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Cheesecake Factory Inc (CAKE -1.02%)
Q3Â 2018 Earnings Conference Call
Oct. 30, 2018, 5:00 p.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Good afternoon. My name is Rob, and I will be your conference operator today. At this time, I would like to welcome everyone to The Cheesecake Factory Third Quarter Fiscal 2018 Earnings Conference Call. (Operator Instructions)
Thank you. Ms. Stacy Feit, Senior Director of Investor Relations, you may begin your conference.
Stacy Feit -- Senior Director of Investor Relations
Thanks, Rob. Good afternoon and welcome to our third quarter fiscal 2018 earnings call. On the call 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 not based on historical facts 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 of assets and lease termination. David Overton will begin today's call with some opening remarks, and David Gordon will provide an update on our off-premise business and marketing initiatives. Matt will then take you through our financial results in detail and provide our outlook for the fourth quarter and the full year 2018 as well as some initial assumptions for 2019. Following that, we'll open the call to questions.
With that, I'll turn the call over to David.
David Overton -- Chairman of the Board and Chief Executive Officer
Thank you, Stacy. Third quarter comparable sales of 1.5% at The Cheesecake Factory were within our expectations. Importantly, our operators executed on our objectives, wage inflation moderated from second quarter and Group medical insurance costs normalized. These factors generated solid profitability during the quarter. Within the four walls, our operators drove year-over-year improvements in food efficiency and labor productivity.
We ended the quarter with lower over-time year-over-year as we continue to focus on ensuring that our restaurants are fully staffed. We have also seen a measurable improvement recently in both dine-in and takeout guest satisfaction scores. There is a strong correlation between these metrics and comparable sales performance. In turn, we reinforced our mission of absolute guest satisfaction daily in our restaurants and look to maintain this momentum.
With regard to development, we now expect to open five restaurants in fiscal 2018. This includes The Cheesecake Factory in Lynnwood, Washington, a suburb of Seattle; and Grand Lux Cafe in Atlanta, which both opened during the third quarter. We expect to open three additional Cheesecake Factory restaurants during the remainder of the year. Due to delays with permitting, we now expect our new fast-casual concept Social Monk Asian Kitchen to open in the first quarter of 2019. Internationally, we expect the licensed location in Monterrey, Mexico to open in the first quarter of 2019, given the shift and the center's opening date. Including this restaurant, we expect as many as five to six locations to open under licensing agreements in 2019.
Domestically, we continue to believe there is potential for 300 Cheesecake Factory locations, and I feel good about the real estate opportunities lining up for 2019. In turn, we expect to drive at least 3% unit growth next year, which is consistent with our long-term objective.
With that, I'll now turn the call over to David Gordon for an update on our off-premise business and marketing initiatives.
David M. Gordon -- President
Thank you, David. We continue to be pleased with the contribution of our off-premise business, which comprised 13.5% of sales during the third quarter. With regard to our guests that opt to pick-up their order, we're seeing good initial traction with our online ordering platform available through our website for all Cheesecake Factory restaurants nationwide. We will continue to focus on raising awareness of this new channel via in restaurant and to go marketing, supported by some local search advertising.
During the third quarter, we transitioned to an exclusive national delivery partnership with DoorDash. With our shared focus on quality and operational excellence, this partnership is enhancing the guest delivery experience while enabling us to maximize profits from our growing delivery business. This agreement also augments our collaborative marketing opportunities throughout the year. To this end, in collaboration with DoorDash and Hershey's, we're in the midst of our Halloween treat -- treat offer. For every $30 order placed through DoorDash yesterday through Halloween, guests will receive a complimentary slice of Reese's Peanut Butter Chocolate Cake Cheesecake or Hershey's Chocolate Bar Cheesecake, underscoring the strength of our brand partnerships.
Our marketing team secured great publicity for this occasion, including outlets like people.com and People magazine's Facebook page, PopSugar and Thrillist. We've also seen fantastic social media engagement. We believe online ordering and delivery are great channels to increased guest frequency and awareness of The Cheesecake Factory as an everyday occasion. Further on this front, we're proud to be partnering with American Express on the new gold card. With an enhanced dining focus, The Cheesecake Factory was selected as one of the four exclusive partners to participate in their new statement credit opportunity. The gold card relaunch and the associated dining benefits also generated great media coverage for us in outlets like Forbes, Conde Nast and Eater, just name a few.
