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Darden Restaurants Inc. (DRI) Q4 2018 Earnings Conference Call Transcript


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Darden Restaurants, Inc. (NYSE: DRI)
Q4 2018 Earnings Conference Call
June 21, 2018, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Welcome to the Darden Fiscal Year 2018 Fourth Quarter Earnings Call. Your lines have been placed on listen-only until the question and answer session. To ask a question, you may press *1 on your touchtone phone. This conference is being recorded. If you have any objections, please disconnect at this time. I will now turn the call over to Mr. Kevin Kalicak. Thank you. You may begin.

Kevin Kalicak -- Senior Director, Corporate Analysis and Investor Relations

Thank you, Aubrey. Good morning and thank you for participating on today's call. Joining me today are Gene Lee, Darden's CEO, and Rick Cardenas, CFO. As a reminder, comments made during this call will include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. Those risks are described in the company's press release, which was distributed this morning, and in its filings with the Securities and Exchange Commission. We are simultaneously broadcasting a presentation during this call which is posted in the Investor Relations section of our website at www.darden.com.

Today's discussion and presentation includes certain non-GAAP measurements, and reconciliations of these measurements are included in the presentation. We plan to release fiscal 2019 first-quarter earnings on September 20th before the market opens, followed by a conference call. This morning, Gene will discuss our quarterly performance and business highlights and Rick will provide more detail on our financial results from both the fourth quarter and the full year before providing our outlook for fiscal 2019. During today's call, all references to Darden same-restaurant sales only include Darden's legacy brands. We will begin including Cheddar's Scratch Kitchen in our blended same-restaurant sales figure in the first quarter of our new fiscal year. Now, I'll turn the call over to Gene.

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Gene Lee -- President and Chief Executive Officer

Thank you, Kevin, and good morning, everyone. As you have seen from our press release this morning, we had another solid quarter to wrap up a strong fiscal 2018 for Darden. Total sales from continuing operations during the quarter were $2.1 billion, an increase of 10.3%, same-restaurant sales for the quarter increased 2.2%, and adjusted diluted net earnings per share were $1.39, an increase of 17.8% from last year.

Our strategy remains unchanged. Our operating teams are focused on becoming brilliant with the basics. They continue to create exceptional guest experiences by delivering outstanding food, drinks, and service in an inviting atmosphere. And, at the Darden level, we continue to strengthen and leverage our four competitive advantages: 1). Our significant scale that creates cost advantages, 2). Our extensive data and insights that improve operating fundamentals and help us better understand our guests and communicate with them more effectively, 3). The rigorous strategic planning process that our brands cycle through on a regular basis, and 4). Our results-oriented people culture, which enables growth.

Olive Garden had a very good quarter. Total sales grew 4% and same-restaurant sales grew 2.4%, the 15th consecutive quarter of growth, outperforming the industry benchmarks excluding Darden by 190 basis points. Same-restaurant guest counts outperformed the industry benchmarks excluding Darden by 270 basis points. For fiscal 2018, Olive Garden total sales increased 3.7% to $4.1 billion. Congratulations to the Olive Garden team members for achieving this significant milestone.

Olive Garden's momentum is the result of our strategy to drive frequency among core guests. The success of this strategy is driven by flawless execution of the guest experience and continued simplification in our restaurants, cravable Italian food and beverage that appeals to our loyal guests, marketing that reaches the right target at the right time on the right channel with the right message, and our ongoing commitment to improving convenience for our guests by focusing on the off-premise experience.

Our simplification efforts have allowed us to reduce our promotional calendar, which limits the amount of new activity in our restaurants, enabling our management team to spend their time focused on execution. As a result, our restaurant teams continue to drive guest satisfaction to new all-time highs. The promotional calendar simplification also enables us to increase our marketing efforts beyond limited-time offers and into long-term growth drivers. During the quarter, we continued our everyday value advertising and emphasized weekday lunch messaging that strengthened our lunch trends. Additionally, this quarter, we showcased cravable Italian food that appeals to our loyal guests with our Big Italian Classics promotion. Giant stuffed fettuccine and the giant meatball provided compelling value and were well received by our guests.

Finally, off-premise sales grew 9% and represented 13.8% of total sales for the quarter. Further demonstrating a momentum in this area, Technomic recognized Olive Garden with its 2018 Consumers' Choice Award for best takeout experience in the full-service segment. Overall, I am very pleased with Olive Garden's performance. The business momentum is strong, driven by a strategy that is working, and we will continue to make the appropriate investments in our team members and our guests.

LongHorn Steakhouse had a strong quarter as well. Total sales grew 4.9%, four times the rate of growth for the industry excluding Darden. Same-restaurant sales grew 2.4%, the 21st consecutive quarter of growth, outperforming the industry benchmarks excluding Darden by 190 basis points, and same-restaurant guest counts outperformed the industry benchmarks excluding Darden by 280 basis points.

LongHorn's performance is being driven by the team's adherence to a long-term strategy of investing in the quality of the guest experience, simplifying operations to drive execution, and leveraging LongHorn's unique operating culture. The impact of this strategic focus was recognized when LongHorn received the 2018 Consumers' Choice Award from Technomic for having the most loyal customers in the full-service segment. This recognition is a strong testament to the great work our operations teams are doing to drive consistent execution and create memorable guest experiences.

The LongHorn team continues to make meaningful strides in reducing operational complexity. This quarter, we made more reductions in our core menu offerings and our operating processes were further simplified. Additionally, we made our limited-time offers less complicated and easier for our teams to implement. This continuous improvement is resulting in better execution. Finally, our emphasis on the culture and focus on team member engagement continues to pay off, as evidenced by LongHorn's industry-leading retention rates at both the manager and hourly team member level.

Our fine dining brands, The Capital Grille and Eddie V's, delivered a strong quarter with same-restaurant sales growth of 2.6% and 3.6% respectively. Both brands have distinctive positioning and consistently deliver exceptional dining experiences. The Capital Grille is increasing capacity in select restaurants to provide additional flexibility for large parties while Eddie V's is focused on developing the talent needed to support growth, and we remain excited about its future growth potential.

Yard House had another good quarter with positive same-restaurant sales of 1.4%. The team increased its focus on operational simplification to create consistently great experiences and made significant improvements in both cost of goods sold and labor productivity. We are pleased with the performance of our new restaurants and believe in continued growth of this brand. Yard House is broadly appealing, with four distinct day parts that allow us to meet a variety of guest occasions.

Bahama Breeze delivered positive same-restaurant sales growth of 0.6%, the 14th consecutive quarter of growth. Our guests come to Bahama Breeze for fun, which is why our restaurant teams continue to create a fun island experience amplified by events such as the successful Viva la 'Rita event that took place during the quarter. The brand is uniquely positioned in the marketplace and continues to resonate extremely well with millennials.

Season 52 generated same-restaurant sales growth of 0.4% during the quarter. We took steps to broaden our appeal by improving the value perception. For example, we featured a limited-time three-course offering that allowed guests to choose a starter, an entrée, and a mini indulgence for a fixed price. This improved our value perceptions and contributed to a 2.1% traffic increase for the quarter. As we continue to enhance the value equation, I am confident that this on-trend brand is poised to capture more guest visits over the long term.

