David Deno: I think for us, we have to do some more work there. Some of the work that we did at Outback, quite frankly. Get a better understanding of our customer in this post COVID environment. I think that’s something that we need to focusing on, we’re doing that work right now. Is there menu investment and simplification opportunities that we can do, we’re looking at that. We’ve invested in operations both in technology, but also focusing on key measures, such as speed of service in our bar and for our food because it’s such a bar centered concept. It’s our highest mixing beer, liquor, wine business in casual dining. And we continue to refresh our assets at Bonefish, those kind of the four-pronged strategy there. It’s not a growth vehicle for us. We’ll continue to upgrade the assets, and we’ll continue to do the customer and menu work to get that brand trends to improve.
Brian Mullan: Thank you.
Operator: Thank you. Our next question comes from the line of Dennis Geiger with UBS. Please proceed with your question.
Dennis Geiger: Great. Thanks, guys. Encouraging to hear about the progress that you’re continuing to see across the Outback operations and the customer satisfaction scores, et cetera. And I can personally attest to some of the positive customer experience benefits from the server handhelds, in some visits recently. So just wondering if there is — you could talk a little more about the opportunity for operation gains. Where is it consistency of speed, food, where sort of the biggest opportunities that you’ve identified lie? And I guess, most importantly, sort of how long you think it takes to get to, I think, the best-in-class level that you spoke to as a target?
David Deno: Yes. We’re making significant progress in our operating measures, so we’ll continue to make progress each and every month. And our goal is certainly as soon as we can I don’t want to make a specific prediction, but it’s something that we are all over. And I’m very pleased with the operating measures we’re seeing, both in the internal progress we’re making, but also externally with Technomic and other people that do a lot of work for us externally. So that is really a great thing to see. So that’s the first thing. The second thing is, I think it’s more around the trade-off at the restaurant between variety and menu simplification. Can we continue to make progress there as we do our work, so there’s more work coming at Outback there.
Number two is, really leveraging our technology. You saw the benefit of the handheld that’s clearly happening. The grills have been a big success. If you look at recooks and reorders and steak satisfaction, that’s been very, very strong. And then as we continue to do this in casual dining, this customer comes two or three times a year. We’ve just got to continue to make progress here. That will be a reinforcement in building traffic. And then as we look at our chances to help our managing partners and our team to offer great service, those are the things that we’re looking at.
Dennis Geiger: Very helpful. Appreciate that. And then just second question, just as it relates to some of the bunch of the traffic drivers that you’ve spoken to, bunch of the work that the team has been doing. As we think about maybe some of the biggest drivers for this year, if there are a couple that you think can be most impactful this year, and then if there are some that are kind of most impactful on a multi-year basis, would there be anything that you’d kind of break out there? Thank you.
David Deno: Yes. I love some of our product and marketing ideas coming up. And I like the fact that we’re looking at how we’re spending our advertising dollars and how we’re doing it to support those ideas. So in the near term, that’s clearly something that we’ll be looking at, and very hopeful for. In longer term some of the menu work we talked about continuing with our positioning is really important. I think the asset upgrades, if you live in Florida and go into our Outback, most of them remodeled now, and you can see it. Those are the things longer term are going to really help us. So our operations longer term, our asset investment longer term, our menu work, we want to balance some short term gains, which I think are possible, along with some of the strong long term things that we have in place at Outback.
Dennis Geiger: Very helpful. Thank you.
Operator: Thank you. Our next question comes from the line of Jon Tower with Citi. Please proceed with your question.
Jon Tower: Great, thanks. I appreciate it. And Chris, best of luck. Look forward to seeing what you do next. Curious, maybe on the $16.99 Aussie 3-Course Meal. I’m just curious to get your thoughts on how you think about everyday value on your own menu today. And do you feel like that is a decent launch and/or something that you can continue to evolve over time to have an everyday value option for consumers over time?
David Deno: Yes, I think it’s the first step and I think it’s something we’ll continue to look at in our various limited time offer opportunities. We can certainly look at that. But then, as I mentioned earlier on the call, Jon, we’re also looking at some products that may have a lower price point. There is still really great products that are good return to the Company, but also offer great value to the customer. So we’re doing some of that work on the menu side as well. But we have the opportunity through our combos and through selected LTOs with the right marketing spend to drive value in the brand.
Jon Tower: In the menu items you speak of, do you see those as permanent or LTO?
David Deno: We are thinking that they would be permanent, but they have to earn their right onto the menu.
