Cheesecake Factory (CAKE) Q3 2026 earnings call transcript

Good afternoon, and welcome to our third quarter fiscal 2026 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 based on historical facts and are considered forward-looking statements within the meaning of the private securities litigation reform Act of 1995.

Factor 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. cheesecakefactory. com and in our filings with the Securities and Exchange Commission. All forward-looking statements made on this call speak only as of today's date, and the company undertakes no duty to update any forward-looking statements. In addition, during this conference call, we will be presenting results on an objective basis which exclude acquisition-related items, impairment of assets and lease termination expenses and other items. Explanations of our use of non-GAAP financial measures and reconciliation 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 third quarter financial results and provide commentary on our financial outlook before opening up the call to questions.

With that, I'll turn the call over to David Overton.

Thank you, Etienne. We delivered an outstanding third quarter with revenues once again exceeding $1 billion. This marked our second consecutive quarter of record revenue while margins and earnings also finished well above our expectations. The Cheesecake Factory restaurant led our performance delivering comparable sales growth of 15.2% and annualized unit volumes of more than $13.9 million. Comparable sales and traffic growth meaningfully outperformed the broader casual dining industry, underscoring healthy demand for our brand and continued market share gains.

Culinary innovation continues to be an important contributor to our sales growth and a key point of differentiation. Bowls and bites are performing well and helping increase frequency. Our broad made-from-scratch menu allows us to respond to changing guest preferences and offer compelling choices across a wide range of price points. Our rewards program app and broader marketing efforts are also driving awareness and engagement across the digital and social channels. We are especially encouraged by the traction we are seeing with our younger guests.

The Cheesecake Factory has always had broad appeal, and our ability to attract the next generation of guests reinforces the enduring relevance of the brand. Our impressive sales performance together with exceptional operational execution drove solid flow through and margin expansion. The Cheesecake Factory's restaurant level profit margin increased 240 basis points year over year to 18.7%.

Turning to development, we opened six restaurants during the third quarter, including two Cheesecake Batteries, one North Italia, one Flower Child, and two FRC restaurants. Subsequent to quarter end, we opened two Flower Child restaurants and one Henry. With 16 restaurant openings so far this year, we remain on track to open as many as 26 new restaurants in 2026.

Looking ahead to 2027, we plan to open as many as 27 new restaurants across our portfolio. In summary, we are extremely pleased with the quarter and performance of the Cheesecake Factory. At the heart of this success is what has always set us apart, delicious made-from-scratch food, exceptional hospitality, and memorable dining experiences. We are excited about the opportunities ahead and remain focused on delivering profitable growth and long-term shareholder value.

With that, I will now hand the call to David Gordon to provide an operational update.

Thank you, David. Our remarkable sales results this quarter once again demonstrate the strength of our best-in-class operators and their ability to consistently execute at a high level and capture incremental sales resulting in another record for annualized unit volumes in what is typically our slowest quarter of the year importantly our sales growth was driven predominantly by outstanding traffic growth of nine and a half percent outperforming the black box casual dining index by an impressive 940 basis points. Additionally, the improvement has been broad-based across geographies, day parts, days of the week, and channels, with off-premise remaining stable at approximately 21% of sales.

This performance reinforces our conviction and our strategy and reflects our continued focus on several key priorities. Best-in-class operational execution, supported by industry-leading retention, menu innovation, and the ongoing growth and evolution of our cheesecake rewards and marketing efforts.

The Cheesecake Factory is a highly differentiated brand, and the breadth and visual appeal of our menu naturally lends itself to engaging and shareable social content. We are increasingly leveraging these attributes to create culturally relevant moments, amplifying organic engagement and discovery, and extending the reach of the brand beyond our existing guest base. This provides a meaningful opportunity to introduce the Cheesecake Factory to new audiences and ultimately drive incremental restaurant traffic.

Taken together, we believe these efforts create a powerful combination. Our marketing initiatives are bringing guests through our doors, while our operators are executing at a high level to deliver the distinctive Cheesecake Factory experience that drives repeat visits and builds long-term guest loyalty.

Our latest Cheesecake Factory opening in Wichita is another great example of the affinity for the brand. The restaurant generated tremendous guest enthusiasm, delivering impressive sales during its first operating weeks, reinforcing the opportunity we see to continue expanding the Cheesecake Factory successfully into new markets.

