Good day, ladies and gentlemen, and welcome to The Cheesecake Factory Incorporated Fourth Quarter 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. As a reminder, this conference is being recorded. I would like to introduce your host for today's conference, Ms. Stacy Feit. Ma'am, please go ahead.

Thanks. Good afternoon, and welcome to our fourth quarter fiscal 2016 earnings call. I'm Stacy Feit, Senior Director of Investor Relations. On the call today are David Overton, our Chairman and Chief Executive Officer; David Gordon, our President; and Doug Benn, 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 not based on historical fact and are considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual 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.thecheesecakefactory.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 call, we will be discussing earnings per share on an adjusted basis, which excludes impairment and lease termination. David Overton will begin today's call with some opening remarks. Doug will then take you through our operating results in detail and provide our outlook for both the first quarter of 2017, as well as our current thoughts on the full fiscal year. Following that, we'll open the call to questions. With that, I'll turn the call over to David.

Thank you, Stacy. We ended 2016 on a high note, as we delivered our 28th consecutive quarter of positive comparable sales, marking seven years of strong financial performance and meaningful shareholder value creation. Once again, we significantly outpaced the casual dining industry during the fourth quarter as we continued to take market share in a challenging environment and operationally we executed well. On the development front, we opened three company-owned restaurants since our last call, including two Cheesecake Factory restaurants in Valencia, California and Tacoma, Washington, as well as a Grand Lux Cafe in Austin, Texas. We met our objective to open as many as eight company-owned restaurants domestically in 2016. In total, average unit volume for Cheesecake Factory domestic restaurants increased to approximately $10.7 million. On the international front, two Cheesecake Factory restaurants opened in the fourth quarter including the first location in Qatar and a third location in Mexico. This brought us to a total of four locations opened under licensing agreements during the year. We continued the national rollout of our delivery service with a third-party partner. We're seeing some incremental sales in many locations. In fact, our to-go business increased in 2016 and we believe delivery was a key contributor to this growth. At present, nearly half of The Cheesecake Factory restaurants offer delivery and we plan to introduce service to additional locations this year. In 2017, we expect to open as many as eight company-owned restaurants. This includes one Cheesecake Factory relocation and our second RockSugar. Internationally, we continue to expect as many as four to five restaurants to open under licensing agreements in 2017 including the first location in Hong Kong. Reflecting back, we delivered on all of our objectives last year, producing solid comparable sales performance, achieving our domestic unit growth, expanding our international presence to a total of 15 locations and increasing operating margins, all of which contributed to approximately 20% earnings per share growth. With that, I'll now turn the call over to Doug for our financial review.

Thank you, David. Total revenues at The Cheesecake Factory for the fourth quarter of 2016, which as a reminder was a 14-week quarter, were $603.1 million. Revenues reflect the comparable sales increase of 1.1% at The Cheesecake Factory restaurants on a 14-week versus 14-week basis. The additional week contributed approximately $54.7 million of sales and about $0.07 in diluted earnings per share. External bakery sales were $17.2 million in the fourth quarter. Cost of sales decreased 60 basis points year-over-year in the fourth quarter of 2016 to 23.2% of revenues. Key ingredients driving the favorability included seafood, groceries, dairy and meat, partially offset by an unfavorable comparison for poultry. Labor was 33.6% of revenues, an increase of about 80 basis points from the fourth quarter of last year. A majority of the increase is attributable to higher hourly wages. Wage rate inflation was in line with our expectations. Other operating costs were 23.9% of revenues, up 20 basis points from the prior year, due to a number of small variances including higher marketing costs. G&A was 6.4% of revenues in the fourth quarter of fiscal 2016, down 40 basis points from the same quarter of the prior year. The variance was primarily driven by timing of stock based compensation cost, general cost control and sales leverage from the extra week. Pre-opening expense was $7 million in the fourth quarter of 2016, roughly in line with the same period last year as we had the same number of openings year-over-year. Overall, a deflationary commodity environment, G&A favorability and sales leverage enabled us to offset wage inflation driving 40 basis points of adjusted operating margin expansion versus the prior year. Our tax rate this quarter was just under 28% and adjusted earnings per share increased 24%. Cash flow from operations for 2016…