Now, I'll provide an update on Cheddar's. The Cheddar's restaurants that we own and operate today were fragmented into three different businesses a year ago, each with different systems, policies, and pricing structures. While same-restaurant sales declined 4.7% for the quarter, the original company restaurants were down 3.3% while the acquired franchise restaurants were down 7%. During the fourth quarter, integration activity peaked as we transitioned to Darden's proprietary point-of-sale system. As we pushed the integration process to completion, it became apparent the team was losing focus on the basic operating fundamentals. Therefore, we decided to spend marketing and promotional activities. We believe this was the correct decision even though we were rolling over a period of heavy promotional activities last year prior to and immediately after we closed the acquisition.

With the integration now complete, we are fully focused on rebuilding the operational foundation and the team has three priorities: 1). Staff our restaurants. There's an opportunity in many restaurants to increase management and team member staffing and scheduling more effective. 2). Master the new tools. Although the integration is complete, the team now has to learn how to use these new tools to improve operational effectiveness. As with past acquisitions, this will take time. 3). Simplify. This is a complex operation that must be simplified in order to improve execution. The team is making progress quickly, but we need to test these changes to ensure we get the desired outcome.

We recently asked Paul Livrieri, a veteran operations leader who experienced first-hand the process of mastering the Darden systems during the LongHorn integration, to lead the operations team at Cheddar's. With his in-depth knowledge of the Darden systems and his track record of operational success, we are confident he will have a positive impact quickly. Cheddar's is the value leader in casual dining, and the average restaurant serves more than 6,000 guests per week. I believe the leadership team has the right plan in place to improve operating fundamentals and I remain extremely confident that Cheddar's will add significant value to Darden over the long term.

In closing, I am very pleased with the progress we made against our strategic initiatives throughout fiscal 2018, and our performance continues to reinforce our belief that we have the right strategy in place. I want to say thank you to our 180,000 team members who bring our brands to life every day in our restaurants and who support our restaurant teams from here in our Restaurant Support Center. We know our team members are our greatest asset, and I'm confident we will continue to win by remaining focused on being brilliant with the basics as we pursue our mission of making every guest loyal. Now, I'll turn it over to Rick.

Rick Cardenas -- Senior Vice President and Chief Financial Officer

Thank you, Gene, and good morning, everyone. We had another strong quarter with total sales growth of 10.3% driven by 8.1% growth from a full quarter of Cheddar's sales, and the addition of 35 net new restaurants at our legacy brands, and same-restaurant sales growth of 2.2%. Fourth-quarter adjusted diluted net earnings per share from continuing operations were $1.39, an increase of 17.8% from last year. This quarter, we paid $79 million in dividends and repurchased $27 million in shares, returning a total of $106 million of capital to our shareholders.

Looking at the P&L this quarter compared to last year, food and beverage was favorable 60 basis points as pricing, cost savings, and synergies more than offset commodities inflation of just below 1%. Restaurant labor was unfavorable 90 basis points as continued wage pressures, workforce investments, and Cheddar's brand mix offset pricing and productivity gains. Restaurant expense was 40 basis points favorable due to sales leverage and workers' compensation expenses.

G&A was favorable 40 basis points, driven by sales leverage and a reduction in the mark to market of our deferred compensation liability and other equity programs. And, we recorded a $4.5 million impairment during the quarter, the bulk of which were attributed to certain restaurant locations. As a result, EBIT margin expanded 30 basis points above last year and absolute EBIT grew 12.9%. Our 20.4% effective tax rate in the quarter was 290 basis points favorable to last year's rate due to tax reform, partially offset by the tax impact of our deferred compensation hedge.

Turning to our segment performance, Olive Garden and the Fine Dining segment both grew sales this quarter, driven by positive same-restaurant sales and net new restaurants. Segment profit margin increased in these segments even after the incremental workforce investments by leveraging same-restaurant sales growth and managing costs effectively. LongHorn segment sales also grew this quarter, driven by positive same-restaurant sales and net new restaurants. Segment profit margin was 19%. Adjusting for the workforce investments, LongHorn's segment profit margin would have been 30 basis points higher than last year.

Looking at the other business segment, total sales grew 38.9% due to a full quarter of Cheddar's sales and both same-restaurant sales and new restaurant growth at the other brands. Similar to last quarter, segment profit margin was 170 basis points lower than last year due to the brand mix impact of adding Cheddar's and for moving consumer packaged goods out of this segment, primarily to Olive Garden.

Fiscal 2018 was another great year of progress as our brands continued leveraging the power of Darden's competitive advantages, resulting in double-digit total sales, EBIT, and EPS growth. Total sales grew 12.7% to $8.1 billion and EBIT grew 10.2%. These results, coupled with tax reform, resulted in adjusted EPS growth of 19.7% while investing $20 million into our workforce. Other accomplishments during fiscal 2018 included returning over $0.5 billion to shareholders consisting of $314 million in dividends and $235 million in share repurchases, realizing approximately $10 million of cost synergies from the Cheddar's acquisition, completing the rollout and integration of systems to all Cheddar's locations, and issuing $300 million of new 30-year debt at 4.55%, replacing $311 million of our outstanding notes tendered that had higher interest coupons.

This morning, we also announced that our board approved a 19% increase to our regular quarterly dividend to $0.75 per share, which results in a yield of 3.2% based on yesterday's closing share price. And finally, yesterday, our board of directors also approved a new share repurchase authorization for up to $500 million of Darden's outstanding common stock. This replaces the previous plan and does not have an expiration date.

Now that we've wrapped up another year, I want to take a moment and remind you of our long-term value creation framework we introduced in December of calendar 2015. This framework called for a 10-15% total shareholder return assuming a constant earnings multiple. Looking back, investors who bought our stock at the beginning of fiscal '16, reinvested all dividends in Darden stock, and held to the end of fiscal 2018 earned an average annual total shareholder return of 18%. And, looking back over any ten-fiscal-year period since becoming a public company, we have consistently achieved or exceeded our targeted total shareholder return range.

As we look to the future, we will still target a 10-15% total shareholder return but are making two minor modifications to the framework. First, we are updating the targeted EBIT margin expansion range to be 10-30 basis points. This reflects the fact that we have already expanded EBIT margin by more than 200 basis points in the last three years. Second, we increased the share repurchase range to be between $150 million and $250 million. This change reflects our growing free cash flow and the significant share price appreciation since the introduction of our framework.

Now, turning to our outlook for fiscal 2019, we anticipate total sales growth to be between 4% and 5%, driven by same-restaurant sales growth of 1-2% and 45-50 new restaurants, capital spending between $425 million and $475 million, total inflation of approximately 2% with 0-1% commodities inflation and 3.5-4.5% of total labor inflation, which includes approximately 5% hourly wage inflation, total run rate investments of $35 million related to tax reform, primarily in our workforce, incremental synergies related to the Cheddar's acquisition of approximately $13 million, an annual effective tax rate of between 11% and 12%, and approximately 125 million diluted average shares outstanding for the year, all resulting in a diluted net earnings per share between $5.40 and $5.56. And, with that, we'll take your questions.

Questions and Answers:

Operator

Thank you. We will now begin the question and answer session. If you would like to ask a question, you may press *1. Our first question comes from Sara Senatore from Bernstein. Please proceed.

Sara Senatore -- Sanford C. Bernstein -- Analyst

Great, thank you very much. Just a couple questions about -- one, really, about the demand environment, and maybe LongHorn in particular. It feels like there's obviously a lot of really dramatic price-point promotions out there. You talked a lot about being brilliant at the basics, but given that you're lapping buy-one-take-one, can you just talk a little bit about what you saw in terms of your mix at Olive Garden? And then, perhaps at LongHorn, very good comp, but the other big steakhouses maybe comped a bit better, so could you talk about the dynamic in that category as well? Thank you.