Jon Tower: Got it. And then I guess just kind of zooming out a little bit and thinking about the business for a few years, you’ve been aiming toward that 8% or so EBIT margin target and had exceeded it at one point. And now we’re taking a bit of a step back. So I’m just curious to get your thoughts on how you see it evolving over the next several years. And I would assume, obviously ’24 is going to be a more difficult year for that. But beyond ’24 and into ’25, how should we think about your ability as a Company to get back to that 8% or so target.
David Deno: Yes. Before I turn over to Chris, I just want to mention, there’s a very benign commodity basket peak, one exception, that’s beef. And so we don’t want to price up to cover that beef cost entirely. So we have to continue looking at our margins to look at that and how it means — what it means for our customer. But I want to make that broad point first before I turn over to Chris.
Chris Meyer: Yes, well, I think that, look, longer term, I think we still feel good about using 8% as an operating margin target. I think the problem has been and the time period between 2022 and 2024, we’ve had this massive inflation that’s been really tough to leverage, not just for us, but candidly for everyone who’s trying to be thoughtful about menu pricing and things and balancing that dynamic. And look, the good news is, I think that despite the inflation, margins are kind of hanging in there. And so as you think about like what’s the path forward, I’d say the key areas we probably need to make progress on in 2024 would be, first and foremost, we need to continue to make traffic progress at Outback, because traffic ultimately is going to be a lever moving forward that you’re going to have to leverage in order to continue to make progress on margins.
Second, once you start to see the new restaurants ramp up, you’ll begin to leverage depreciation, et cetera, and you’ll make more progress on that in 2024. And then I think that the last thing is once the beef situation improves, you’ll have the makings of a much better landscape from an inflation standpoint to make progress on margin. So I think the signs are encouraging, and I think that looking ahead to 2025 and beyond, there’s some reasons to believe.
Jon Tower: Got it. Thanks for taking the question.
Operator: Thank you. Our final question this morning comes from the line of Andrew Strelzik with BMO Capital Markets. Please proceed with your question.
Andrew Strelzik: Hi, good morning. Thanks for taking my questions. I just had two on the cost side. The first one is back on the marketing spend. You mentioned that it’s going to ramp through the year. So is it fair to assume that that would hold at a higher level in 2025 as well? And maybe more importantly, are you going to be exiting this year at a more kind of steady state level. I think if I’m looking at this right, you’d be kind of like 2.5%, maybe a little bit higher than that percent of sales. So still a bit of a gap from where you were pre-COVID, but just curious how we should think about that trending.
Chris Meyer: So I’ll start and I’ll turn it over to Dave. Yes, I think the way I think about 2024 marketing is, yes, it will be higher. It’s probably going to be higher in every quarter, to be honest, even Q1 than it was a year ago. So there’s going to be increases in marketing spend. I think we’ve talked about marketing, we’ve talked about this for years in terms of — we used to spend 3.5% of sales on marketing. We got down to the low 2s. We recognized but we’ve always talked about, hi, look, even when we laid out that margin framework a couple of years ago, we said, hi, look, we think the sweet spot for marketing is probably in that 2.5% to 3% of sales range. I think that’s kind of where we really think it’s going to be long term as well.
So I think that, if we land this year sort of in that 2.5% to 3% range, then I would say that that’s probably a good thought for us moving forward. But obviously the spending can ramp up as our sales increase. So I think we feel good about it as a percentage of sales.
David Deno: Yes. I’d just like to say in our Company, the money follows the ideas, and good ideas get supported, and we’ll continue to have that discipline.
Andrew Strelzik: Okay, that makes sense. And then just my other one was on the commodity outlook. It sounds like really only beef as a problem child there. And you’ve been able to lock beef on an annual basis the last couple of years. Were you able to do that again this year? I’m just curious on the visibility to that commodity outlook. Thanks.
Chris Meyer: Yes, same thing. We’re probably 74% locked on our basket for the year, 74%, 75% somewhere in there. Beef is 100% locked. Obviously, as in prior years, though, we’re hopeful that the market continues to make progress. And if it does, hopefully we can take advantage of some of that upside.
Operator: Thank you. Ladies and gentlemen, that concludes our question-and-answer session. I’ll turn the floor back to Mr. Deno, for any final comments.
David Deno: Thank you, everybody, for your time this morning. We look forward to updating you on our Q1 call later this year. And, Chris, thank you for everything you’ve done for our Company.
Chris Meyer: Thank you. Thanks, everybody.
Operator: Thank you. This concludes today’s conference call. You may disconnect your lines at this time. Thank you for your participation.