Finally, our consumer packaged goods business continues to maintain momentum with the recent announcement of our new branded refrigerated puddings in partnership with Lakeview Farms. Four flavors are slated to launch in grocery stores nationwide in January of 2019. These partnerships along with another consumer research study were recently completed, confirmed that affinity for The Cheesecake Factory brand is as strong as ever. We will continue to leverage the brand power and our operators' execution to drive performance moving forward.
With that, I will now turn the call over to Matt for our financial review.
Matthew E. Clark -- Executive Vice President, Chief Financial Officer
Thank you, David. Total revenues for the third quarter of 2018 were $580.9 million, reflecting a 1.5% increase in comparable sales at The Cheesecake Factory restaurants and $13.6 million in external bakery sales. This compares to total revenues of $555.4 million in the prior year period. Cost of sales was 23% of revenues, an increase of about 10 basis points from the third quarter of last year. Labor was 35.2% of revenues, an increase of about 30 basis points from the same period last year. This is primarily attributable to hourly labor, specifically higher wages.
Other operating costs were 24.8% of revenues, down 10 basis points from the same period last year. G&A was 6.5% of revenues in the third quarter of fiscal 2018, up 10 basis points from the same quarter of the prior year. Preopening expense was approximately $3.3 million in the third quarter of 2018, about in line with the same period last year.
And our tax rate this quarter was approximately 5.7%, which was below our anticipated range. This was primarily due to a higher proportion of FICA tip credit as well as some discrete items. With this tax rate, adjusted earnings per share of $0.62 exceeded our expectations. However, even with this tax favorability -- even without this tax favorability, adjusted earnings per share would have been at the midpoint of our guidance range, underscoring our solid core operating performance.
Cash flow from operations was approximately $41 million during the third quarter and $181 million year-to-date. In the quarter, net of roughly $14 million of cash used for capital expenditures and $11 million in growth capital investments in the two Fox Restaurant concepts, we generated over $15 million in free cash flow. And we completed approximately $19 million in share repurchases and returned $15 million to shareholders via the dividend during the quarter.
That wraps up our financial review for the third quarter. Now I'll spend a few minutes on our outlook for the fourth quarter and full year 2018 as well as some initial assumptions for 2019. As we've done in the past, we continue to provide our best estimate for earnings per share ranges based on realistic comparable sales assumptions and the most current cost information we have at this time. These assumptions factor in everything we know as of today, which includes quarter-to-date trends, what we think will happen in the weeks ahead and the effect of any impacts associated with holidays or weather.
For the fourth quarter of 2018, we now expect comparable sales in the range of 0.5% to 1.5% at The Cheesecake Factory restaurants with adjusted diluted earnings per share between $0.60 and $0.64. This is based on an assumed tax rate of approximately 10%.
Turning to full year 2018, we now anticipate comparable sales of approximately 1.5%. We are now estimating adjusted diluted earnings per share between $2.42 and $2.46. And we are now forecasting a tax rate of approximately 10%.
With regard to capital allocation, we now expect our cash CapEx in 2018 to be between $80 million and $85 million, including the five planned openings. And we have completed our $25 million in planned 2018 growth capital contributions to the two Fox Restaurant concepts. Looking further ahead, we continue to target 1% to 2% comparable sales growth within our long-term framework.
On the cost side, based on the visibility we have today, we expect food inflation for 2019 market basket to be approximately 1% to 2%. As David mentioned, wage rate inflation moderated from the second quarter to the third quarter and is now running around 6%. We expect this trend to continue into 2019.
With our history of continuous improvement, we will seek additional efficiencies in our restaurants to help offset pressure on the labor line. And we will also further enhance our market-based pricing strategy in higher wage geographies to support our objective of maintaining flat restaurant level margins.