Gene Lee -- President and Chief Executive Officer

Good morning, Sara. I think about the demand in the space right now, we saw some improvement in April in the benchmarks. May fell off a little bit. I would describe the environment as volatile week to week, but overall, the demand has been fairly good for the casual dining brands that are well positioned with strong value propositions. In your question, you brought up the fact that there are some folks -- other brands out there heavily discounting and being very promotional. We'll see. We think that that's not the right place to be right now. We're very pleased with how we lapped Olive Garden in the fourth quarter. We thought they had a very strong quarter.

On the LongHorn side, the LongHorn two-year stack was approximately 6%, and one of the things that I like where we are in LongHorn right now is we've been able to pull back on some of the incentives that we've had in the marketplace, and I really like our profitability. I really like our margin structure compared to the other steakhouse players. Sometimes, the headline same-restaurant sales number is not the entire piece of the puzzle. I like to look at the whole business model. I'm thrilled with LongHorn's performance in the fourth quarter and two-year stack, and you have to remember in LongHorn, these are very small boxes that -- our strategy is that we maximize the box, and then we build another restaurant three miles down the road, and that's how we ended up with 45 restaurants in Atlanta, Georgia.

Sara Senatore -- Sanford C. Bernstein -- Analyst

Understood. Thank you.

Operator

Thank you. Our next question comes from David Tarantino from Baird. Please proceed.

David Tarantino -- Robert W. Baird -- Analyst

Hi. Good morning and congrats on another good year. My question is about -- or, I have a couple questions about the guidance for 2019. So, first, on the comps outlook of 1-2%, I think your long-term range -- when you shared it originally -- was comps of 1-3%, and you've consistently either been in the middle or maybe toward the higher end of that. I'm just wondering why the guidance for '19 anchors on the lower half of that range in light of your comments about the environment being better. And then, secondly, it doesn't -- given your tax rate guidance, it doesn't really seem to suggest -- at least, at the midpoint -- that you're expecting much margin expansion relative to that 10-30-basis-point target. Just explain why you might not get a lot of margin expansion in 2019. Thanks.

Rick Cardenas -- Senior Vice President and Chief Financial Officer

On the comps, the reason that we're at the lower half of our guidance range -- as Kevin mentioned on the beginning of the call, we are including Cheddar's next year in our total comp, and as Gene mentioned, we still have some things to go through on the learning of the integration, and we would expect Cheddar's to be on the lower end of that range, so that would bring us down from what we finished this year, a little above 2%. So, that's where we are on the comps side.

On the margin side, the real difference -- the real reason that we'd be either at the low end or have very little margin growth next year -- is the additional workforce investments we're making based on the tax reform, which actually helps on the tax line. So, we've got those two things, we've got the workforce investment, and actually, we're pricing well below our inflation as you think about what we talked about our pricing ranges normally and our inflation ranges. So, both of those things should cause our margins to be at the lower end of our range.

David Tarantino -- Robert W. Baird -- Analyst

Great. And, Rick, just one follow-up -- the workforce investments. I think the incremental amount is around $15 million. Did I hear you correctly that the Cheddar's integration savings would be roughly in that same ballpark? So, I guess, is it more the latter factor that you mentioned around not pricing the cover inflation that's driving that outlook?

Rick Cardenas -- Senior Vice President and Chief Financial Officer

Yes, it's more the latter if you think about pricing -- as we've said, our strategy is to leverage Darden's scale, price below inflation, which we've done for the last few years, and we expect to do that next year.

David Tarantino -- Robert W. Baird -- Analyst

Great, makes sense. Thank you very much.

Operator

Thank you. Our next question comes from Brian Bittner of Oppenheimer and Company. You may now proceed.

Brian Bittner -- Oppenheimer and Company -- Analyst

Thank you. Good morning. In the quarter, now that it's over and you can go back and look back at the results, is there any way you can tell us what the effect of not running the promotions had on sales and on comps margins? And, I have a follow-up.

Gene Lee -- President and Chief Executive Officer

I'm going to be very vague purposely on this. All I will say is that our team did a great job of implementing a new promotion to lap over the buy-one-take-one, and as you can see by our results, we had a very strong quarter. The other comment I would make about the quarter and the promotional strategy and the advertising strategy is that -- and, I said this in my script -- we have made the choice to invest some dollars into brand marketing away from promotional activity, which we believe will drive overall -- enhance the brand overall, but it's not as effective as your pure promotional advertising.

And, we think we saw some of that benefit in the quarter, of the investments we've been making in the value platforms and advertising that. So, again, I'm very pleased. I think the team did a great job lapping one of our most popular promotions, which we had run for an extended period of time earlier in the year. So, the total number of weeks of exposure for that promotion were down, but not down real significantly. So, the team did a great job, and we're very pleased with the overall results.

Brian Bittner -- Oppenheimer and Company -- Analyst

Okay, thanks, Gene. And, Rick, just two questions for you, one on the quarter -- the OpEx on a per-unit basis was down year over year. Can you unpack that a little bit more for us? And then, on the 2019 earnings guidance, following up on David's question, is there a specific operating margin range you want us to think about for 2019? Is it flat to 20 basis points instead of 10 to 30? Any help on that would be great. Thanks.

Rick Cardenas -- Senior Vice President and Chief Financial Officer

I'll start with the second question. I would say you're probably closer to flat to 20 basis points than on the higher end of that range, as the follow-up to the question. And, if you look at our restaurant expense line, it's primarily a workers' comp difference versus unpacking anything else, but the big driver of the drop in restaurant OpEx was workers' comp and the synergies that we've gotten from the Cheddar's acquisition.

Brian Bittner -- Oppenheimer and Company -- Analyst

All right, thank you.

Operator

Thank you. Our next question comes from Jeffrey Bernstein, Barclays. Please proceed.

Jeffrey Bernstein -- Barclays Capital -- Director

Great, thank you very much. Maybe two broader questions on the industry. Gene, I'm just wondering, as you get to look to so many different brands, and you said it seems like the casual dining industry is seeing some healthier demand trends, and I'm just wondering -- maybe you could talk a little bit about the sustainability or what you think of the drivers. I know in the past, you had talked about when the consumer gets a benefit, whether from tax reform or lower gas prices, you end up seeing the benefit in mix, but yet, it seems like it's still around. Mix is relatively flat. You saw a nice uptick in traffic. So, I'm just wondering if you can parse through what you think of the drivers of that.

The second question was on the industry. As we look at '19, I know you're guiding to 1-2% comp. I'm wondering what you're assuming in that for the broader industry because it does seem like your comp gap has narrowed in the past number of quarters. I'm wondering if you see that narrowing further in fiscal '19 or how comfortable you are with the potential gap as we think about '19. Thank you.

Gene Lee -- President and Chief Executive Officer

There's a lot in there. Again, it's hard to predict the future demand in our space. We have a tendency to want to look back at the past as a predictor of the future. More discretionary income with the consumer should be good for restaurants, and I'll keep coming back to it should be good for the well-positioned that have strong brand propositions and have strong value equations all throughout the menu. I still think that the consumer does not want to be told what they have to purchase in your restaurant to get value. They want value in everything that they purchase, and that's why these promotional constructs are somewhat -- I don't think they're as effective as they have been in the past.