Now turning to our other concepts. North Italia third quarter annualized AUVs totaled $7.2 million and comparable sales declined 3%. restaurant level profit margin for the adjusted mature North Italia locations was 13.2% for the quarter versus 15.7% for the prior year the change was primarily driven by sales to leverage as I outlined on our last earnings call we are advancing a number of targeted initiatives aimed at improving sales performance and positioning North Italia for sustainable long-term growth our new menu which was recently rolled out, includes new offerings and more accessible price points designed to enhance value and make North Italia more approachable to a broader range of guests. We've also refreshed our happy hour program with more attractive price points, new shareable dishes, and an expanded selection of beverages to deliver compelling value while building on the atmosphere, hospitality, and energy that make North Italia special.

We are meaningfully increasing our media investment in two markets to expand the brand awareness and introduce North Italia to a broader audience. These efforts will allow us to test our ability to translate increased awareness into guest trial and conversion.

Lastly, we're beginning to implement a kitchen management system designed to improve kitchen throughput, order coordination, and execution, supporting a more consistent and sustainable and efficient guest experience.

Collectively, these initiatives address the areas where we see the greatest opportunity at North Italia. We believe they provide the right framework to support improved performance over time and strengthen the brand for the long-term.

Flower Child performed extremely well and once again, meaningfully outpaced the fast casual segment. Third quarter comparable sales increased 11%, with two-year comp sales growth accelerating to 18%. The sales performance drove annualized AUVs of $5.1 million. Restaurant level profit margin for the adjusted mature flower child locations was 20.2% in the quarter, an improvement of 280 basis points from the prior year. Given the strength and consistency of flower child's performance, we believe the concept as well positioned for a meaningful acceleration in unit growth. Over the past year, we have invested in the real estate pipeline, leadership team, and operating infrastructure needed to support the brand's next phase of growth.

With that foundation increasingly in place, we expect to further accelerate development beginning next year. And lastly, we expanded the FRC portfolio with two culinary dropouts, one in Omaha and other in Salt Lake City. And with that, let me turn the call over to Matt for our financial review.

Thank you, David. Let me first provide a high-level recap of our third quarter results versus our expectations I outlined last quarter. Total revenues were over 1.033 billion dollars, meaningfully above the high end of the range we provided. Adjusted net income margin was 5.1%. And adjusted diluted earnings per share was $1.02, both finishing well above our expectations. And we returned $16.6 million to our shareholders in the form of dividends and stock repurchases. We also generated quarterly net income of 61.3 million dollars and adjusted EBITDA increased 38 percent from the prior year to 98.7 million dollars marking another quarter of strong earnings growth now turning to some more specific details around the quarter third quarter total sales at the Cheesecake Factory restaurants were $754.4 million, up 16% from the prior year.

Total sales for North Italia increased 11% to $93 million. Other FRC sales totaled $90.3 million, up 16%, and sales per operating week were $120,100. Flower child sales totaled $56.5 million, up 17% from the prior year. And sales per operating week were $97,500. And external bakery sales were $12.6 million.

Now moving to year-over-year expense variance commentary. In the third quarter, we realized year-over-year improvements across several key line items in the P&L. Specifically, cost of sales declined 60 basis points, primarily driven by lower dairy costs and sales mix related to lower external bakery sales, partially offset by higher beef and seafood costs. Labor as a percent of sales declined 80 basis points, primarily driven by sales leverage. operating expenses decreased 50 basis points primarily driven by sales leverage and lower insurance partially offset by higher incentive compensation and electricity costs gna declined 10 basis points from the prior year primarily driven by lower professional fees partially offset by higher stock-based compensation expense incentive compensation and relocation costs Depreciation declined 20 basis points from the prior year.

Pre-opening costs were $11.2 million in the quarter, compared to $6.6 million in the prior year period. We opened six restaurants during the third quarter versus two restaurants in the third quarter of 2025. And in the third quarter, we recorded a pre-tax net income of $12.9 million, primarily driven by the final true-up of contingent consideration associated with the FRC acquisition. Third quarter GAAP diluted net income per share was $1.19. Adjusted diluted net income per share was $1.02.