And for modeling purposes, we estimate a 2019 tax rate of approximately 12%. We expect our cash CapEx in 2019 to be between $100 million and $110 million to support our anticipated unit growth. We expect growth capital contributions to the two Fox Restaurant concepts prior to the potential acquisition of North Italia to be approximately $20 million to $25 million. To that end, as we begin to prepare for the potential North Italia acquisition in the second half of 2019 and ensuing increase in future unit growth rates with an expanded portfolio, we will be completing reviews of Grand Lux Cafe and Rock Sugar to ensure that we have the best levers in place to drive company wide ROIC and earnings growth in the future.
In addition, with The Cheesecake Factory pipeline well positioned for next year, as David referenced, supported by the enduring strength of the brand and operational excellence, our focus on the core long-term success drivers has never been greater. At the same time, we will continue to execute a balanced capital allocation strategy, complementing growth investments with continued return of capital to shareholders via our dividend and share repurchase program in 2019 to generate the best returns for our shareholders.
In closing, we are leveraging The Cheesecake Factory's broad consumer appeal and high degree of relevance to drive sales while managing through the industry cost pressures. At the same time, we believe we are making the right long-term decisions and investments to continue to provide our guests with great dining experiences, offer growth opportunities for our staff members and maximize long-term value for our shareholders.
With that said, we'll take your questions. In order to accommodate as many questions as possible, please limit yourself to one question and then requeue with any additional questions.
Questions and Answers:
Operator
(Operator Instructions) And your first question comes from the line of John Glass from Morgan Stanley. Your line is open.
John Glass -- Morgan Stanley -- Analyst
Thanks very much. First, if I could just ask on the labor line this quarter, I think you said inflation was still, I'm not sure if it was this quarter, just a forward comment, 6%, but you're labor dollars per store were substantially lower than they've been in the past. So what was the labor inflation this quarter specifically and what drove the better efficiency, was it just lower overtime hours and how do you think about the sustainability of that in the fourth quarter, for example?
Matthew E. Clark -- Executive Vice President, Chief Financial Officer
Hey, John, this is Matt. And so for third quarter, the inflation rate was about 6%, and we're also expecting that for the fourth quarter, so just to clarify on the specific percentage. And there are a variety of factors that go into the labor dollars per line item. For example, we did see the Group medical moderate back to normal levels compared to where it was earlier in this year. And so all of those factors go into what you're looking at in terms of the total labor dollars per operating week. But we would expect at a 6% inflation rate on our like-for-like basis, you would see similar performance going forward.
John Glass -- Morgan Stanley -- Analyst
And would you just might just breaking down the comp, the 1.5 into the components of traffic and ticket?
Matthew E. Clark -- Executive Vice President, Chief Financial Officer
Sure. Pricing was 2.9%, mix was a positive 0.6% and traffic was down 2%, but we did have a shift in one of our programs for National Cheesecake Day that just had to do with the calendar shift, and that was basically a trade-off between traffic and mix, it was about 1%. And so when we look at it kind of on a run rate basis, traffic was probably closer to down 1%. Absent that shift and the mix was close to breakeven, if that makes sense.
John Glass -- Morgan Stanley -- Analyst
Okay. Yeah. Thank you.
Operator
And your next question comes from the line of Jeffrey Bernstein from Barclays. Your line is open.
Jeffrey Bernstein -- Barclays -- Analyst
Great. Thank you very much. Two questions, one just on the comp. The 1.5 was at the lower end I guess of your 1.5 to 2.5 range. We assumed that was going to prove more conservative, because, I guess, July was already known at the time and it seemed like the broader industry improved in August and sustained in September. So wondering if you can provide some color on the sequential trends through the quarter and (inaudible) in the fourth quarter to be 50 bps to 150 bps, so maybe this is a slower run rate in your business that you've seen over the past couple of months. Just looking for any color there.