As far as our gap and how to think about that, I think that we've had a very good, sustained performance of outperformance of the industry, and when we think about it, what we're really focused on is how do we invest in our businesses to ensure that we can hit our long-term framework over time of 1-3% same-restaurant sales growth? And, we're not trying to maximize that quarter to quarter or even year to year, and there are times when we really need to make investments to ensure that our value perception is improving and is better than our competitors. And, that's what our focus is.

When we think about our guidance for next year, I'll just reiterate, I think, what Rick was trying to get across. We expect Cheddar's to be a little bit of a drag to our other brands and have an impact, and that's why we're down to that 1-2%. At this point in time, we believe we have the right recipe -- no pun intended -- to really improve the operations in the Cheddar system and drive same-restaurant sales, but we all know that trying to drive same-restaurant sales through operational improvements takes more time than coming up with an advertising promotion or advertising gimmick to drive sales. We want to build a foundation that can move this business forward and sustainable for the long term, and that is our plan, and we're going to stick to it. So, when we think about our guidance, that's what's impacting it.

Jeffrey Bernstein -- Barclays Capital -- Director

Understood. Thank you.

Operator

Thank you. Our next question comes from David Palmer of RBC. You may now proceed.

David Palmer -- RBC Capital Markets -- Analyst

Thanks. Just a follow-up about Olive Garden. Assuming you guys' comp gap to the industry has been hit by not running not only the buy-one-take-one, but fewer promotions throughout fiscal '18 -- I know you're trying to simplify and improve everyday value, but could you give us some numbers or anecdotes about why this strategy has been good or will be good for Olive Garden heading into fiscal '19? I have a quick follow-up.

Gene Lee -- President and Chief Executive Officer

All right, David. I don't believe that going from nine promotions to six promotions had any impact on our comparable store sales throughout the quarter. We believe that simplifying a promotional construct allows us to execute at a much higher level at the restaurant level. We believe that it takes some cost out of the overall system from a training standpoint, from a supply chain standpoint. It's our belief that we, as restauranteurs, sometimes get bored with our own messaging faster than the consumer does when you look at the frequency of our consumer, so we believe this was a really important move in our simplification effort and we believe it had no impact on our overall same-restaurant sales for the year or the quarter.

David Palmer -- RBC Capital Markets -- Analyst

And then, back to Cheddar's, I know you're talking about using new tools, and the staffing up, and the simplification there. A lot of that sounds like stuff you've done before, even at a greater scale with Olive Garden. What is your thought about the rate of improvement you can get with these tools and the learning curve? Is this something of a 6-to-12-month nature?

Gene Lee -- President and Chief Executive Officer

I'm not going to put a timetable around it. Our challenges are significant here, especially in the acquired franchise restaurants, and if we had to weaken the base restaurants by pulling human resources out of those restaurants to help staff the acquired restaurants... All I would say around this is they're in their 14th month of integration, which is really the low point. I think about where I was and how I felt at the 14th month of integration when we were acquired. It wasn't a great place, and I've talked to a few others on my team around what it was like, and we're thinking about that and trying to help the Cheddar's team really focus and get back to what we call brilliant with the basics.

We've got a great team, we've got great people, they all want to do the right things. We just need to ensure that we can help them get those basics, and we're going to start with staffing. The turnover rates are too high; we're not fully staffed. Before we can make meaningful improvement in the overall guest experience, we've got to make overall improvement in the team member experience, so we're focused on those basic things. How long is that going to take? I don't know. Obviously, when we start wrapping some of the weaker comparables, hopefully, we can get back positive at that point in time.

David Palmer -- RBC Capital Markets -- Analyst

Thank you.

Operator

Thank you. Our next question comes from Gregory Francfort, Bank of America. Please proceed.

Gregory Francfort -- Bank of America Merrill Lynch -- Vice President

Hey, Gene. I just had a follow-up on the Cheddar's integration. Can you walk back through your overall process of integrating the brand? And then, any expectation on how you think about the relationship between total sales and comparable sales on a go-forward basis?

Gene Lee -- President and Chief Executive Officer

At a high level, when we think about integration, the first few months is you're assessing the work you need to do, you bring in a third party to help manage the process, and then you design the systems. You've got to design our proprietary POS system, which is the major change. In the fourth quarter, we had the biggest impact, and the biggest impact was on the original owned Cheddar's. We had done the franchised restaurants first.

And then, the first disruptor is the supply chain -- integration into our supply chain network, which is pretty invasive because when you think about it, it's the same product coming in, but the package size is different, the delivery times are different, how you account for it is different, so there's just a lot of change. And then, the big one is the POS system. And then, from there, when you implement the POS system, you're implementing all our productivity tools, and that's when you really impact the management because it's all brand-new to them.

And, even though we partner them up with our other local restaurants, that takes time. It's going to take a year for them to become proficient on these new tools, which are significantly better than the tools that they had and should improve productivity. We also have to make change to all the benefits and programs and put them on our programs, which is disruptive, and I think from a human standpoint, during this process, what you think about is how is this going to impact you, and you're really concerned about that, and that takes your focus away from the everyday taking care of guests and taking care of team members. So, that's really the process. Remind me of the second part of that question.

Gregory Francfort -- Bank of America Merrill Lynch -- Vice President

The second part was how you -- so, I know you've talked about total sales and comparable sales playing out. How are you thinking about that relationship going forward?

Gene Lee -- President and Chief Executive Officer

On that relationship going forward, I think that we believe in the relative share model, Cheddar's relative share in the markets in which they compete in is very low, and prior management was really adverse to adding lots of units into a marketplace because of the headline comp number, and the example I like to give is we're doing over $100 million in sales in Olive Garden in Orlando, Florida, and we're doing close to $22 million or $23 million in Cheddar's. So, the opportunity is for us to be able to do a lot more volume there, which is going to put pressure on the headline number in these markets that we're growing out.

And so, we think long-term that the real focus on Cheddar's for us is going to be how do we grow top-line sales by adding units and maintaining a relatively healthy comp number? But, we can't add 15 units to the Orlando market and expect comps to be solid. But, we think by becoming more -- having a bigger relative share, we will increase the overall profitability of the overall business.

Gregory Francfort -- Bank of America Merrill Lynch -- Vice President

Great, thanks.

Operator

Thank you. Our next question comes from John Glass, Morgan Stanley. You may now proceed.

John Glass -- Morgan Stanley -- Executive Director

Thanks very much. Gene, at one time, I'd heard you talk about LongHorn potentially being a national brand if you could get the West Coast and California markets to work in particular. Where are you in that process of discovering whether that is feasible and if you're able to more rapidly expand out west in particular?

Gene Lee -- President and Chief Executive Officer

I think we're within 24 months of having a couple restaurants opened in the great state of California.

John Glass -- Morgan Stanley -- Executive Director

Okay, great, thank you. And then, Rick, on the guidance in the reduced long-term framework of 10-30 basis points versus 20-40 in the past or 10-40 in the past, is that just a function -- as you framed it -- of there's only so much margin expansion you can get in this business and you've already achieved a lot, or are you also factoring in a higher level of reinvestment necessary in this business? Are you factoring in that wages are structurally going to be in that 4%-plus range? Are there other factors besides just what you've already done that impact your view on the lower margin expansion opportunities in the future?

