake Factory over the past 30 years have been created by the operators in the restaurants. It wasn't Bain and McKinsey did show up and say, "Here's how you should be running the restaurants." They're all internally grown systems and processes. So we have a lot of mechanisms within the structure today that allow people to bring up their best ideas. They get shared directly on to my e-mail or it shows up a David Overton's. It's people, whether it's a menu idea or a simplification process or a way to make any process easier and better. We include also all the way down to the hourly staff to be able to be a part of that discussion. I think part of the employee value proposition at Cheesecake and when we talk about growth, what we didn't really talk about is human capital is going to be the linchpin for all of us in this industry moving forward. And our employee value proposition, being on the Great Place to Work list from Fortune for 9 years in a row, but it's also the quality. People want to work somewhere that they can be very proud of, especially Gen Z and Gen X, they're proud to work in the kitchen that's a scratch kitchen. And I think that helps us with attraction and then keeping people because when their family ask them where they work, they can sit up properly and say, "Hey, did you know everything is made fresh from scratch" and it makes a difference on the employee side, too.

It was an interesting comment that you said about Sam, and this is going to be a bad paraphrase, but have the customer flow and the revenues first, and you can always go back and kind of solve the profitability, the cost problem after. So like is that -- is that a multiyear journey? I mean, are there things -- like, again, I mean I want to get back to that Cheesecake Factory kind of margin of 12.8%. In terms of, "Hey, we need to be faster. We need to be better. We need to be tighter. Less waste. Less comps or whatever you want to call it. Do you have -- are there any big ideas that kind of exist in the store, it's going to increase? Or is it just going to be just a series of, "Hey, we just need to be incrementally better at a lot of different things."

I think that we've always had the incrementally better at a lot of different things approach over time. That doesn't mean we're not willing to look at any new technology that may come around that may make it easier, faster, better, as long as it doesn't compromise the guest experience. And so typically, we'll get asked about tablets on tables. That would be really easy. Why don't you go to 8 tables in the station and just put a tablet there and let guests, well, that's not high touch hospitality. So it doesn't mean we won't look at it. And I think having the portfolio of concepts gives us a greater opportunity to experiment perhaps with things that we might not do immediately in The Cheesecake Factory, but maybe we could test. As an example at one of the concepts at FRC, they're testing handhelds. So would we use handhelds at Cheesecake? It's easy to say no right away. The menu is too big, it's really complicated. But if there are things we can figure out in the ecosystem of FRC, then maybe we could translate to Cheesecake. We'll look at every opportunity to be more efficient.

And especially as that -- it used to be that the waiter or waitresses wasn't comfortable in using handheld technology. Now, of course, they are. And it's certainly been a change relative to when they were first introduced. So let's talk about the composition of your Board. So I mean, Roark is probably the single biggest restaurant, directly or indirectly, restaurants in the country, and they were on your Board for nearly 2.5 years. You've recently added some capital markets, financial real estate expertise replacement partially related to the Angelo Gordon Company. So it's kind of interesting. Like, maybe these guys are kind of financial engineers. Janice Meyer, dear friend, performer, #1 ranked analyst is in your company. You guys like, okay, listen, you have some real Wall Street-type financial thinkers that have been on your Board. Is there any influence that kind of comes out of that? Or there's like you just keep on going out and running great restaurants and the stock is going to take care of itself?

Well, I think, look, the blend of operations and finance are the key pillars. So we also have a couple of long-term operators that have been in the industry. And I think our business has become more complex. We have a portfolio. We are growing multiple brands. We're focused on capital allocation. And the Board spends a lot of time thinking about the dividend and the repurchase and building units, and making sure that what we're driving to ultimately is providing ROIC for the shareholders. Do they trust the operations seeing to get the margins back? Yes. So when you do that then, how are you going to optimize the company? And somebody like Janice has a lot of experience understanding how Wall Street thinks about multiples, and so how can we get credit for it when we achieve what we want to achieve? So I think that, that blend and bringing some of that expertise is based on the fact that we're not as simple as we used to be.

And I think as we talk about new unit inefficiencies, especially when we talk -- look at the North Italia margin, for example, when we look at -- presumably, we're going to get a clean look at Flower Child relatively soon. I think that concept of the unit inefficiencies in the margins is something that probably is going to be very helpful in terms of people saying, "Hey, listen, this is -- this is an average business or this has been a potentially great business."

And in that regard, the margin structure, well, the ultimate profile looks and feels like Cheesecake, the initial does not. And that's a great point of differentiation, right? Cheesecake comes out and runs 125% of what we think AUVs will be, right? North is at 75%. It takes 3 or 4 years to build up, to get the sales, to leverage it. And so it is a very different look and feel, it's much more traditional in our respect. So being able to do the math on that, I think you're right, would give people that perspective.

And just our final question. I mean are there any misconceptions or just like Street believes one thing and you guys just see something different based on the facts that you...

No, look, I mean, I think it's hard to understand running an operations-based restaurant company through the last 3 years. Most of our public peers are marketing-based companies, and a lot of the margin leverage has been cutting marketing and stopping the discounting piece of it. How do they recover? And do they now need to go back and do TV? I think for Cheesecake Factory, the pricing lag and trying to understand the timing of the pricing versus the inflation, people want to just see it print, which is totally fair. We have confidence that it's going to get there. And I think doing that math has been tricky for people understanding the lag effect of the pricing piece of it. So -- but we feel like we have caught up and we feel like we have great sales trends, and we're seeing better input costs. And so in total, it feels more stable.

Excellent. Thank you so much.

Thanks, John. I appreciate it. Thank you everybody.

Thanks, John. I appreciate it. Thank you.