Matthew E. Clark -- Executive Vice President, Chief Financial Officer
Yeah. Hey, Jeff, this is Matt. I think that the biggest driver probably to that was really the industry and some of the enhanced and accelerated promotional activity. I mean, so we're 50 bps below the midpoint. And I don't think it was a big difference for us and not any real driver of that. I think importantly though ,to the second half of your question, we saw a very stable run rate from August into September. I think a lot of the industry started to see that tail-off a little bit. In September, I think we were a little bit more consistent. I think with respect to the guidance, it's just more a reflection of that promotional activity that's out there, and we continue to drive full margin sales, and we just think that's a prudent range to be providing at this point.
Jeffrey Bernstein -- Barclays -- Analyst
Got you. And then my other question was just on the unit growth side of things. I think, David, you mentioned 3% growth next year, which on a base of 200 units, I'm guessing we're talking about 6 units, just kind of the ballpark. So I'm wondering if you can just confirm that and maybe share if you're seeing any benefits to maybe getting from significant retail closures, whether it's better terms or locations or tenant allowances? Just trying to get a feel for what benefit you might be seeing from a real estate perspective. Thanks.
Matthew E. Clark -- Executive Vice President, Chief Financial Officer
I think we're talking about maybe 6 to 8 or so sites and we think we're getting excellent deals. I can't say we're getting better deals. More things are being rolled by us, but they're either the wrong size or whatever, they're small -- too small to take kind of on a basic street site, but there are a lot of empty stores. I just noticed that the other day, myself, how many there were, but so many of them can't really support The Cheesecake Factory. So we're doing fine with our deals, but nothing really great has been offered to us.
Jeffrey Bernstein -- Barclays -- Analyst
Great. Thank you.
Operator
Our next question comes from the line of Sharon Zackfia from William Blair. Your line is open.
Sharon Zackfia -- William Blair -- Analyst
Hi, good afternoon. I guess a question on the commentary around Grand Lux and Rock Sugar. Is the idea when you review the portfolio that potentially you would convert those to North Italia's or are you thinking of closing sites?
Matthew E. Clark -- Executive Vice President, Chief Financial Officer
No. Sharon, this is Matt. I think the first one, really we are not looking at closing sites, we're just doing a review. It's mostly about capital allocation. I don't think it's a conversion either as we have a broader portfolio to choose from, and we look to drive long-term returns, we just want to make sure that we use that lends to evaluate future opportunities with each of our brands.
Sharon Zackfia -- William Blair -- Analyst
Okay, that's helpful. And then secondarily, as we start to focus more at 2019, can you remind us how much Group medical will have penalized you in 2018 relative to 2017, either on a dollar basis point level, and how are we thinking about that for 2019? Is that similar year-over-year as a favorable or any kind of color there would be helpful?
Matthew E. Clark -- Executive Vice President, Chief Financial Officer
Sure. I think really what we've called out in the Group medical, particularly around the second quarter if I remember was around $4.5 million. What I would say though is it's maybe a little bit early to call out for 2019, we still have one quarter to go, and so I think it would be prudent. We can give a perspective on that in February to help everybody out and that you really don't know until the end of the year how much you think you're going to crossover really for the next year, but that was the gap in the second quarter, at least.
Sharon Zackfia -- William Blair -- Analyst
Thank you.
Operator
And your next question comes from the line David Tarantino from Baird. Your line is open.
David Tarantino -- Baird -- Analyst
Hi. Good afternoon. Matt, just a question on the guidance for next year. I think this quarter is the typical quarter you usually give an EPS framework, and I don't think you mentioned that on this call. So just wondering is that a change in philosophy on how you're guiding going forward? And maybe a second follow-up question, if I can give it a shot is could you maybe give us a framework for the EPS growth for next year, is it likely to be an above average growth year or below average growth year relative to your targets in line with your line targets? Thanks.
Matthew E. Clark -- Executive Vice President, Chief Financial Officer
David, I'm so glad that you asked that question so we could clarify that for everybody. Really, there's a couple of moving parts going into 2019, particularly around the North acquisition, we're still firming up our plan with our Board around the financing alternatives, which could impact some of those pieces. So we're planning to provide that particular guidance with respect to the earnings framework on our fourth quarter earnings call in February. And also, to be honest, I think it lines up a little bit more with the industry best practices. It's is kind of what we are seeing everybody doing at this point. So we're not going to give too many specifics, we hope that all of the assumptions that we provided with respect to the cost of sales inflation and wage rate, et cetera, will help people at least with the initial modeling.
