Andrew Charles: Thanks for the color Jack.
Operator: Next question will be from Brian Bittner from Oppenheimer & Co. Please go ahead.
Brian Bittner: Thank you. Thanks for the question. As you move throughout 2023 and you lap some of these large menu price increases as the year progresses, would you think about replacing them with some type of increases, albeit probably a lot more normalized, more lower price increases? Or do you plan to let these fully roll off? And Jack, as you sit here today, what do you anticipate the total pricing factor to be for the full year 2023 for the same-store sales model?
Jack Hartung: Yes. So, I mean I’ll start with that and then we can talk about expectations. We’re running right now in that kind of 9% to 10% range. And as I mentioned, it rolls off early in Q3. And then in €“ I’m sorry, early in Q2 and mid-Q3. And then there were a couple of delivery adjustments, target adjustments in there as well. We’ll end up being somewhere in that kind of mid-single-digit because by the time you get to the end of the year, we’re running basically zero pricing. So overall for the year, it will be somewhere in that kind of mid-single-digit. In terms of pricing action, we’re not going to take a price increase just to cover a lap over last year. The main thing we’re going to do is we’re going to want inflation, and we’re going to hope that inflation is tame.
Right now, we know that there is some pressure on a few of our ingredients. Beef is the one that we keep hearing about. We haven’t seen it yet, but everyone is predicting that there’s going to be greater supply versus demand. But we’ll watch that carefully and see what inflation does. But it’s going to be more about inflation and wages, inflation and ingredients and do we need to take pricing action to cover some of that, but I €“ we wouldn’t take a price increase just to cover a comp lap.
Brian Bittner: That makes sense. And just a clarification on the same-store sales guidance for the first quarter. I know you’ve talked a lot about traffic flipping positive here in January. But if we just hypothetically land in that high single-digit range for the first quarter, what do you think mix and traffic would separately be in that build if it kind of played out how you thought?
Jack Hartung: Yes. I mean, right now, we’re running, call it mid-single-digit positive traffic. We expect for the quarter, that guidance range assumes that we’re also going to be positive transactions more in the low-single-digit as we move away from Omicron. Pricing will be that 9% to 10% range that I mentioned. And then there’s going to be a mix component. We think it’s kind of probably be in that low maybe 2-ish, 3-ish percent something like that. Mix is a little harder to predict, but those are the main components.
Brian Bittner: Great. Thank you.
Operator: Thank you. And the next question will be from Jon Tower from Citigroup. Please go ahead.
Jon Tower: Great. Thanks for taking the question. Quick clarification on the question. On the new store productivity, I know we talked on this a little bit earlier. During the quarter, was there anything about timing where €“ based on the way that we can calculate it looks like the productivity of the stores might have been a little bit lower than the normal. And I don’t know if that’s related to timing or something else. That’s kind of the clarification. The question is then on thinking about the Garlic Guajillo Steak, it didn’t live up to your expectations. Curious if you could dissect that and give us a reason as to what you might have missed. I know it hasn’t been that long, but curious to know how it didn’t perform versus your expectations and why you think that happened?
Brian Niccol: I’ll let Jack answer the first one on the store productivity, and then I can chime in on the…
Jack Hartung: Yes. You hit the nail on the head. We opened a record 100 restaurants during the quarter, but it was very, very back-loaded. Our teams did a great job of just scratching, clawing and doing everything that they could to get the restaurants open. And I think we probably had a record opening in the month of December as well. We had more than half of the openings or in the last month of the year. So yes, you’re not €“ you didn’t see a typical sales flow-through, considering we opened 100 restaurants.
Jon Tower: Thank you.
Brian Niccol: And then on your question about Garlic Guajillo Steak. Look, I think it’s one of those things where we tested it in a very different environment than when we rolled it out. And as a result, we got the check benefit, but we didn’t get the transactions. And it also had the challenge of rolling over brisket, which was arguably one of our best-performing menu items that we’ve done to date. But we’ll continue to analyze that we make sure we learn from it going forward and that’s why we use the stage-gate process so that we are always learning.
