If there is mix pressure, we’re very proud to have been able to offset that with incremental traffic growth. We do have a number of things that we expect in terms of opportunities for side menu ordering, namely the biggest one being guests being able to order from their phones instead of just having to reach over their buddies sitting closer to the conveyor belt — the tablet. People can just use their smartphones as their menu. But the bigger thing is that now as a Stage 2 for that, our guests will be able to earn prizes by ordering side menu items, which have never been a consideration before. And so we’ve got a lot of things to look forward to in addition to the fact that mix is already been improving.
Jon Tower: Got it. Thank you. Appreciate that color. Maybe jumping around a little bit to — on the DoorDash partnership that you’ve got. And I think, Jimmy, you had mentioned the idea that this is going to be margin-neutral relative to in-store transactions, while keeping the prices the same, if I understood that correctly. So, are effectively this just getting passed along to consumers in the higher — in the form of higher delivery fees. I’m just curious how you guys manage that?
Jeff Uttz: So, our expectation is that it’s going to be margin-neutral to margin-accretive. We’re really excited about the partnership with DoorDash. And in terms of passing along cost to guests, we’re actually — one of the reasons that we’re partnering with DoorDash is because we can offer a better guest experience than ever before. We’re on DashPass, so if you have a DashPass membership, you can now get delivery for free, where before, it costs $7 or $8. And so to be able to offer the same prices as in our restaurants and give guests free delivery and be market-accretive, it was really a no-brainer for us. But this really came down to the deal terms we were able to secure with DoorDash. And as Jimmy mentioned in the prepared remarks, if we hadn’t been able to arrive at these terms, this wasn’t something that we were entertaining the fact that we got these terms is really what triggered our decision to go forward with this.
Jon Tower: Got it. In terms of, I mean, maybe it’s early days for it, but I’m curious either what you’re seeing in stores that were — maybe it was deployed already in terms of how it’s mixed in or what your internal expectations are? And then separately, but related how are you managing this within the store? Because obviously, your kitchens are super busy already, you’ve got a lot of traffic running through. How are you handling these delivery orders versus the in-store transactions that are taking place?
Jeff Uttz: Yes, the operations team has done an amazing job in terms of implementing and integrating it into their operations. We’re able to throttle orders and so if we are busy and our kitchen’s already at capacity, we’re always going to prioritize the guests that are already in our restaurants. And so we just slowed down or shut down our upfront orders and it really hasn’t been an issue.
Jon Tower: Got it. Awesome. Yes, I’ll pass it along and maybe hop back in the queue. Thank you.
Hajime Jimmy Uba: Thank you, Jon.
Operator: Our next question comes from the line of Mark Smith with Lake Street Capital. Please proceed with your question.
Mark Smith: Hi guys. First off, I just wanted to dig in the margins a little bit more on the labor expense up here. Can you break down at all how much of that was due to the higher openings here versus just kind of pure labor inflation? And then I’m also curious, any impact that you guys are seeing in California restaurants on labor with hire faster with minimum wage there?
Hajime Jimmy Uba: So, if you look at our Q, you can see that our preopening costs for Q2 are $700,000 higher than preopening costs in the prior year’s Q2. And the bulk of that $700,000, which that’s about 1.2% of sales, the bulk of that $700,000 is labor. So, you can see immediately just how big of an impact that the accelerated preopening labor did. In terms of the full year, we expect mid-single-digit labor inflation, which is what we’ve said in past quarters. The change in labor is really — again, it’s really driven by the preopening labor compounded by the lever that we saw across our markets. We’re very pleased with the margins that we put up in spite of that and we have zero concerns in terms of recurring to normal since we entered Q3.
As we’ve mentioned, we have a lot of tailwinds and we think — we know that the elevated labor from the last quarter is due to things that were either out of our control, weather, or we’re pleased with, which is that we were able to open our restaurants. And so yes, we’re pretty happy.
Hajime Jimmy Uba: In terms of the FAST Act, as I’m sure you’re aware, we’re not — as the legislation stands, we’re not under that umbrella. A lot of other casual dining restaurants or restaurants generally have been impacted by it regardless of whether or not they’re directly under that umbrella just continuing to maintain competitive wages. In California, our employees in the back of the house are eligible for tips and so they’re already making very competitive wages. We just don’t see a scenario where they’re going to leave our heavily-automated restaurants to do more work for less pay. And so this really hasn’t been a wage pressure for us. We all spend a lot of time in California or live in California. So, we’ve seen — we’ve seen price go up, sometimes high single-digits, sometimes double-digits as the restaurant and cafes that we always go to.
And so the fact that we’re keeping pricing where we are, we think it’s a strategic and meaningful advantage. We think that this is an opportunity to really grow our audience. When everything else seems more expensive than ever and Kura is an affordable luxury, which is really what so many guests want about the brand, we think this is an opportunity from the current experience to tons of new people, especially when our price point just gets closer and closer and closer to QSR as a greater price [Indiscernible] market.