David Tarantino -- Baird -- Analyst
Fair enough. And then if I could ask about one of the assumptions. I think you mentioned that your goal was to hold restaurant margin roughly flat next year and with all this inflation, I just was wondering how do you plan to do that? Is it mostly through pricing or do you have some sort of combination of pricing and efficiencies that will help that line hold flat in this inflationary environment?
Matthew E. Clark -- Executive Vice President, Chief Financial Officer
I think it always has to be a combination when wage inflation is around 6%, but though, when you look at some of the math, we do expect cost of sales inflation to be slightly more benign than it was this year, and so that will support it. I also think if you look at some of our margin cadence in this year in the third quarter, it definitely started to stabilize. As we look at the guidance for the fourth quarter, it's fairly stable. So I think what we're doing to be efficient in the four walls, whether that's driving cost of sales efficiencies or managing overtime is helping to support that going into next year as well.
David Tarantino -- Baird -- Analyst
Great. What level of pricing are you thinking you'll maintain next year or have in the menu?
Matthew E. Clark -- Executive Vice President, Chief Financial Officer
I think it's around the same of where we're at today. Obviously, we would continue to have more region specific focus given the continued separation and minimum wage really between the geographies. But the average will probably be somewhere in the ballpark of where it is this year.
David Tarantino -- Baird -- Analyst
Right. Thank you very much.
Operator
And your next question comes from the line of Gregory Francfort from Bank of America. Your line is open.
Gregory Francfort -- Bank of America -- Analyst
Hey, guys, thanks. I have two questions. The first is, I think you touched on it, but in terms of funding North Italia, I think -- what's the initial thought there, is it to take on debt, is it to -- I can't tell if the message is to potentially maybe sell Grand Lux or something like that, but any help there would be appreciated. My second question is just -- I think you touched on guest satisfaction scores recently improving, and I'm curious what time period you're referring to and what's scores you're seeing an improvement in, is that the last month or two, is that the last six to nine months? I guess I'm just curious what that message was?
Matthew E. Clark -- Executive Vice President, Chief Financial Officer
Sure, Greg. This is Matt. I'll take the first one. And so just to clarify, I think we got the question, but when we're thinking about Grand Lux and Rock Sugar, it's not about monetizing those assets, it's about looking forward in terms of capital allocation. So we're still working with the Board on the best way to support the financing at this point in time. We do want to continue with the share repurchase program and the dividend is obviously an important part, so continuing to be able to do it all is important to us. And so I think there is just a variety of alternatives that are open, and we'll provide more clarity on that when we get to the February call.
David M. Gordon -- President
And Greg, this is David Gordon. Just on the guest satisfaction scores, we have seen an uptick in our net promoter scores really toward the end of summer and moving into September. I think I've touched on before that we really try to look at it at a very high corporate level around those scores. We push that down more to the restaurants to make sure that they understand where exactly they stand on their net promoter and then some of the service drivers below that, whether that's pace of experience, quality of food, overall guest satisfaction, et cetera. So we've put some some heightened focus and awareness really starting at the end of summer, and we think that's paying off now.
Gregory Francfort -- Bank of America -- Analyst
And maybe if I sneak one last one in here. Just -- I think you touched on pricing by region in response to the last question. Do you have different value scores across regions on the coast, so they are different than the middle of the country? And I guess the question is do you have permission from the guests to price more on the coast and how do you measure that?
David Overton -- Chairman of the Board and Chief Executive Officer
I think we have seen different net promoter scores by region, but it's not really related to the pricing. I think you can even get down into specific cities that have slightly different approaches to how they rate the experience itself. When we look at the elasticity of pricing, I think we definitely have pricing power on the coast, the disposable income is much higher there. California continues to be one of our strongest markets and certainly, we're taking more pricing in California with the minimum wage here than we are in some other places. So I don't think we see a correlation between the scores that we're talking about and the pricing, at least not to-date.
Gregory Francfort -- Bank of America -- Analyst
Thank you.