Thank you. Our first question comes from the line of John Glass with Morgan Stanley. Your line is open. Please go ahead. John Glass - Morgan Stanley & Co. LLC: Hi. Thanks very much. Question just related to the sales discussion for the fourth quarter and the first quarter. In the fourth quarter, did you experience the industry-wide slowdown seen in December, I think, largely tied to the weaker retail environment or do you feel like maybe you're a little more protected from that for whatever reason. Then, Doug, as you look into the first quarter, there's been a lot of conversation about trends decelerating meaningfully, particularly in February around tax rebates, weather and stuff. Have you seen those specific factors influence your first quarter guidance other than things like calendar that you already cited?

Yeah. Let me address the first one first, and talk about comp store sales for the fourth quarter. We started off strong and we moderated as we moved through the quarter, which is a trend similar to the broader industry as I think you referred to. However, we maintained a significant and widening gap to the industry throughout the quarter. So, October was our strongest month. The quarter in December was the weakest, again similar to what the industry saw. I would say though that we saw softer traffic during the period between Thanksgiving and Christmas, but that's been a multi-year trend. However, we had a very strong Thanksgiving sales, and very strong Christmas and post Christmas sales. So, we netted out where we kind of expected to be. And what I think it's important to note about the fourth quarter is we continued to see a lot less volatility than the broader industry was seeing. With respect to the first quarter, we have factored in again what we know to-date about sales, everything that we know. We factored in the fact that there's been adverse weather so far in the first quarter. We factored in, I mentioned in my prepared remarks, the fact that the Easter spring break is shifting. So, there's a 50-basis-point negative impact implied in our zero to 1% guidance that were given related to the first quarter. We factored in that Valentine's Day was on a Tuesday this year, which was favorable and we factored that into our guidance. There is certainly an impact to our revenue and our profitability in the first quarter, given that one of our strongest weeks of the year, which was captured as the 53rd week of 2016, is being replaced by an average week. So does that give you the color on the first quarter that you're looking for? John Glass - Morgan Stanley & Co. LLC: I think so. Thank you very much.

Okay, John.

Thank you. And our next question comes from the line of Sharon Zackfia with William Blair. Your line is open. Please go ahead. Sharon Zackfia - William Blair & Co. LLC: Hi, good afternoon. Just a few questions, Doug. First, can you break out the components of the comp first for the quarter in terms of price, mix, and traffic? And then, secondarily, on the trending of the high-end of the 2017 EPS guidance, it sounds like the COGS and the labor inflation outlook were pretty similar to what you thought late last year. So just wondering kind of what caused you to take off a couple of cents at the high end.

Yes. Okay. So first, let me give you the break-out here. We had 1.1% comps, as you know. That's composed of 2.5% price, negative 1.8% traffic and a positive menu mix shift of 0.4%. And then the other question was related to our guidance. We revisited the various inputs. We did change the guidance at the high-end from $3.11 to $3.07. We simply just tightened that guidance range, I think Sharon, to reflect our best estimates from where we sit today, taking into account our current cost outlook and the timing of our planned openings. With regard to cost, there really isn't any significant movement on any one piece, in particular. Just overall our updated view is that the top end of the guidance range is better positioned at $3.07 rather than $3.11. Sharon Zackfia - William Blair & Co. LLC: Okay. Thank you.

Thank you. And our next question comes from the line of Jeffrey Bernstein with Barclays. Your line is open. Please go ahead.