Now turning to our balance sheet and capital allocation. We ended the quarter with total available liquidity of $585.3 million, including a cash balance of $249.3 million and $336 million available on a revolving credit facility. Total principal amount of debt outstanding was $575 million, representing the principal amount of the convertible senior notes due 2030 CapEx totaled approximately dollars during the third quarter for new unit development and maintenance During the quarter we completed approximately 2.4 million dollars in share repurchases and returned 14.2 million dollars to shareholders via our dividend.

Now let me turn to our outlook. While we will not be providing specific comparable sales and earnings guidance, we will provide our updated thoughts on our underlying assumptions for Q4 2026 and the full year 2027. Our assumptions factor in everything we know as of today, including net restaurant counts, quarter to date trends, our expectations for the weeks ahead, and anticipated impacts associated with holiday shifts. Specifically for Q4, we anticipate total revenues to be between $1.04 and $1.05 billion.

Next, at this time, we expect effective commodity inflation of low single digits for Q4 as our broad market basket remains stable. We are modeling net total labor inflation of low to mid-single digits when factoring in the latest trends in wage rates and minimum wage increases, as well as other components of labor. G&A is estimated to be approximately $68 million. Depreciation is estimated to be $30 million. And pre-opening expenses to be $13 million to support 13 openings in the quarter. Based on these assumptions, we would anticipate adjusted net income margin to be about 5.8% at the midpoint of the sales range provided. For modeling purposes, we are assuming a tax rate of approximately 14 to 15% and diluted weighted average shares outstanding of approximately 52.5 million, including dilution from the convertible notes and stock-based compensation associated with a higher share price.

With regard to development, we remain on track to open as many as 26 new restaurants in 2026. This includes as many as five cheesecake factories, eight North Italians, seven flower childs, and as many as six FRC restaurants. And we continue to anticipate approximately $210 million in cash CapEx to support unit development, as well as required maintenance on our restaurants. Note, this CapEx estimate includes some new restaurant construction expenses, which may be classified as operating lease assets, instead of additions to property and equipment in the statement of cash flows.

Before I turn to our 2027 outlook, I want to acknowledge that while we are very encouraged by the Cheesecake Factory's recent sales inflection, it is early, and we believe it is prudent to remain measured in our outlook. As a result, our underlying sales growth and margin assumptions for 2027 are more closely aligned with our historical algorithm objectives. As we continue to gain greater visibility into these trends, we will update our expectations accordingly.

With that in mind, I'll now turn to our initial fiscal 2027 outlook, which reflects what we know today. First, with regard to development, as David mentioned, we plan to further increase development next year. At this time, we expect to open as many as 27 new restaurants in 2027, with roughly three-quarters of those openings planned for the second half of the year.

Next, based on our estimates for net operating week growth, we are targeting total revenue of approximately $4.425 billion for fiscal 2027. We currently estimate total inflation across our commodity basket, labor, and other operating expenses to be in the low to mid-single-digit range and relatively consistent across the quarters. And we expect some modest leverage from G&A, depreciation, and pre-opening expenses of approximately 10 to 20 basis points in total compared to 2026. Based on these assumptions, we would expect full-year net income margin of 6.0 to 6.1% at the sales estimate provided, consistent with our long-term algorithm of 25 to 35 basis points of annual margin expansion. For modeling purposes, we are assuming a tax rate of approximately 12% and diluted weighted average shares outstanding of approximately 52 million, with the ultimate share count dependent in part on stock price performance.

And we would anticipate approximately $220 million in cash capex to support new unit development as well as required maintenance on our restaurants. Note that the total capex estimate includes roughly as many as five Cheesecake Factories, 4-5 North Italia's, 11-13 Flower Childs, and 6-7 FRC restaurants.

In closing, what is most encouraging about the quarter is the breadth and consistency of our performance. Our operators are executing at a high level. Menu innovation is resonating with guests. Engagement with rewards and the app continues to grow. and our broader marketing efforts are expanding awareness and attracting new guests to the brand.

Importantly, these are not isolated drivers. They are reinforcing one another and amplifying the underlying strengths of the Cheesecake Factory, helping us increase frequency and drive exceptional sales performance. The impact is evident in our financial results, including record quarterly revenue, healthy flow through, margin expansion, and strong earnings growth. At the same time, we have a robust development pipeline and significant capital to reinvest in the business.