Operator
And your next question comes from the line of John Ivankoe from JP Morgan. Your line is open.
John Ivankoe -- J.P. Morgan -- Analyst
Hi, thanks. First, a clarification on labor comments that you made. On a 6% wage inflation, did you say that we would expect something like a 2.5% labor dollar per operating week increase, at least for the next several quarters as you have some initiatives in place or that the increase in the labor dollar per operating week basis would be closer to 6%?
Matthew E. Clark -- Executive Vice President, Chief Financial Officer
I think, John, to clarify, this is Matt, we just expect to see similar performance relative to the wage inflation rate. I wouldn't go so far as to say I expect 2.5% dollars (inaudible) because there are other factors that can play into that light, equity compensation for our General Managers and the Group medical. So I think we've been effective over time in being able to manage our labor below the inflation rate, but I just don't think it necessarily has to be 2.5%, but somewhere below 6%.
John Ivankoe -- J.P. Morgan -- Analyst
Okay. And that is what we calculated for the third quarter, just -- in case you need to change that for the transcript. But second question is on G&A, you did show a little deleverage in the third quarter, and I do think showing leverage over time is part of the shareholder return algorithm that you've talked about. As you think about '19 G&A, maybe even going a little bit longer, either with or without North Italia, what's the current thinking in terms of the organizational structure?
Matthew E. Clark -- Executive Vice President, Chief Financial Officer
Yes. For the third quarter, John, really -- it's just really a comparison. So last year, if you remember going back, third quarter was pretty tough in the industry and so that's really the incentive comp comparison on a year-over-year basis that was adjusted. So I think our long-term outlook of attaining 10 basis points a year and leverage in the G&A line is still where we feel good.
John Ivankoe -- J.P. Morgan -- Analyst
Thank you.
Operator
And your next question comes from the line of Brian Bittner from Oppenheimer. Your line is open.
Mike Tamis -- Oppenheimer Holdings -- Analyst
Hi, thanks. This is Mike Tamis on for Brian. Just wondering about the same-store sales performance versus the industry. It kind of seems like your outperformance gap has narrowed, and I think it was actually a little bit negative in this quarter. Just wondering how do you think about that, and then how do you think about getting back to sort of the historical outperformance when you position that against your comments around the competitive discounting going on out there?
Matthew E. Clark -- Executive Vice President, Chief Financial Officer
Sure, Mike, this is Matt. I think as we've said before, we look at the industry gap more on a rolling six quarter basis. I think any given quarter, there can be a lot of noise. I think we saw a lot of noise in the third quarter around two factors, obviously the promotional activity, but as well as the year-over-year hurricane activity that was just a little bit noisy in terms of that comparison. So when we look at the rolling six-quarter average, we're still pretty close to where we have been historically. And certainly, with the labor pressure that is out there and you're now hearing it across the industry, the degree of promotional activity, we'll ebb and flow as it always has been, and I think we'll continue to keep the same course that we have and continue to drive full margin sales, and our long-term outlook of 1% to 2% is still where we're performing.
Mike Tamis -- Oppenheimer Holdings -- Analyst
Great, thanks. And then within the guidance for the fourth quarter, is there any holiday shift, either its good or bad that we can (multiple speakers).
Matthew E. Clark -- Executive Vice President, Chief Financial Officer
Not meaningful. No, it's not a meaningful movement.
Mike Tamis -- Oppenheimer Holdings -- Analyst
Okay, perfect. Thanks very much guys.
Operator
Your next question comes from the line of Karen Holthouse from Goldman Sachs. Your line is open.
Karen Holthouse -- Goldman Sachs -- Analyst
Hi. I just a couple of clarifications. On the guidance where 6 to 8 unit opens next year, is that specific to Cheesecake Factory? And if not, could you give us any idea of how to think about sort of allocation of Cheesecake Factory versus other concepts?
Matthew E. Clark -- Executive Vice President, Chief Financial Officer
Hi, Karen, this is Matt. It's all Cheesecake Factory.
Karen Holthouse -- Goldman Sachs -- Analyst
Okay. And then what were bakery sales in the quarter?