Great, thank you very much. Two questions, just one on the unit openings, the company operated, domestic at least, it sounds like you said quarterly is going to be pretty well pushed back mostly in the fourth quarter. I'm just wondering if you can give any more color on how that played out. We are hearing some in the industry that just, real estate is just hard to find, and the cost to open continues to elevate. So I'm just wondering if you would offer any color, if you're seeing any change in trend on the cost to open or just the ability to find this real estate, whether that led to you tweaking the company operated openings to the lower end of the prior range. And then I had one follow-up.

I think if you're referring to going from as many as eight to nine to going to as many as eight, the environment is dynamic, we never say for instance, how many leases we have signed because sometimes we have leases signed in the future year and we don't have leases signed on restaurants that we know we're going to open this year. So, I would just say that we looked at our – we had a couple of months go by and we looked at what we are realistically going to open for the year and it would be better for us to say as many as eight as opposed to as many as eight to nine. As far as construction costs go, I think that – maybe speak to opening finding locations, David, if you're finding locations or is it harder to – that's this question.

Well. Great locations are always hard to find. I would say, it is a little bit harder right now, but we have a number of things in the hopper and Doug can answer the costs more, but because the building trades are so busy, there is so much construction, you don't get as quite the same deals as you might have gotten before. I don't know if it's so much that costs have gone up, other than the different contractors, electrical, plumbing, so and so forth, can give you a bit on the higher side rather than the lower side and still fill their year's workflow.

Yeah, Jeff, we stay very returns focused and so that maybe it is harder to find sites; if you're return-focused, you want to make sure that you got high probability of meeting the return hurdles that you've set for yourselves. And certainly construction costs are more and it's the tight labor environment, like David referred to, it's all those trades people, but the tight labor environment is causing construction costs to be higher and so we have to even be more selective in order to have that high probability of reaching our return hurdles.

And I would just add, Jeff, that our selection process hasn't changed. We're still looking for grade A sites, that's not going to change. We've seen the results of that discipline over the past few years and the success of the restaurant openings that we've had. Along with the cadence, you asked about the cadence of openings being back ended, that's not similar to how it is just about every single year.

Got it. Then Doug, speaking to the commentary around the first-quarter revenues and then the very back-end loaded openings for the year, I'm just wondering whether you would offer any color on how you see the push and pull of all of those costs you discussed in terms of whether you want to look at restaurant margins, the operating margin, how you kind of see – whether you think you can get any kind of expansion if you're still running that 2.5 points of price.

You're talking about overall operating margins for the year?

Whether it's restaurant margin or operating margin, however, you want to slice it, it seems like...

Yeah, yeah. And as you're aware, Jeff, we just finished the year where we had operating margin expansion of 60 basis points. We had 90 basis points the year before that. And that's we're really outpacing what our margin expansion expectations have been. But based on our current assumptions and what we have in our guidance, we could see a year-over-year decline in operating margins in 2017 given the labor pressure and a little less favorable, a little less benign commodity environment. And really the fact that we're losing the positive margin impact from that 53rd week that we're lapping, which you shouldn't underestimate how profitable that week is. But with our continued focus on menu innovation and service and hospitality and our traffic driving initiatives, we'll continue to push for higher comp store sales to try to offset some of those pressures. And in this environment we need to have probably 2%-plus comp store sales in order to during this – labor the way that it is in order to be able to expand operating margins in a given year. And as you know, our comp store sales guidance isn't for more than 2% for the year.

Understood, thank you very much.

You're welcome.

Thank you. And our next question comes from the line of Nicole Miller with Piper Jaffray. Your line is open. Please go ahead. Nicole M. Miller Regan - Piper Jaffray & Co.: Thank you. Good afternoon. I had a question about development piece with two parts. The first being domestic development. Are these new malls and lifestyles that are – lifestyle centers that are being built, are they existing places, and what do you know about the sites and the models that you're building that tell you what kind of customer you're going to draw? And then the second part is for international development, what might be a realistic quarterly cadence, so that we get our models adjusted appropriately and what could you tell us about the sales trends of those international stores that are up and running? Thank you.

Do you want to start then...

Yeah. I'll start with the second one first, because I don't know what the answer to the first one is.