Our balance sheet and cash generation provide the flexibility to accelerate unit growth while continuing to return capital to shareholders. Taken together, we enter the fourth quarter from a strong position with multiple levers to support traffic and earnings. We remain focused on translating this momentum into profitable growth and long-term shareholder value. And with that, we'll take your questions.

Sure, sure, John. This is Matt. Thanks for the questions. Just to take the second part first, as we had talked about with investors, we are taking the opportunity to reinvest in our business, and in particular, our frontline management that are making these amazing results happen. And so in that other OPEX line, there is about $4 million that would be attributable to that reinvestment in a discretionary one-time bonus. With respect to the labor, you know, I think we feel good. We caught up. I mean, obviously the sales are very high, and so making sure that the restaurants are staffed is super important as we look to maintain our near record high NPS scores, even with these volumes, right?

So we feel good about where it's at. I think, you know, relative to the mix of the total company, Cheesecake Factory, obviously outweighing makes the dollars per week look a little bit different. But if you do it by the concept, I think we're feeling pretty good about that.

Hey, John, this is David Gordon. Good to hear from you. Thank you for the question. I think that first off, Cheesecake Factory has always been a word of mouth business, right? Number one for us is to make sure that we're executing as well as we possibly can. So people continue to wanna talk about their wonderful experiences and their operators are doing a terrific job doing that. The strategy over the past couple of years, as you know, has been to leverage the new rewards platform and to make sure that our member acquisition and activation of those new members continues to grow. And we saw that through all of Q3, great momentum in that program. And we have an increased focus on driving frequency, driving repeat visits, using all the data that we've been able to gather over the past couple of years to continue to offer personalized offers for guests who are part of that rewards program.

So we feel really, really good about where that program sits today. As you know, we launched the app in the second quarter. We continue to see strong adoption of the app, moving into the third quarter and really strong engagement. And it will continue to have a growing role in the program, whether that's the digital ordering or just direct guest engagement and communication through the app. So rewards will continue to remain a pretty important factor in the Cheesecake marketing trajectory. Certainly the social engagement in the quarter was strong. Cheesecake continues to be a highly differentiated brand and the breadth and visual appeal of our menu really lends itself to really great shareable content. So we'll continue leveraging that visual appeal, the menu and all the social commentary to create those culturally relevant moments and amplify any organic engagement that we can where we feel it's appropriate.

Increasing that brand awareness and then bringing new guests into the fold. And lastly, our traditional lead generation, paid search, search, appropriate influencer engagements will continue across all of our social channels, whether that's on TikTok or Instagram or Facebook, you name it. And then lastly, I just touched on the execution, but I don't really think there's anything more important than ensuring that those new guests that walk through our doors, we deliver on the execution promise that have been key to our long-term success and driving sustainable long-term traffic.

We have the best operators in the business. Experiential dining is something that we believe firmly in and what guests continue to want and desire, and we can deliver and execute because of those operators and their passion for executing for all of our guests, whether they're visiting for that first time because they heard about us in the social channel or they're coming for their hundredth time. We're going to continue to earn their loyalty.

Hey, Andy, sure. This is Matt, and certainly an important question, we know, for investors there. So, you know, we don't give quarter-to-date trends, but maybe I'll take this opportunity to contextualize the Q4 guidance and help people understand how we're seeing the business today. That guidance considers that the Q3 comp trends are durable and that we see that strength being able to be sticky, but with one little caveat, the last three weeks of the quarter are typically pretty much at capacity for Cheesecake Factory given the holidays, and We modeled those just at our pricing of 3%. So just assuming that that would be flat traffic. And so then we took those two parts and deducted 1% for the holiday shifts.

So that's kind of how we get to the guide, and that gives you a little barometer that, you know, we feel pretty good about our business run rate.

Well, as we noted in the prepared remarks, I mean, the breadth of the strength was really one of the key points. And it was across the country. It was every day of the week. It was every day part. You know, as you might imagine, a little bit less on like a Saturday night, of course. But we've talked about the capacity before. While we ran a nearly $14 million AUV in what is historically the slowest quarter of the year for the restaurant industry, we do have restaurants that are of average size that are doing low 20s. And so capacity continues to not be a problem for us, and we were able to deliver on that virtually at every angle in the quarter.