Gene Lee -- President and Chief Executive Officer

There are a few other factors. As I said, we have increased our margins a couple hundred basis points since we announced that framework. We've also taken significant costs out of our P&L. We continue to find other costs to take out, but we have been reinvesting a lot of that. Just to frame it, it's only a 10-basis-point reduction in the top end, so it's only going from 40 basis points to 30, but as we've mentioned, we continue to price below inflation. We price below our competition, which is our strategy. That puts pressure on margins. And, we use the Darden scale advantages to find other cost saves to help that.

Wages are -- as we said, our hourly wage -- we have inflation of around 5% in our guidance for this year. And so, that's why we're bringing that down. There's nothing structurally different, other than wages are a little bit higher. We continue to go after our strategy of pricing below our competition and pricing at a range that doesn't drive a whole lot of top-line margin at the restaurant level.

John Glass -- Morgan Stanley -- Executive Director

Great. Thank you very much.

Operator

Thank you. Next question comes from Will Slabaugh, Stephens, Incorporated. Please proceed.

Hugh Gooding -- Stephens Incorporated -- Analyst

Yeah, thanks for taking my questions, guys. This is actually Hugh on for Will. My first one is around -- you continue to simplify operations at both Olive Garden and LongHorn, and I'm specifically thinking about LongHorn and removing a good amount of SKUs the past couple quarters, and yet, comps have remained pretty impressive, and the loyalty factor as well. And so, at many restaurants, we've seen something similar done, and it's become a drag on those businesses. What has allowed you to implement these streamlining initiatives and continue to grow same-store sales without bringing disruption to the in-restaurant operations?

Gene Lee -- President and Chief Executive Officer

The way we think about it is the process from the back door to the table -- how do we simplify all the prep procedures, how do we simplify the processes between the grill and the expediting station, and how do we quickly get that food to the table? So, we break it down into those areas. I think as we think about pure menu simplification, it's the art, not the science. It's the art of being able to put a menu together that covers all the significant areas that your guests want to be covered without having a lot of products doing or working in the same ways and ensuring that you have unique, interesting products in each of those categories. If you do that, I think that you can artfully create a menu that meets the consumer needs but yet allows you to simplify your execution so you can execute that product at a really high level.

When you think about our industry, no one has done this better than Hillstone, and for many years, they've had a very limited menu and executed at an extremely high level. But, if you ever study their menu, they do a wonderful job of hitting every possible area a consumer might want to dine, and I think that's what we're trying to do, is remove the duplicity in our menus with similar products, really providing an opportunity for our guests to eat what they want, but without having two choices in the same particular area.

And, that's what we're focused on, and we believe there's still a lot of work to be done here. And so, at the end of the day, we need to deliver on the food side a product that's executed the way it's been designed to be executed and being delivered extremely hot and flavorable to the guest, and that's what we're excessively focused on.

Hugh Gooding -- Stephens Incorporated -- Analyst

Yeah, appreciate that. And then, just one quick one on the progress at Olive Garden on third-party delivery. I know in the past, you've been more focused on the opportunity of large-party catering, but is there any update on either of those fronts?

Gene Lee -- President and Chief Executive Officer

Let me provide an update on this. We have met with and have tests going on with all the third-party delivery services of scale. There continues to be significant hurdles that we need to work through, such as how do we ensure that these delivery services will enhance our brands? Can it be flawlessly executed for our guests and our team members? Can we create a sustainable, incremental growth at scale that's additive to our company? Can we agree on viable economics? And lastly, can we ensure that we own the data?

Now, those are the things that we need to really work through in order to get to a place that we can partner with one or two of these organizations. We're still testing doing small order self-delivery. We'll continue to analyze what the opportunity is there. We also recognize that we have 400-plus restaurants out there that are participating on a local basis with some of these companies. Those aren't what I would call sanctioned tests, but they're part of what's happening. We think it's an interesting space. However, there's a lot of hurdles to get over, also including how will we deal with the $0.5 billion we're doing in Olive Garden take-out sales today, and how would that be impacted, and what the margin impacts of that are. So, that's the update on where we are with the third-party deliverers. We are continuing to meet with them and trying to understand what our opportunities are.

Hugh Gooding -- Stephens Incorporated -- Analyst

Sure. That's it for me. Thanks, guys.

Operator

Thank you. Next question comes from Jon Tower, Wells Fargo. Please proceed.

Jon Tower -- Wells Fargo Securities -- Analyst

Great, thanks for taking my question. Olive Garden -- on a two-year basis, the traffic trends were pretty solid, and I was just curious to your breakdown, where you're seeing the growth. Is that coming in earlier parts of the day? I know one of the promotions you did in the fiscal third quarter was focused on the 3:00 to 5:00 time window. Or, are you seeing growth during the weekdays, the weekends? If there's any kind of breakdown you could provide for us, that would be helpful.

Gene Lee -- President and Chief Executive Officer

The overall business in Olive Garden is strong in all periods as we continue to focus on value at lunch, continue to focus on value from 3:00 to 5:00, and with the Cucina Mia platform and some of the other value platforms that we're running -- this giant meatball was a hit. The stuffed fettuccine was a big hit. That's right in the sweet spot of what we're doing with our core guests. So, we're seeing strengths all throughout the business. I wouldn't point to one particular period.

Jon Tower -- Wells Fargo Securities -- Analyst

Okay. And, I know a primary objective of management has been to drive frequency of core guests at Olive Garden, and pretty much across the brand. So, is there any chance you could give us a breakdown on how that frequency of those core guests have changed over the past several years? Maybe frame it to now.

Rick Cardenas -- Senior Vice President and Chief Financial Officer

I'm not going to give you specific numbers, but we segment our consumers into different groups, and the ones that we are focusing on are the ones that are high-frequency and most recent, and that group of consumers is growing faster than any other group that we have.

Jon Tower -- Wells Fargo Securities -- Analyst

Okay, great. Lastly, just a clarification. I know today, you had some new compensation agreements announced, and I was wondering if that's included in that $15 million of incremental tax saving reinvestment into the business in fiscal '19.

Gene Lee -- President and Chief Executive Officer

No, Jon. That's not part of the $15 million.

Jon Tower -- Wells Fargo Securities -- Analyst

Okay, thank you.

Operator

Thank you. Next question comes from Greg Badishkanian, Citi. Please proceed.

Fred Wightman -- Citibank Research -- Analyst

Hey, guys. It's actually Fred Wightman on for Greg. We saw a large casual dining franchisee file for bankruptcy earlier this quarter. Is that something you think is meaningful from an industry perspective, and then, if so, what do you think that indicates for unit growth or closures across the category going forward?

Gene Lee -- President and Chief Executive Officer

I don't think that's meaningful. I think that's more about someone reorganizing their balance sheet. I think there will be continued store closures and there will be continued store openings as the weak continue to struggle that aren't as well positioned and maybe overexposed, but I still think that we're going to see a net positive unit growth going into the next couple years.

Fred Wightman -- Citibank Research -- Analyst

Thanks. And then, can you just remind us how you're evaluating the returns on that $35 million of employee spending, if it's turnover or crew satisfaction? Is there anything that you can give us early days or early reads?

Gene Lee -- President and Chief Executive Officer

No. That's something... I truly believe that we need to invest into our 180,000 team members who bring our brands to life every single day. We continuously evaluate our position in the marketplace from a benefit to an overall employment proposition, and we believe these were the right thing to do in order for us to maintain our leadership from a retention standpoint, and I believe we have the best team members in the business, and I'm going to continue to reinvest with them when I have the opportunity. I'm very thankful for what they do every single day. There's no one sitting around me here who cooks one meal or serves one meal. These people do it, and I'm going to continue to reinvest in them.