Right.

So with respect to international, we expect that four to five international restaurants opened by our licensee partners and up to three of those in the Middle East and up to two of those in Asia, so we would say between four and five international restaurants. Our international locations continue to generate very good volume and we are very pleased with the 15 international locations that we have open. I'm not answering a part of your question...

The other part was the cadence of the...

The cadence...

It will be the middle – first opening would be the middle of the year, probably the end of the second quarter, mid-second quarter, and the rest of them are in the third quarter and the fourth quarter.

A lot of those are new malls. So it's hard to judge exactly in the time they get going to get a date, but they are huge projects and there is a lot of government sign-offs and so on and so forth that sometimes come on time and sometimes they don't. In terms of our domestic openings, they are mostly in malls but what they are is Sears and other big boxes that have gone out where the landlords are now breaking them up putting in restaurants and theaters and other high-end retail. So, we're happy about that in a sense it works as a very independent setting right next to the mall, but as they go out, that landlords don't try to find another big box user, they want Cheesecake Factory and other independents. So that's been very good for us.

And our site selection criteria hasn't changed. We're still looking at the right demographic, the right average income, none of that has really changed over time. Nicole M. Miller Regan - Piper Jaffray & Co.: Thank you.

Thank you. And our next question comes from the line of Brian Bittner with Oppenheimer. Your line is open. Please go ahead. Michael Tamas - Oppenheimer & Co., Inc. (Broker): Great. Thanks. This is Mike Tamas on for Brian. Just a quick question on unit growth. Are there plans for any Grand Lux in 2017?

The one that we had for 2017 is going to open in 2018. So, although we're working on a Grand Lux right now, there probably won't be any in 2017. Michael Tamas - Oppenheimer & Co., Inc. (Broker): Okay. And then, just – I know you gave great color on the first quarter, but just curious if there's anything you could talk about either day part where it's at the shoulder periods or days of the week or just any sort of interesting trends that you're seeing that, that would be helpful for us?

I don't know about any interesting trends...

The sun is shining outside today in California.

Yeah. It is not raining here, which you might think that doesn't go to sales, but it really does. We're impacted when it rains in California, because we can't use our patios. For the fourth quarter, I'll make the comment that I think that our fourth quarter comps were impacted about 0.4% (25:16) by weather. So, I don't know if that helps you any. We talked about the month-to-month cadence. What else?

No other changes really looking at the first quarter. Michael Tamas - Oppenheimer & Co., Inc. (Broker): Okay. Thank you.

Thank you. And our next question comes from the line of Gregory Francfort with Bank of America. Your line is open. Please go ahead.

Hey, guys. Can you talk a little about your experiences with delivery so far, maybe how impactful it is, how much incrementality you're seeing and in terms of – is that impacting your thoughts on your store footprint for development, just trying to fit delivery into the box going forward?

Well, we currently have delivery in close to half of our locations. And as David mentioned in his opening remarks, we have seen an overall uptick in to-go through 2016 about a percent better than where we were when we already have relatively high to-go sales volumes. We've been happy thus far with our third-party partner, and I don't know that we're evaluating, looking at sites, any differently or design any differentially because of the volumes that we're doing. We have seen some nice incremental uptick in some of those locations and that's great. Those locations tend to be ones where delivery is already entrenched in that market in general, and we're benefiting from that. We are focused this year, in general, operationally on just improving our off-premise operations and doing the best we can to execute the volume that we're getting, so that the guest experience within the restaurant stays at the levels that it always has been, if not even gets better. And that we're able to hit delivery times that are 50 minutes or so with our partners. And ensure that the quality of the product getting to the guest is as good as it can be that you would receive in the restaurant.

Thanks. And maybe just one housekeeping one. Can you talk, is the tax rate for the full-year, is that sort of roughly flat for the quarter? I know with the new accounting changes, I think it throws around a little. Should we sort of think about if that's sort of being consistent during the year or maybe is 1Q, 2Q, any different from that?