Sure, John. This is David Gordon. Certainly 26, matching 26 and 27, matching 27 is not a strategy, it's a coincidence.

But we're excited about opening all 26 restaurants this year and that number for 27 next year, I think is a good mix. We're enthusiastic about accelerating the flower child unit growth and feel like we're in a very stable addition to be able to do that. I know you've heard us mention in the past that we really wanted to make sure that we handled that growth in a way that was quality growth and we were able to execute all those new openings as well as we possibly can. And I think we're in a good place to do that. To your point of Cheesecake Factory, it really is a site-based strategy. And as great projects come available, we, to your point, can open more Cheesecake Factories.

We have all the sizes to be able to do that. The recent opening in Wichita at around 6,500 square feet was very, very successful. It gives us confidence that that smaller footprint is one that works really well for the operators and can deliver the type of ROI and sales generation that we need. So as we look out to 28, I wouldn't expect that 28 is going to match 28. You might see a slight acceleration from there as more sites continue to become available.

And we have the capacity certainly from everything we've done in the past at Cheesecake Factory to open up more Cheesecake Factories than four to six a year.

Yeah, so it would be 11 to 13 for next year. That would be roughly, John, this is Matt, roughly 25% increase year over year, about midpoint. And, you know, we feel ready to do that with the people, work that has been done. And, you know, if that is successful, then we should be able to continue that.

That's great. Thank you, guys.

Hi, Jim. This is David. As far as capacity goes, historically on those busiest shifts at Cheesecake Factory on a Saturday or Friday night when the wait is an hour, really what happens is it just extends the shoulder periods. And we might be busier at 9 o'clock or 10 o'clock at night and, you know, we're open late night at Cheesecake Factory on the weekends. So there still is even capacity there. And to Matt's point about, you know, the restaurants that are doing $20 million a year in AUVs, there's still capacity. So we have, you know, very stable off-premise business. I just mentioned that as well. Throughout the quarter, 17% off-premise, and there's still an opportunity to grow that business.

We've seen some growth in the delivery business as well. So there's opportunity. As far as new guests' behavior, they tend to be very much in line with what we see historically. As you know, we did have some good social content around one particular menu item, the Cajun salmon. and we did see a lot of new guests coming in and trying that salmon and fortunately bringing people with them. And when you look at the mix of those tickets, you see guests ordering a longtime favorite, Chicken Madera or Avocado Red Rolls, along with trying that Cajun salmon, which may have been the reason that they came in for the first time.

Dessert order behaviors continue to remain very, very consistent as well. I'm sorry, I think I said 17%. I want to clarify on the off-premise is 21%. 17% is the continued dessert sales as a percentage of sales.

Well, certainly as we bring the newer concepts into newer markets where they don't have as much awareness, then we would increase that marketing spend, whether that's for a North Italia or a flower. To your point, we really don't have to do that with Cheesecake Factory. Wichita, again, is a good example. Although it's a new market, people have been going to Kansas City Cheesecake Factory for years, and the awareness of the brand is much stronger. So we might have an elevated spend at the newer concepts, especially in those new markets. And as stated in the earlier comments, we are right now doing some pilot marketing to increase awareness to increase awareness in a couple of markets for North Italia, just to see if that improves some of the awareness in those new markets, even though maybe those restaurants have been there for 6, 12, 18 months thus far.

Hey Sharon, it's Matt. Thanks for the question. We're very encouraged. You know, the data that we have shows that a very large percentage of the guests that are coming in are younger in general. And so it's always important for brand relevancy to continuously refresh that pipeline. Feels a bit early to think about the frequency. We're about four months in, but what we have seen so far is very consistent sales trends over the last four months, right? And so no matter what the cadence has been of some of the organic social, Matt Bolian, It really hasn't changed our sales trends up and down in ways we've been very consistent so that that's a very positive. Matt Bolian, I think marker for us and the consistency as noted earlier across the country, the day parts in the days of the week all of those things tell us that you know we're doing an excellent job in the four walls when those guests come in and that we are expecting to convert a good percentage of them to be you know more frequent over time.

Sure. It was 2.4% pricing, a positive 3.3% mix, and 9.5% traffic.

Sure, Chris. Thanks for the question. Well, certainly I think we're engaging in the organic social content at a greater level and frequency than we were 12 months ago. 12 months ago, maybe we were a little more gun-shy to engage. And today, where appropriate, when appropriate, we're talking about the brand. We're sharing more about what we're doing that's new.