Fred Wightman -- Citibank Research -- Analyst

Great, thank you.

Operator

Thank you. Next question comes from Chris O'Cull, Stifel. Please proceed.

Chris O'Cull -- Stifel Financial -- Managing Director

Thanks. Good morning, guys. Gene, the company has argued that it's organized to successfully add brands to its portfolio and benefit from synergies, and I know you guys are getting the synergies from the Cheddar's acquisition, but do the integration issues with Cheddar's cause the company to rethink its approach to acquisitions? If so, what have you learned and what things would you change?

Gene Lee -- President and Chief Executive Officer

Not at all. I think that what I would call the acquisition indigestion we're having with Cheddar's today was the exact same that we had with LongHorn ten years ago. I've got a very long-term approach to this, and I look, and I understand that we are going to have some issues as we integrate brands, but I look at where we are with Yard House today, and Eddie V's, and LongHorn, and Capital Grille... Cheddar's is going to work its way through this and it's going to be a dynamic brand. Not all these are going to move at the same level.

We continue to do what we call a postgame analysis after we do these acquisitions. One of the things we did this time is we moved a little faster with integrating into our systems. We think that was helpful. Hopefully, that will play out that we recover a little bit quicker, but this has no impact, and if anything, would make me more confident in our ability to do it.

Chris O'Cull -- Stifel Financial -- Managing Director

Okay. Secondly, can you quantify the impact to Cheddar's same-store sales of pulling the promotions, and will the promotional activity be more comparable going forward year over year?

Gene Lee -- President and Chief Executive Officer

No, we can't give you the impact of it. We just know that before we owned it, they were promoting extremely heavily to keep their same-store sales positive, so we didn't have an opportunity to retrade the deal. We know that before we got into the integration that they were continuing to keep that promotional cadence alive. We believe -- like other brands that compete in this space -- that promotional activity and marketing is not a key. We want to put those dollars on the plates. We want to create value where the consumer can see it every day. I think we all know that there's another competitor out there that does that extremely well, and we want to take that strategy and implement that strategy and keep that strategy with this brand. We will continue to focus them on the basics. We believe that we have great competency in executing the basics of a restaurant operation, and we're going to focus this team on doing that.

Chris O'Cull -- Stifel Financial -- Managing Director

Great, thanks.

Operator

Thank you. Our next question comes from Nicole Miller, Piper Jaffray. Please proceed.

Nicole Miller Regan -- Piper Jaffray -- Managing Director

Thanks. Good morning. In our research, we saw corporate bonuses go toward the low-income or low-middle-income demographic, and they also have an improved personal finance outlook. Is this anything you can attribute to your same-store sales growth, I would say especially at Olive Garden, and maybe at LongHorn?

Gene Lee -- President and Chief Executive Officer

I think all those types of things are contributing. I wouldn't point to one specific demographic indicator. I think there's multiple indicators out there that are contributing to the overall growth of the well-positioned brands. And so, that's definitely not hurting, but I wouldn't attribute it singly for all of Garden's strength.

Nicole Miller Regan -- Piper Jaffray -- Managing Director

And then, just a second question. On the Olive Garden off-premise, I think you said up 9%, 14% of sales. Could you talk about the pieces -- to-go, catering, delivery, et cetera -- and how did each perform?

Gene Lee -- President and Chief Executive Officer

We're not going to talk about -- for competitive reasons -- that kind of detail. The one thing I'll say -- I'll get this in -- is that over a three-year period, we're up 50% in our off-premise. Our teams have done an extremely good job of ramping up the experience and proving the overall satisfaction of our take-out or off-premise consumer. Our guests love the experience; our team has done a great job with it. They're going to continue to invest to improve their capabilities as the business grows, but a job well done by the Olive Garden team. 50% over three years is fantastic.

Nicole Miller Regan -- Piper Jaffray -- Managing Director

Thanks, Gene.

Operator

Thank you. Next question comes from Matthew DiFrisco, Guggenheim Securities. Your line is now open.

Matthew DiFrisco-- Guggenheim Securities -- Managing Director

Thank you. I have a question and just a couple of quick follow-ups. In the past, Gene, you've been somewhat not so much enamored with the quick casual category and citing that the demographic seems a lot narrower or smaller than the casual dining audience out there. I wonder -- have you seen a beginning in the industry of the lunch...the assault that the quick casuals had on the casual dining lunch business? Has that tapered off for the industry? I know you guys have improved your value at lunch, but I'm talking more so for the industry. Has lunch strengthened a little bit or the share loss -- has that slowed?

Gene Lee -- President and Chief Executive Officer

I think the way we would describe it is that it was a headwind with the amount of fast casual units being added. That headwind has probably been diminished somewhat as the unit growth for that segment slowed. I think that the category's economics are difficult, and we've been able to actually come in and give the consumer better value with a full-service experience. So, that's how we're thinking about it. We think the headwind has been removed.

Matthew DiFrisco-- Guggenheim Securities -- Managing Director

Okay. And then, Rick, with the free cash flow guidance, is there anything we should read in to that as far as the return to shareholders that you're guiding toward as far as a signal on your appetite for acquisitions going forward, or is that still something on the table if you look very long-term as far as the growth model for the Darden portfolio?

Rick Cardenas -- Senior Vice President and Chief Financial Officer

I think as you look at the guidance, we've only increased the CapEx by -- not the CapEx, the share repurchase -- by $50 million year over year, so it's not a significant change. But, we do know that because our share price went up, we needed to do that. We have plenty of debt capacity if something comes along that makes sense for us, but we're not going to talk necessarily about specific acquisitions or doing acquisitions. We know that our long-term framework works with or without those acquisitions.

Matthew DiFrisco-- Guggenheim Securities -- Managing Director

Thank you. And, just a last question going back to that delivery question. Off-premise being around 13-14% for Olive Garden -- does that represent an opportunity and something that signals delivery could raise the ceiling? Some people get concerned sometimes that when you flip the switch to delivery, you're just going to cannibalize the existing off-premise business and add a layer of cost and service to it. So, would this be 13% -- the success you've had with off-premise -- would that delay your rollout of delivery, or is this something that says you need to raise the ceiling, and delivery might come sooner?

Gene Lee -- President and Chief Executive Officer

Well, I would go back to the significant hurdles I described. We need to get comfortable that we have solved for these, especially around it's going to be brand-enhancing. And so, our goal was to meet the consumer needs data convenience. We're going to continue to focus on that. There are no limitations on a number. We believe through our research that we're capturing a lot of occasions in Olive Garden we wouldn't capture, that people are using our off-premise services that would probably not come into our restaurants.

We believe that people -- for the most-part, the decision-making is, "Am I taking out or dining in tonight?", and then they decide where they're going to go. So, I'm not as concerned about what the number is. I've said in the past I think if the consumer -- if the need state continues to grow, Olive Garden's off-premise could go to 20%. How we get that -- that's still yet to be determined. We are focused right now -- seem to be focused on large-party catering, over $100.00 with 24-hour notice. We like that business, and it's being very well received by the consumer set.

Matthew DiFrisco-- Guggenheim Securities -- Managing Director

Excellent. Thank you.