It's – I think, when we talk about it, it's going to be a little tough to get used to all this, but it's going to be really bumpy actually. It's going to be, it's going to add volatility. So in the first quarter, for instance, the tax rate is going to be lower than what the full year will be because during the first quarter we have a lot – it just happens to be that there are a lot of restricted stock grants that become exercisable and the restrictions lapse on them, and when that happens we receive the tax benefit from this deduction now, that's lowering our tax rate. So it is going to be a little bumpy and I think that's the way it's going to be from now on. So we said what we thought it was going to be for the year, but that's certainly not necessarily smooth quarter to quarter.

Thank you.

Thank you. And our next question comes from the line of David Tarantino with Robert W. Baird. Your line is open. Please go ahead. David E. Tarantino - Robert W. Baird & Co., Inc.: Hi. Good afternoon, Doug, just following on that question, what tax rate are you assuming in your guidance for Q1 and then I have a follow-up?

Right around 20%. David E. Tarantino - Robert W. Baird & Co., Inc.: 20%. Thank you. And then I think my second question relates to pricing. I think you had not given a update recently on what level of pricing you planned or you expect to take in 2017. So what are you planning for this year, and I guess, I might have a follow-up to that as well.

Okay. So with pricing we're always trying to balance the demand and the cost environment, and during this current menu change which we refer to as our winner menu change, we'll be taking about 1.2% pricing, which is replacing 1.4% that's rolling off. So this will – that will bring pricing for the first part of 2017 to right at 2.3% which is a little lower than it was last year during the first half of the year. But still well within our historical range and a little above our average of 2%. And when we take pricing we're continuing to use more of a market based approach skewing some of the increases to areas where we are seeing more wage rate pressure. And as far as second half of the year, we're going to – we'll decide that one when the time gets here. I think, we have a – we think that we continue to maintain pricing power. We could take additional pricing at that time during the summer menu change if we think the environment necessitates that. David E. Tarantino - Robert W. Baird & Co., Inc.: Yeah, that was my follow-up on the pricing question is, how are you measuring your ability or sort of your pricing power as you think about sort of the last several years, the traffic has been slightly negative in those quarters and the pricing has been pretty consistent. So is there a thought that maybe at some point you need to take less pricing to drive traffic or do you not think those two are correlated (30:48)?

Well. So, first of all, we're always trying to take as little pricing as we possibly can take, okay. So pricing is not a good thing to generate demand obviously. So we try to take as little pricing as we can. One of the things that informs us some about our pricing is that in markets where we've taken more geographic pricing like in California. We have seen traffic levels that are consistent with or better than other regions. So we don't think that the – if you think about it the pricing that we're taking that's sort of over above the average is like a 0.5%. So it's not a lot more than the 2% that we're – we've always pretty much taken on the average. You've got to be able to take pricing over time. Any business has to be able to take pricing over time. And we're not taking that much more than the normal. It's an art not a science and we're going to continue to balance the guest traffic levels with the cost pressure and try to make the best choices. David E. Tarantino - Robert W. Baird & Co., Inc.: Great, make sense. Thank you.

You're welcome.

Thank you. And our next question comes from the line of Jeff Farmer with Wells Fargo. Your line is open. Please go ahead.

Thank you. I have a couple of follow-up questions as well. What your margins look like on those delivery order sales relative to what you are selling in-store or in-restaurant?

Well. I would say that we have – we pay a charge for delivery. We get some of that, that's offset with having to do less things in the restaurants like the – not – the people aren't using napkins and we're not having to wash their dishes, and those types of things. So we're thinking at this point in time with respect to the amount of delivery that we're doing that we are able to offset a lot of those costs.

Yeah. So it'd really be margin neutral. And we are seeing a higher average check on the delivery orders as well with deserts contributing to the majority of that.