Operator: Thank you. And our next question will be from Sharon Zackfia from William Blair. Please go ahead.
Sharon Zackfia: Hi. Good afternoon. I wanted to ask a question about staffing and the lower turnover that you’re seeing. Is there a way to kind of compare and contrast tenure on the frontline now versus 2019? And if we think about throughput opportunity as we enter high season, I mean, how much is the frontline because it is less experienced kind of lagging where you were in 2019 or dimensionalize kind of how €“ how much throughput opportunity is really on the table here as you have more productive frontline staff?
Brian Niccol: Yes. Look, thanks for the question on this because I think this is an important one, which is what we know is when we have our teams at model and deployed correctly with leadership present for shoulder-to-shoulder training, our restaurants perform and that’s what we saw in 2019, and that’s what we anticipate occurring going forward. So we know there’s upside in how much throughput is our teams are capable of doing. And obviously, we’re targeting to get those throughput numbers back to where they were in, call it, the 2019-time-period. The one thing that’s nice is our turnover levels have dropped. So we’re getting more stability in the teams, which means they’re getting more reps. So that as we walk into these higher-level or higher-volume months, they’ve got more reps and being deployed correctly, working together correctly to ensure that we get more throughput.
And that’s what we’re focused on is the people that we have today, how do we get them trained, how do we get them deployed and then how do we make sure those teams stay together.
Jack Hartung: Yes. And Sharon, just to add, when we look at the timing position back to 2019, and there’s two factors here. One is turnover. The other one is promotion rates as well, but when your turnover slows down, people are going to be in their position longer. In for example on the kitchen manager, we’re very close to where we were in 2019. So the average tenure in the kitchen manager role was like 0.69, meaning it was about eight months or so. Today, it’s like 0.64. So it’s like maybe seven, 7.5 months something like that. In apprentice, we’re not quite back to 2019, but we’re ahead of where we were a year ago, and we’re in striking distance again. So those are areas that we were seeing that our average tenure was going down during the high-turnover period of the last year €“ year-and-a-half or so. But those numbers appear to just like with the turnover be stabilizing and moving back up.
Operator: Thank you. And the next question will be from John Ivankoe with JP Morgan. Please go ahead.
John Ivankoe: Hi. Thank you. I know you’ve been working on a number of different automation or technology practices in the store that could potentially reduce the demand for labor and also make you efficient and perhaps more consistent in some ways. So I was just hoping you could take a few minutes or a few seconds and just kind of talk about some of the different packages that you have. How far along they are and when you €“ we actually might be able to start to see some benefit, even if it’s on a limited basis at a market level? Thank you
Brian Niccol: Yes. Sure. So probably the one that’s closest in is the new grill work that we’ve got going on, which I mentioned in my earlier remarks. It just gives our teams a tool that allows them to cook the chicken, frankly just perfect every time and a lot faster, significantly faster. And the same thing goes for steak. And we’re actually moving that from a one-store test now to a multi-store test as we speak. So we’re excited about that one. Obviously, we’re working on an automated digital make-line, which is in partnership with Hyphen. And we’ll get the first one of those into a real live prototype in our Cultivate center probably end of this quarter, early in the next quarter. So that one’s a little bit further out. And then we just got rolling with a live pilot on the, what we call Chippy, which is our automated arm or robotic arm to fry chips.
And €“ so I have much more information on that as that goes live in the one restaurant. So I’d say the one that’s probably close in is the grill, and the ones probably furthest out probably is our digital make-line €“ automated digital make-line. But all these are really promising because when you can significantly reduce cook times and then make the practice of grilling chicken and steak easier, good things happen with our culinary, and that’s what we’ve seen in the one restaurant. People are giving us feedback that the steak and chicken taste great. Our team members are giving us feedback that they love using the new grills, and so we’re more consistent with great culinary, everybody wins.