We've actually taken a new approach in some of our content and how our menu items look in social. And we think that's resonating really, really well with guests also. And I would say the experiential elements of Cheesecake Factory today are resonating as well as they ever have. whether it's the hospitality, the way the restaurants feel, the vast menu, and the ability for people to get just about anything they want today, and then share that content is really relevant. And so I think it's a little bit of what we're doing, and we're going to continue to do that. We'll certainly continue to monitor those social channels, influence them appropriately when we think we should, and most importantly, as I said earlier, execute against those new sales and the traffic growth because we don't want it to be a one-and-done situation.

It never has been a Cheesecake Factory. We're building brand loyalty and guest loyalty for the long term.

Sure, Chris. That's a great question, and we're happy to provide that clarity. I think we had talked about Q2 being hyperproductive at that 35% rate, really, as sales started ramping up. And I would say where we were at relatively in Q3, adjusted for the sales would be similar in Q4, right? So if the sales trends, because, you know, some of that in the holidays that were at capacity, and so on a weighted total sales basis, we're still talking about 20 to 25% versus that Q2, 35%. And I think that incorporates any of the reinvestments similar to Q3.

Sure Sarah Let me just reiterate one point that I think is most important is you know our guide for Q4 again to reiterate this doesn necessarily call for a deceleration of the Q3 trends through the balance of the quarter It's only the last three weeks where we feel like we're modeling today at only plus three pricing because of the capacity. And we're, you know, typically 25 to 30 percent busier in those weeks than others. So I just want to make sure that that's our outlook on the quarter. I think with respect to next year, certainly we're modeling that Q1 is going to be stronger than normal.

But as we lap back around, that you're going to see some tapering as we cross over these really big quarters. And so I think at this point in time, we feel like that's sort of the appropriate level. And we'll continue to update as we see the trends continue into next year. I think the convert is obviously, as you noted, in the money, that's the dilution that is predominant in the guidance that we've given for waste. So a little bit of that is respected to the equity comp, but most of it is with regards to the convert. At this point in time, what we're talking about is kind of earning into that dilution. And it's early days with where the stock is at, and we'll see how that plays out over time.

certainly we have tremendous financial flexibility with the cash flow that we have in the balance sheet that we have so we're in a really good spot we're happy for our bondholders we're happy for our shareholders and you know we hope to continue to just produce results that keep the bond in that territory got it thank you and then just on the okay I understand so the the weighted sales I think I was doing the math wrong on 4q so understood thank you for that clarification.

Yeah, so let's contextualize it this way. If you take out sort of the outside sales that we have, and we're talking about a normalized environment again, what we've talked about is having a little bit more ownership of the sales trends vis-a-vis the rewards program and the marketing. And so we do feel good about that. And, you know, we would be on a normalized trajectory instead of talking about one to two, maybe talking about a 3% or plus comp, right? And so I think that's still our view. And as we approach that lapping point in time, you know, that would be our objective.

Sure. Yeah, it definitely is. I mean, I'd have to go back into the archives and see if, like, the post-COVID revenge spending was up there. It might have been. But, you know, a couple of things to note. But the Cajun salmon with all of those hacks that we know went viral is certainly, you know, at the upper end of our entrees. And so we did see a disproportionate sales for that. I also think it's important to know when you look at the Cheesecake Factory overall and why guests are coming in the experiential nature. In fact, we're up in alcohol incident rates, right? And we're flat on cheesecakes, even though we're still at an all-time high.

So, you know, what we're seeing is that the guests that are coming in, it's, you know, they're not bargain hunters. They're wanting experiential dining, and, you know, they're getting the full Cheesecake Factory experience, as we say.

Sure, Jeff. As I said, David, menu innovation has been key to Cheesecake Factory for nearly 50 years now. And the cadence of innovation has always been heightened. We're always looking for new ideas. We're always sharing new ideas. we're always working in our R&D kitchen to come up with what's next that we can put on the Cheesecake Factory menu. So that work is always being done and will continue to be done. The cadence is the two menu changes a year and that will be the same cadence moving into the next next year and for the foreseeable future. I wouldn't anticipate that that's going to change.