Okay, that's helpful. And then shifting gears to the labor line. So it looks like 5% wage rate inflation and something close to 2.5% menu pricing did result in that looks like 80 basis points of labor cost pressure in 2016. You guys are pointing to a similar level of wage rate inflation meaning 5% and in 2017 a little bit less menu pricing. So is there some other component out there that potentially would not result in another year of 80 basis points of labor pressure, something that could potentially offset again that high-level or that second consecutive year of a mid single-digit wage rate inflation?

Yeah. So, it will be the third consecutive year actually, because we've certainly been able to confront the labor issue in both 2015 and 2016. We had some help obviously from a very favorable commodity cost environment. But in both of those years, we produced robust earnings per share growth despite the fact that there was 5% labor wage rate inflation in each. Looking forward, we're going to continue to use the things that have made us the Cheesecake Factory and have really produced the results that we've produced, our menu innovation, our focus on service and hospitality, excellence, our traffic-driving initiatives to push for higher comp store sale to help offset those labor pressures. But additionally, we'll continue to seek other cost efficiencies, other cost savings as we did in 2016. We didn't talk about specifically any of those in 2016, because they were each individually sort of small, but we're going to continue – we had some of them in 2016, we'll continue to look for other cost savings measures to help offset the labor pressure. And then, of course, there's pricing which we've already talked about. And we think that we continue to maintain pricing power. So really when I look at it, when it all adds up even in a year where we have a – from a calendar perspective, a negative comparison having only 52 weeks comparing to 53 weeks last year, we're still expecting 8% earnings per share growth at the high-end of our range despite the fact that we have 5% labor wage rate inflation.

Understood. Thank you.

Thank you. And our next question comes from the line of Will Slabaugh with Stephens. Your line is now open. Please go ahead.

Hey. Thanks, guys. I wanted to follow up on the international comment. Now that you have a decent number of stores in multiple markets, I wonder if you could speak to their performance versus your initial assumption of around, I think, it was around $0.01 per store of contribution. And then also any general feedback from your licensees in terms of their willingness to accelerate their build-out going forward will be helpful?

Well, I think that this year – well, I know that this year was the first year that all three of our licensees opened restaurants. So we now have three licensees and they're all happy with the sales volumes that their restaurants are doing and they're going to build more restaurants. So two of the three are going to build restaurants in 2017 and then our partner in Mexico, Latin America, will – did I say 2017?

Yeah.

...2017 is going to build open a restaurant 2018. But all three licensee partners are very happy with the sales volumes that their restaurants are generating. And if I were to compare it to the $0.01, the ones in Mexico and in Asia are closer to the $0.01 and the ones in the Middle East are higher than that.

Thank you. Operatory: Thank you. And our next question comes from the line of Matthew DiFrisco with Guggenheim Securities. Your line is open. Please go ahead.

Thank you. Doug, I had a couple of just follow-ups as well. You said there was an uptick of around 1% on delivery to the to-go sales, so that's 1% of overall aggregate sales gained in the store?

1% in overall uptick in to-go, overall to-go sales.

So some portion of that was incremental, but not the whole 1%.

Okay. So just basically at the store level, you only have it in 50%. So is that a comment of 1% for the entire system got a lift, or is that a 1% of the stores that have it?

It's 1% for the entire system.

Okay.

But that's full to-go.

Because to-go sales in general have just picked up. People walking in is also picking up.

How much in aggregate is to-go inclusive of delivery, off premise sales I guess?

Yeah, it was 11% last year.

11%, and that's inclusive of delivery?

Correct.

Okay. And then is delivery then a higher margin experience?

No.

Okay. Can you quantify how much maybe the earnings impact would be? Is it meaningful of the Easter shift into 2Q? Should we expect the cadence of the earnings growth to be stronger in 2Q than it would be for full-year?

I think earnings growth follows very closely with the comp store sales growth. So to the extent that there is less comp store sales growth in the first quarter, it's certainly impacting earnings and it should conversely help the second quarter.