Operator

Thank you. Next question comes from Andrew Strelzik, BMO Capital Markets. Your line is now open.

Andrew Strelzik -- BMO Capital Markets -- Managing Director

Good morning. Thanks for taking the question. I hate to belabor the point on the off-premise business. Obviously, growth is still healthy, but at 9%, it was a bit lower than we're used to seeing, and it's obviously become a bit more competitive with others getting involved there. So, is there anything that you're considering doing, any levers at your disposal to support that growth going forward? And, I guess more broadly, as we're seeing a lot of concepts talk about incremental growth from off-premise, where do you think those eating occasions are coming from, primarily?

Gene Lee -- President and Chief Executive Officer

On the first part of the question, I think that we're going to continue to execute our strategy and try to drive the off-premise business. The 9% number does not bother me at all. I think with a two-year stack of 25% and a three-year stack of over 50% on an annual basis, that's healthy. Where is this coming from? I think it's trading out of grocery to some extent. I think for the first time -- we've seen an MSR chart recently where out-of-home eclipsed grocery sales. I might not have that totally active, but it's pretty darn close. So, I think people are just thinking about convenience differently, and let's not forget, we have a demographic wave with millennials coming our way, which could benefit us over time, and there's a lot of good data out there about this demographic wave.

Andrew Strelzik -- BMO Capital Markets -- Managing Director

Great. Thank you very much.

Operator

Thank you. Next question comes from Karen Holthouse, Goldman Sachs. Please proceed.

Karen Holthouse -- Goldman Sachs -- Analyst

Hi. Going back to Olive Garden, the promotional strategy, I know last year was nine promotions -- two years ago, I guess, at this point, it was nine promotions. Last year was six. I think you framed it as a little bit of a testing year to see the cost in terms of traffic versus the benefits in terms of execution simplicity. How do you feel about those different levers or the puts and takes this year and how should we think about the promotional calendar headed into next year?

Gene Lee -- President and Chief Executive Officer

Well, we're getting into some dangerous territory here for me to speak too openly about this. Our competitors would love to know what our promotional cadence was going to be next year. All I'll say is I think that our team executed six promotions extremely well, they kept them fresh for a longer period of time, they used some innovative tactics to do that, and I want to continue to encourage them to be creative and to be able to run our promotions on a longer scale and try to reach more consumers through innovative integrated marketing opportunities. But, I'm not going to signal what our promotional calendar is for next year.

Karen Holthouse -- Goldman Sachs -- Analyst

Understood. Thank you.

Operator

Thank you. Our next question comes from John Ivankoe, JPMorgan. Your line is now open.

John Ivankoe -- JPMorgan Chase -- Managing Director

Hi, great. Thank you. Gene, you've talked, obviously, about your outperformance relative to the industry, but the industry itself -- same-store traffic in your May quarter, your fourth quarter, was still negative. Can you comment on why you think casual dining same-store traffic is still negative at this point in the cycle, and if there's any insight that we can have on a market-by-market basis that's up maybe -- some markets that you think maybe have leading indicators, whether positive or negative, that may influence the rest of the country in terms of future segment trends?

Gene Lee -- President and Chief Executive Officer

I'll take the latter part of that first. We see nothing when we look across the individual ADIs -- sales are a little weaker in New England, but for the most part, it's fairly similar as we look across the country. Why do I think casual dining in general is struggling to grow traffic? It's a mature industry that is somewhat over-restauranted, and in an environment like that, it's going to expose the weaknesses of brands that aren't positioned well, and that's exactly where we are as an industry, and those who have been willing to do less guests, charge more money, and try to make additional profit that way are going to end up paying a price, and the brands that are focused on maintaining their guest counts or even driving their guest counts and willing to give up short-term margin and pricing below inflation and competitors will continue to take share.

I think there's some really good brands out there that are really well positioned that continue to do that, and I think we have a lot of them in our stable. I think we're better positioned than most because of our scale and what we're doing with data and insights, and we'll continue to stay focused on that, but we see an opportunity in a mature market to gain share.

Kevin Kalicak -- Senior Director, Corporate Analysis and Investor Relations

All right, Aubrey, I think we're ready for the next question.

Operator

Our next question comes from Stephen Anderson, Maxim Group. Please proceed.

Stephen Anderson -- Maxim Group -- Senior Vice President

Yes, good morning, and not to belabor the point about the post-integration efforts over at Cheddar's, but on past calls, you've mentioned about maybe rolling out some sales-building initiatives and things like off-premise sales. Do you think at this point, it may be a bit premature to discuss that? Is that something that you might consider overall, even in the first half of the fiscal year?

Gene Lee -- President and Chief Executive Officer

No, we're going to be focused on staffing our restaurants, simplifying our operation, and improving and mastering the new systems that we put in. Right now, these restaurants on average do well over 6,000 guests a week. I want to delight those guests with a great experience, and that's our focus right now.

Stephen Anderson -- Maxim Group -- Senior Vice President

Okay. Now, in regard to some of the menu price rationalizations that you've done in a number of markets, has that process now been completed?

Gene Lee -- President and Chief Executive Officer

In the Cheddar's system, yeah. We've got them fairly much aligned on the similar pricing structures. It's a good question because that was painful, but it was the right thing to do.

Stephen Anderson -- Maxim Group -- Senior Vice President

Thank you.

Operator

Thank you. Next question comes from Brian Vaccaro, Raymond James. Please proceed.

Brian Vaccaro -- Raymond James -- Analyst

Thanks, and good morning. I wanted to circle back on the Olive Garden advertising. I noticed that the reported marketing spend overall was up about 8% year on year. Was that a meaningful driver of Olive Garden comps during the quarter that was maybe able to offset the buy-one-take-one lap? And, given the intensely competitive environment we're still in, should we expect ad spend as a percent of sales to be up, perhaps, in fiscal '19?

Gene Lee -- President and Chief Executive Officer

First of all, we're just verifying, but our advertising spend in Olive Garden was not up for the quarter or the year, and so, I don't know what you're looking at, but I believe it was actually probably a little less.

Rick Cardenas -- Senior Vice President and Chief Financial Officer

I think you're looking at the actual income statement, which didn't have Cheddar's in all of last year. When you look at total marketing spend, as we've said, as a percent of sales, our marketing spend was down 10 basis points -- we were favorable 10 basis points -- so that would have been mainly adding another brand with all their sales.

Brian Vaccaro -- Raymond James -- Analyst

Okay, understood. Any comments on fiscal '19 overall ad spend as a percent of sales?

Rick Cardenas -- Senior Vice President and Chief Financial Officer

No comment specifically on marketing spend. Just to go back to our framework and where we are going to be, we wouldn't anticipate marketing as a percent of sales to be significantly different year over year, but no comment on specific ad spend.

Brian Vaccaro -- Raymond James -- Analyst

Okay, that's helpful. And also, if I could just shift gears to the food cost during the quarter, Rick, can you quantify the savings you achieved in the quarter and how we should think about those food cost savings specifically into fiscal '19? And then, last question from me, just thinking about your fiscal '19 EBIT margin -- I think you said closer to flat year on year -- what does that assume in terms of G&A in fiscal '19? Thank you.

Gene Lee -- President and Chief Executive Officer

We mentioned total synergies for the year. I'm not going to go specifically for the quarter, but total synergies for the year were about $10 million, and about half of those are in cost of sales. That helped offset pricing below inflation. The other part of your question on G&A -- we would anticipate -- as we've said before -- to leverage G&A every year, maybe by 10 basis points. So, if we are at zero EBIT margin next year, that would imply that our restaurant-level margins were down 10 basis points, but we're not saying we're going to be at zero. Just assume we probably will get about 10 basis points of leverage in G&A.