The Cajun salmon actually had been on the menu for a while. It wasn't even a new menu item. It had already been on the menu and somebody just discovered it and decided to talk about it a little more loudly than they had before.

Yeah, Brian, I'll start with that one. I think you nailed it. It's just the higher sales levels. We did also call it higher electricity on a rate basis. So really those are the two things. On a year-over-year basis, the marketing dollar percentage comparisons of cheesecake aren't really that different. And for the fourth quarter, everything that we talk about in terms of reinvestment is in there. So there is some incentive comp. There's also some marketing. David Gordon talked about that at North. That would fall in the other OPEX line. So there is some continuation of that. As we get the actuals, we'll be able to update everybody on the next call as to what actually transpires in the quarter.

But we are forecasting some additional one-time costs there.

Sure. I'll start with the economics and then David Gordon can talk about the build-out expectations. Right now, we're super happy, really, to be honest. 5 million AUVs and 20% mature margins on the build-out cost. It's been around $2, $8 to $3 million. And so, pretty strong cash-on-cash returns. And frankly, they continue to accelerate. And so, So, you know, at that level, the business is great and we'll look to expand the 11 to 13 that we are planning for next year. But, you know, the momentum is continuing, as you see with their comps and the stacking actually getting better. So, you know, there's room in both of those metrics to continue to improve.

And, Brian, as far as the mix for next year, it's probably about 50-50, new to existing markets. And I would expect that to continue. We see some great synergy when we're able to get that second and third restaurant open in an existing market. So we're happy to follow up in new markets and get a second and third in there relatively quickly. But I would expect that cadence to be probably the same in the outlying years in 28 and 29.

Brian, this is Matt. Thanks for the question. I mean, we're encouraged across many fronts, right? I think if you go and you look at how the business is performing, as I noted, we're still near record high NPS scores, even with all of these volumes. You know, guests are coming in for that full experience at Cheesecake Factory. But beyond that component of it, really the underpinnings that David Gordon mentioned are the rewards program and the new marketing. And we're seeing the effectiveness of those. We continue to have twice as many acquisitions per week with the rewards program than we did before the launch of the app. So it's important that we're bringing in new guests, but then we're also engaging with them and continuing to drive the frequency.

We know guests that are part of the rewards program have a higher frequency. So there's a lot of tail left in that to continue to grow the business outside of some of the social. But, in fact, the social continues as well. It does have a virtuous cycle to it, and we see that the more that we engage, the more that we get organic content created by our really rabid fans. And so we have seen that be very consistent and very durable to this point in time.

Brian, I would just add that the tenure of our operators and their ability to execute as well as they have gives us the confidence that we can take market share. And experiential dining today is appreciated as much as ever. And I just want to give kudos again to those operators who have done such a terrific job throughout the quarter and will remain really stable in the restaurants to be able to execute on the higher volume.

Yeah, I think, you know, for one, Brian, it's early in the sales list to gauge that incompleteness. But, you know, we were hyper-focused on making sure the restaurants got to staffing levels to deliver the service and the quality that our guests are expecting. In particular, if you think about these new guests, those aren't the ones we want to be hyper-productive on. We want to show them as much love and care as we possibly can to bring them back in, right? And so we view it all as investing for the future and making sure. And we feel pretty fantastic about the overall flow through for the year that we're projecting. So you're right. There's going to be quarters where the metrics don't seem quite as outstanding.

But I think our view is that a 30% net income gain this year on top of what you talked about, which is a pretty good outlook, is leading the industry right now. And that's our goal is to continue to make sure we run the business for the long term.

Yeah, that's a fair question. I mean, again, you know, is there capacity during those weeks? There is, right? I mean, I'm not saying that every restaurant is full on a Tuesday night for all three of those weeks. I think for us, that just seems like a prudent approach at this point in time. And they are markedly more busy. There's no doubt about that. They're usually more busy, 25% to 30% compared to sort of the average weeks in the other parts of the quarter.

But hopefully we'll be able to beat that number. But for the moment, that seems like the right way to model it.

Yes, and a little bit of that was just the timing of year-over-year pricing. So 3% is sort of a run rate is good to use for next year as well at this point in time. Of course, we'll reserve the right to update that as we get into the menu change cycle and we see where our cost and sales trends are. But I think for everybody's modeling, that's a good start.