Okay. And then also I guess just last question, Doug. Can you answer as far as with respect to eight store openings and then a $125 million to $140 million in CapEx, I guess that implies about $60 million to maybe $80 million in non-development CapEx if I'm doing the math right? Can you just talk about what type of projects that's going to be deployed on, what type of remodels potentially or refurbishments that you might be doing in the stores? It seems like it's a little over $200,000 per store.

$200,000. Okay. I see what you're saying. Okay, we have maintenance CapEx each and every year that is roughly 30-plus million dollars. This year we have another $10 million to $15 million that were included in that CapEx number related to more extensive remodel activity in certain of our restaurants. So that's part of what the difference is. And the other part is we're doing an infrastructure upgrade in our West Coast bakery that is roughly $10 million of that.

Okay. Does that mean you're looking at more external businesses like I guess more the Costco-type relationships and get more restaurant third-party giving them the cakes?

We're looking to grow our external business but that's not why we're doing the infrastructure upgrade. It's needs to be done because in order to be...

Which means we have new equipment and more modernization to make the West Coast bakery more like the East Coast bakery.

Okay. Last question, can you just put into context that 11% that off-premise represents in 2016, what that was in 2015?

10%.

10%.

10%? Okay. Thank you.

Thank you. And our next question comes from the line of Andy Barish with Jefferies. Your line is open. Please go ahead.

Hey, guys. Most of the questions have been answered, but wondering if there is any way to call out any improvement during the MasterCard. I know MasterPass and CakePay was highlighted in some of their national advertising. Were those weeks that you saw some increased awareness in sales or is it tough to tell?

I think it's tough to tell. It would just be anecdotal and we'd rather not take a guess. Certainly, it's not hurting. MasterPass was very happy actually with the ad. So happy that they're going to be running it again here in the next couple of months, which wasn't part of the original agreement. So we're happy about that.

Okay. Thank you.

Thank you. And our next question comes from the line of Peter Saleh with BTIG. Your line is open. Please go ahead.

Great. Thanks. I think a couple times during the call you guys had indicated or talked about traffic-driving initiatives. I was hoping you could maybe elaborate on those and where you stand on some of these initiatives.

Yeah. Let's just really – we also talked about the fact that our gap between our sales and those of the rest of the industry had widened during the quarter. In fact, I need to mention that our gap to Knapp-Track was 400 basis points, which is the widest it's been in seven years since the first quarter of 2010. Our goal is obviously to move back to a flat traffic but over time versus running short-lived promotions. And the way that we, Peter, that we go about doing capturing new guests is by really working on our key points of differentiation that we have with respect to food, with respect to menu innovation, and service and ambience, while complementing those ongoing activities that we always do with some more targeted strategic initiatives. And, at the same time, trying to capture all those sales at full margin. So some things that we've talked about as traffic and sales building initiatives, delivery which we've talked a lot about on this call and I think that it is working out for us. We're going to expand it more in 2017. And we've talked about our CakePay, our mobile payment app, and then we've talked about enhanced server training, all those things too. A good example really of how we're using our operations, though, not with respect necessarily those special initiatives, but more ongoing, the winter menu change that I mentioned earlier, we will include a new special card featuring a number of unique items. I think there's three appetizers and six or seven maybe entrées on this special menu card that you're going to get when you walk in...

Pick the (43:38) pricing.

...all are true to the Cheesecake Factory's innovative spirit, they're high taste profile, they're a big portion size, and they're all priced under $15 to continue to provide great options for our guests across many price points, while still driving full margin sales for us. So while they're all under $15, there's a couple of them on there that are like, what...

$12.95.

$12.95 and...

Appetizers at $4.95.

$4.95. So we're giving you a menu card, we're giving you a choice now when you walk in the restaurant that if you want to spend less and you want to order these new grade items that are really fully priced for us, but they are lower priced in absolute terms. That's one of the things that we're doing that we are hopeful will help to drive traffic as well.

Are those planned to be permanent menu items or just limited (44:36)?