Brian Vaccaro -- Raymond James -- Analyst

Very helpful. Thank you.

Operator

Thank you. Our next question comes from Jeremy Scott, Mizuho. Please proceed.

Jeremy Scott -- Mizuho Americas -- Analyst

Hey, thanks. Just had one follow-up there. I just wanted to ask about your food basket. Everything we 'relooking at would indicate that you're likely to see more deflationary tailwinds, especially on protein and dairy, and of course, you mentioned the supply chain benefits of your menu simplification. So, I'm just wondering what's behind conservatism in fiscal '19. Is that the way you're contracted? Can we see some relief in the back half of the year or into 2020 if it's something we're missing?

Gene Lee -- President and Chief Executive Officer

You've got to understand about when we take contracts and when we buy. We have in our presentation that's out on the website our coverage this year. We're about 65% covered for the first half of the year, which is about where we were last year within 5% plus or minus. All of those, we believe, will be at low single-digit inflation primarily. So, that's why we think for the year, the inflation number we've given is appropriate.

Jeremy Scott -- Mizuho Americas -- Analyst

Okay. I guess when you're thinking about the portion that's not covered, you would likely lock in prices that are well below what you're currently experiencing, right?

Gene Lee -- President and Chief Executive Officer

We're talking about single-digit -- 0-1% inflation in commodities. It's really a function of when we buy. We're pretty much covered -- as I said, 65% -- and it's also a function of where we were last year and last year's costs. Now, if costs come in lower and we take coverage when we do, we'll let you know, but right now, we still believe that our commodity inflation assumption is accurate.

Jeremy Scott -- Mizuho Americas -- Analyst

Okay, thank you.

Operator

Thank you. Our next question comes from Howard Penney, Hedgeye. Please proceed.

Howard Penney -- Hedgeye -- Managing Director

Thank you so much. Gene, I want to go back to your answer to the delivery question and why you think it's so important for you to own the customer data as a part of your delivery assessment. Thanks.

Gene Lee -- President and Chief Executive Officer

Hey, Howard. We think it's really important because these delivery services are net-neutral sites. However, their goal is to sell as much food as possible on their platform. We want to ensure that we own our data and our data is not used against us, and that's very important in this whole negotiation, and we want to be able to benefit from our own data, but we want to ensure that our data is not used against us, and in our platform, we talk about data being one of our competitive advantages, and we have -- over the last decade, we have been behind a lot of trends because we've built our own proprietary system so that we can own the data. And, we believe that that's going to be key going forward, so it's an important part of this negotiation.

Howard Penney -- Hedgeye -- Managing Director

Thank you.

Operator

Thank you. And, our next question comes from Jake Bartlett, SunTrust. Please proceed.

Jake Bartlett -- SunTrust Robinson Humphrey -- Analyst

Great. Thanks for taking the question. Rick, I'm hoping you can give us an update on what your cost savings were for the full year in '18. The third quarter, there were some pieces given in the 10-Q on the COGS side, but also on your labor productivity in your slides, so I'm wondering what the overall result was for the year. And then, it sounds like you're not expecting material savings in '19. Just confirm that given your guidance.

Rick Cardenas -- Senior Vice President and Chief Financial Officer

We haven't specifically called out cost savings over the last year or so because we generally have been reinvesting those savings. And so, the only savings we've been talking about are synergies from the Cheddar's acquisition. We did get cost savings in the fiscal year that just ended. We reinvested those, as Gene has mentioned in the past. We reinvested in food quality, in people, and other areas. So, we're really not ready to talk about any other cost savings.

Jake Bartlett -- SunTrust Robinson Humphrey -- Analyst

Got it, but when you say "reinvest," you also mean reinvest in pricing. That allows you to keep the pricing low.

Rick Cardenas -- Senior Vice President and Chief Financial Officer

Absolutely. That is one of our reinvestments. We did price below inflation. When you include labor and food cost, we priced below inflation, and if you look at check growth in the industry, our check growth was well below the industry for this fiscal year and the last quarter.

Jake Bartlett -- SunTrust Robinson Humphrey -- Analyst

Got it. Okay, quick question on Cheddar's. Part of the deceleration in same-store sales this quarter was pulling back on promotions as you got the integration going and working through that. Do you expect to quickly reignite those promotions, or is this one reason why you'd expect weaker results in Cheddar's bringing the whole same-store sales down for the year for the whole company?

Gene Lee -- President and Chief Executive Officer

Jake, I think you'll start to see us slowly bring back some promotional activity, but right now, our focus is on getting our restaurants staffed and ensuring that we're scheduling properly and that -- are we creating great guest experiences in all of our Cheddar's? It's really back to basics. The system has been through a lot. They're all great people. I know myself, Dave George -- we went through this. We are fully aware of what they're going through, and we want to help them get back to doing basic things, and when it's the right time to start adding some more promotional activity, we will add some promotional activity. We have great people trying to do great things. We're just here trying to help them accelerate that.

Jake Bartlett -- SunTrust Robinson Humphrey -- Analyst

Great. Thank you very much.

Operator

Thank you. At this time, there are no questions on queue. Back to you, speakers.

Kevin Kalicak -- Senior Director, Corporate Analysis and Investor Relations

Thank you. That concludes our call. I want to remind you that we plan to release first-quarter results on Thursday, September 20th before the market opens with a conference call to follow. Thank you for participating in today's call.

Operator

Thank you. That concludes today's conference. Thank you all for joining. You may now disconnect.

Duration: 78 minutes

Call participants:

Kevin Kalicak -- Senior Director, Corporate Analysis and Investor Relations

Gene Lee -- President and Chief Executive Officer

Rick Cardenas -- Senior Vice President and Chief Financial Officer

Sara Senatore -- Sanford C. Bernstein -- Analyst

David Tarantino -- Robert W. Baird -- Analyst

Brian Bittner -- Oppenheimer and Company -- Analyst

Jeffrey Bernstein -- Barclays Capital -- Director

David Palmer -- RBC Capital Markets -- Analyst

Gregory Francfort -- Bank of America Merrill Lynch -- Vice President

John Glass -- Morgan Stanley -- Executive Director

Hugh Gooding -- Stephens Incorporated -- Analyst

Jon Tower -- Wells Fargo Securities -- Analyst

Fred Wightman -- Citibank Research -- Analyst

Chris O'Cull -- Stifel Financial -- Managing Director

Nicole Miller Regan -- Piper Jaffray -- Managing Director

Matthew DiFrisco-- Guggenheim Securities -- Managing Director

Andrew Strelzik -- BMO Capital Markets -- Managing Director

Karen Holthouse -- Goldman Sachs -- Analyst

John Ivankoe -- JPMorgan Chase -- Managing Director

Stephen Anderson -- Maxim Group -- Senior Vice President

Brian Vaccaro -- Raymond James -- Analyst

Jeremy Scott -- Mizuho Americas -- Analyst

Howard Penney -- Hedgeye -- Managing Director

Jake Bartlett -- SunTrust Robinson Humphrey -- Analyst

More DRI analysis

This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see ourTerms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.

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The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy .



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



This article appears in: Personal Finance , Stocks
Referenced Symbols: DRI


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