Matthew E. Clark -- Executive Vice President, Chief Financial Officer
Bakery sales, I think, were $13.7 million.
Karen Holthouse -- Goldman Sachs -- Analyst
And then going back to the sort of gap to the industry, if you look at -- in the past, you've really anchored us to the -- a rolling six-quarter average, which does, at this point I think, show up multi-year decline. Given -- and pretty steady multi-year decline, was there any insight you gleaned from the consumer research that you just completed that would help explain that or sort of give you a path to how to reverse that trend?
Matthew E. Clark -- Executive Vice President, Chief Financial Officer
Karen, this is Matt again. Again, I would say that in the quarter that we just ended with some of the discounting noise, it does impact even on a rolling basis. I think it's hard to say for sure. The thing that really stood out to us with the consumer research is just the ongoing solid brand positioning that we have. The guests that are coming to the Cheesecake Factory really love all aspects about it. They love the experience, the food. So I think we resonate as much as we ever have with consumers. That being said, we're just not going to be in the game of limited time offers and the TV advertising that tends to move the averages. And yeah, I think when we look at that, our average of being about 1% to 1.5% above Knapp Track, it was pretty consistent even after -- over the past couple of years.
Karen Holthouse -- Goldman Sachs -- Analyst
Okay. Thank you.
Operator
Your next question comes from the line of Will Slabaugh from Stephens, Inc. Your line is open.
Hugh Gooding -- Stephens Inc. -- Analyst
Hey, guys, this is actually Hugh on for Will this afternoon. I just wanted to start with the question on the delivery piece that I don't think has been touched on yet. Are you all still seeing the similar level of kind of 70% incrementality in that -- in third-party delivery and did you break out kind of a mix of delivery in off-premise as a percentage of sales, and could you do so if possible? Thanks.
David M. Gordon -- President
Hi, Hugh. Yes, this is David Gordon, thanks for the question. We continue to see growth -- total growth in off-premise. Year-to-date and in Q3 of this year, we were at about 13.5%. Last year at this time, we were sitting at about 12% and moving into Q4, we're seeing an even higher rate. So the growth in overall off-premise continues to be strong. We still believe that 60% to 70% incrementality is what we're looking at from the delivery business. And if you break down the overall off-premise business, deliveries comprising about 25% of that, takeout phone-in ordering is about two-thirds and our new online ordering platform that we launched earlier this year is in the -- right around 10% to 12% range of all of our off-premise business.
Hugh Gooding -- Stephens Inc. -- Analyst
Got it. Thanks so much.
Operator
(Operator Instructions) Your next question comes from the line of Joshua Long from Piper Jaffray. Your line is open.
Joshua C. Long -- Piper Jaffray Companies -- Analyst
Great. Thank you for taking my question. I wanted to see if you might be able to provide some context around regional trends, if there were any, or if -- in terms of the 1.5% comp you saw during 3Q was more or less balanced across your different geographies?
David M. Gordon -- President
Josh, this David Gordon again. It was pretty balanced. Some of our strongest area is Florida, Texas, Southwest, really that we didn't really see a lot of weakness. Matt already mentioned how strong California has been and continues to be. Probably, of all the geographies, the one that may have been the weakest was the Southeast, but really nothing meaningful.
Joshua C. Long -- Piper Jaffray Companies -- Analyst
Great. Thank you for that context. And then more of a housekeeping item. Could you provide the Grand Lux comp during the quarter?
Matthew E. Clark -- Executive Vice President, Chief Financial Officer
Sure. Grand Lux was down 3.1% in Q3.
Joshua C. Long -- Piper Jaffray Companies -- Analyst
Got it. Thank you so much. I'll requeue.
Operator
And your next question comes from the line of Robert Derrington from Telsey Advisory. Your line is open.
Robert Derrington -- Telsey Advisory Group -- Analyst
Yes. Thank you. it relates to Grand Lux, we appreciate the detail on the same-store sales trend. Hence, the reason that you're looking especially pointedly at that brand, the fact that the other trends have remained relatively volatile versus Cheesecake Factory or is it you have more stores that have a greater level of volatility versus the entire pool of Grand Lux restaurants?