The answer is, always it depends how well do they sell. If they sell really well, then we'll probably keep them.

We've done this before and at some point they'll go on to the regular menu and then have new special cards or we may drop it. We will analyze it as we go.

Excellent. All right. And then just on the pace of the delivery rollout to the stores, I know you said you're at about half of the units now with delivery, do you anticipate getting to all the stores this year 80%, 90%? How should we be thinking about the pace of delivery expansion?

Yeah. We don't necessarily think we can get to all the restaurants this year. Really, we'll go as far as we can with DoorDash. They're our current third-party vendor and then we will explore other third-party vendors or other avenues to get to some of those markets where perhaps DoorDash doesn't have an intention of going. But that might not be accomplished through this year.

All right. Thank you very much.

Welcome.

Thank you. And our next question comes from the line of John Ivankoe with JPMorgan. Your line is open. Please go ahead.

Hi, just a couple of quick follow-ups at this point. In preopening per unit company store in the U.S., where is that currently running? And I assume the relocation would be a less preopening than the other units. And secondly, is there any preopening that's allocated to international units that maybe would have explained the fourth quarter levels?

There's no preopening allocated to international units. In the fourth quarter, I think, we opened comparable number of restaurants and did it in a comparable amount of preopening costs. So I didn't see anything unusual with that. Preopening per restaurant is roughly $1.1 million.

Around $900,000.

$900,000.

Okay. And considering that you don't really have many units coming on in the first half of 2017, I mean, that should be the run rate for the overall years. So in other words, when we look at preopening for fiscal 2017, you would expect the year to have a round number of something like $9 million in total?

Well, maybe we'll have to get with you offline on that, but it's obviously going to be backend loaded like our openings are going to be, but the preopening costs are going to be, I would think, higher than $9 million.

Okay. But I'm just trying to take that eight company units in the U.S. and then looking at, I think, you just told me it was $1.1 million. So I'm just trying to juxtapose...?

Yeah. Some of the preopening obviously has to do with the fact that we have openings – any preopening with respect to anticipated openings in the first quarter of the next year. So some of it's that.

Right. And it doesn't really sound like you have anything. Okay, that's fine. We can talk about that from offline, Doug. And then just finally it may be not terribly important, but just hoping that we could get somewhat of an update as you put some capital and some attention behind Flower Child and North Italia, kind of what you're seeing as you look at those concepts and what they could potentially mean for you? And as you get more experience there, what you're thinking about those two concepts for 2017 and 2018?

For 2017 and 2018, basically, we've made a minority investment. We're going to continue to fund their growth over that period of time. As far as impacts on our cash flow, it's going to be negligible. As far as impacts on our financial statement, it's going to be negligible. So not a lot in 2017 and 2018 related to those. The beauty of this investment is we've partnered with a highly skilled – with a strong infrastructure in place and a highly skilled team that can take these two what we believe are good growth brands and move them from where they are today, which is 11 North and six Flower Childs to more than that over time. And that we will get to participate more heavily if that's done in a good manner.

Okay, thanks.

You're welcome.

And just to clarify...

Thank you. And our next...

...preopening is more around $1.5 million per restaurant.

Okay, all right. Thank you, Stacy.

Thank you. And our next question comes from the line of Steve Anderson with Maxim Group. Your line is open. Please go ahead.

Yes. Good afternoon. Just looking at the other expense line, I saw a little bit of deleverage there. You mentioned some of the items that contributed to that, specifically increased marketing spend. Is this something that you'll be looking to basically repeat in future quarters, or other one-offs we should be aware of?

I don't think so. No.

All right. Thank you.

Thank you. And I have a follow-up question from the line of Matthew DiFrisco with Guggenheim Securities. Your line is open. Please go ahead.

I think it's the favorite phrase that Doug probably wants to hear, all my questions were answered. Thank you.

Yeah.

And I'm showing no further questions at this time. And this does conclude today's program. Everybody have a great day.

Thank you.

Thank you.