Matthew E. Clark -- Executive Vice President, Chief Financial Officer
Hi, Bob, this is Matt. Really it's around returns, and as we've said before, The Cheesecake Factory returns are superior to those of Grand Lux Cafe. So we've always taken that approach with our business, and I think we're just taking the opportunity to remind the investment community as we continue to add brands to our portfolio that prudent returns, focused growth is something that is a priority for us. And so that's really the driver of future decision making.
Robert Derrington -- Telsey Advisory Group -- Analyst
That makes sense. Back to the unit count development target for next year, fiscal '19, the six new stores, which I think you mentioned, were all Cheesecake Factory. Don't we also have the Social Monk, is that falling in the 2019 now, so that would be an incremental store?
David Overton -- Chairman of the Board and Chief Executive Officer
It will be first quarter '19. It was all about the roots of trees that slowed us up. There's Oak trees on the property and they are quite guarded over that here. But it'll be first quarter of '19, just a little delay.
Matthew E. Clark -- Executive Vice President, Chief Financial Officer
And so Bob, that would be incremental to the 6 to 8 Cheesecake that David had talked about.
Robert Derrington -- Telsey Advisory Group -- Analyst
Okay, terrific. Thank you.
Operator
And your next question comes from the line of John Power from Wells Fargo. Your line is open.
John Power -- Wells Fargo -- Analyst
Hey, thanks. We've gone through a lot of questions so far, so I'm going to be focused on some of the ancillary businesses. First on the CPG and the bakery business, it sounds like you're getting a quite a bit of growth there, and I'm just curious how you can maybe frame that over time and how we should think about that contributing to earnings and the business maybe over the next 12, 24 months? And then lastly, just from a rule of thumb standpoint, I believe the international licenses, the stores, I believe in the past it was $0.01 in EPS, $0.01 to annual EPS is how you kind of gave us for a rule of thumb for contribution. Does that still hold?
Matthew E. Clark -- Executive Vice President, Chief Financial Officer
Hey, John, it's Matt. So, yeah, I'll answer the second part quickly. Yes, that's still holds on average, so we continue to be pleased with our performance internationally and continue to see about $0.01 in earnings per share for full operating year for an international unit. On the first question, I would kind of separate as I want to make sure we're talking about the CPG business and then we talk about the bakery. Certainly, the bakery businesses is paramount to the total brand Cheesecake Factory with our production predominantly going toward the restaurants. But we do have a third-party business that continues to grow at about 5% a year, and then we believe that we'll get some incremental profitability based on the remodel of our West Coast bakery. On the other side, the CPG business is predominantly licensing where we're not doing the manufacturing or any of the marketing. And it's sort of having one more international partner that's opening maybe one to two restaurants going forward a year. So that's about the range of magnitude, at least for the next year or two, and then we'll see where that goes. But we've been very happy with the quality of the product and also with the branding and getting more eyeballs on the Cheesecake Factory brand in the marketplace.
John Power -- Wells Fargo -- Analyst
Thank you.
Operator
And this concludes today's conference call. I'd like to thank you for joining us this evening, and you may now disconnect.
Duration: 41 minutes
Call participants:
Stacy Feit -- Senior Director of Investor Relations
David Overton -- Chairman of the Board and Chief Executive Officer
David M. Gordon -- President
Matthew E. Clark -- Executive Vice President, Chief Financial Officer
John Glass -- Morgan Stanley -- Analyst
Jeffrey Bernstein -- Barclays -- Analyst
Sharon Zackfia -- William Blair -- Analyst
David Tarantino -- Baird -- Analyst
Gregory Francfort -- Bank of America -- Analyst
John Ivankoe -- J.P. Morgan -- Analyst
Mike Tamis -- Oppenheimer Holdings -- Analyst
Karen Holthouse -- Goldman Sachs -- Analyst
Hugh Gooding -- Stephens Inc. -- Analyst
Joshua C. Long -- Piper Jaffray Companies -- Analyst
Robert Derrington -- Telsey Advisory Group -- Analyst
John Power -- Wells Fargo -- Analyst
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