Q4 2019 Earnings Call
Yes, it's funny 19 earnings.
Today's conference call is being recorded.
All.
Listen only mode.
During our presentation, we will conduct a question and answer session.
Instructions will be provided for you at the time to develop phrased question.
Now lets turn call over Seraphim gross manager I see our.
Thank you sorry.
That's a restaurant group's fourth quarter and full year 2019 earnings release was issued after the market close today, you have not a ready access that it can be found on the company's website www dot FRG <unk> dot com under the Investor Relations section before we begin I like to inform you that turning the call.
Today, the company will make various statements that are not based on historical information. These forward looking statements include without limitation statements regarding the company's future financial position and results of operations business strategy budget projected cost some plans and objectives management for future operations.
Actual outcomes and results may differ materially from one of the expressed or forecasted in such forward looking statements and the company can give no assurance that such forward looking statements will prove to be correct.
Important factors that could cause actual results to differ materially from those expressed or implied by the forward looking statements can be found in the company's FCC filings.
Please note that during today's conference call.
Non-GAAP financial measures will be discussed with the company believes can be useful in evaluating its performance hey discussion of suffering information should not be considered in isolation or as a substitute results prepared in accordance with GAAP a reconciliation to comparable GAAP measures is available and the Companys earnings release.
On the call today, our president and Chief Executive Officer, which talking Chairman and Chief Financial Officer, Dirk Montgomery and now I'll turn the call over Tourettes [noise].
Thank you raised.
Before we review fourth quarter results I want to highlight a few thoughts on the trajectory bar business, it's a strategic direction of the company.
As I mentioned last quarter, the key to the future of yesterday's nurturing the existing oil business and positioning positioning our lead concept to achieve its full potential well stabilizing the taco Cabana business for returned to growth.
We made good progress it boils during the fourth quarter and a number of key areas.
First and foremost.
Oil is positive sales momentum at the close of the third quarter continued through the fourth quarter and now into 2020.
Fourth quarter comp store sales were up driven by increases in both traffic and check size.
The last week, we have generated five consecutive months of positive traffic growth.
Tough to accomplish in the challenging markets in which we operate.
Comp sales for the first quarter through last week were positive.
We continue to gain market share in both comp sales and traffic based on black box data.
With sequential growth in traffic share gains in four consecutive quarters.
240 basis points travel again in Q2, 2019 that has accelerated each quarter to a 610.
Basis point.
<unk> share of traffic share gain in Q1 to date in 2020.
This topline momentum is driven by a successive LT successful L. T O promotions.
And the success of our value offering combined with check accretive add ons and new menu items.
We made great strides in terms of sales growth and building capability and off premise in the fourth quarter high hopes for strong growth in 2020.
We are successfully eliminating the barriers for our guests to enjoy oil anywhere and anytime through the channel they prefer including dine in.
Delivery.
Catering and pick up.
We more than doubled off premise sales in the fourth quarter compared to 2018 and made significant strides in building our infrastructure to eliminate barriers for our customers who enjoy all across all channels.
Quoting catering sales team addition.
The launch of easy cater online capability and significant work on a new app being developed by bottle rocket a leading digital strategy design and development company.
The new unapproved App will be launched in the second quarter.
The first quarter, we're also expanding our deliberate capability with more third party providers, such as do breeds labor and other leading providers to supplement our previously exclusive partnership with door at Ash.
Regarding Taco Cabana, we noted in the third quarter that we needed to improve overall guest satisfaction through improved operations and menu simplification, we made significant progress against this goal in the fourth quarter by reducing our order cycle times to five minutes for dry through orders a two minute improvement.
And improve overall guest satisfaction stores scores, which continued into the first quarter of 2020.
Although sales decline were below expectations at Taco in the fourth quarter, we identified the issues and are making progress in three key areas.
Well, our operations initiatives and simplified menu achieved our goal of improved guest satisfaction. The unintended consequences was a greater than expected reduction in sales.
First quarter of 2020, we brought certain items back to the menu and expanded daypart choices on select items to increase sales and have already seen positive results our value promotion Tc time did not drive enough incremental transaction to offset discounted prices we discontinued this promotion.
February and now offering unique value promotions within each of our eight marketing and promotion women.
As part of the simplification efforts, we did not introduced new items in our LTL to the final Windows Q4, which was negatively received by I guess.
We have accelerated new item ideation in Q4 and into Q1 to identify exciting new items were also bringing back proven LTL goes from past the past that sold well well LT always in 2020 will include new items and special value offers.
During the fourth quarter, we made very good progress on plans to improve margins 200 to 300 basis points in 2020 compared to 2019 that include the impact of efficiency initiatives operation simplification and closure of 19 underperforming restaurants in Texas that we announced in January.
With those store closures. We believe we now have a highly viable portfolio of stores going forward with fewer units that are not not at least breakeven from a profit perspective.
The final update on Taco today, we announced Chuck lock is no longer with Taco Cabana. This move allow Chuck to spend more time as family floor I want to thank Chuck for his passion and leadership over the last few years and wish him. The best of luck in his future endeavors.
With that let's discuss specific details on our fourth quarter results and the status of our growth initiatives.
Starting with oil Tropichop comparable restaurant sales increased 26% during your floor, which notably was its first quarter a positive comparable restaurant sales since the third quarter of 2018.
The brands comp growth consisted of 25% increase in comparable restaurant transactions and a 0.1% increase in average check.
As I mentioned, we see gained significant share over the quarter.
Making this the third quarter in a row of share gains as measured by Black box fast casual, Florida benchmark for markets in which we operate.
From a marketing standpoint, we continue to see strength and unit sales of Apoyo time value platform and continue optimizing pricing on those promotions.
During the quarter, we took a 50 cents increase price increase from Threem for 399 to 449 on a quarter chicken lunch bladder with no significant decrease in unit sales momentum.
It's rascoe state Clatter, LTL and grow Master trio LTL also did very well at prices up 829 in 99 respected.
Those items drove both traffic and check average versus last year during their promotional windows. We are encouraged that our sales and transaction momentum continued into the first quarter with positive comps through last week and additional share gains compared to our market benchmarks.
Coils restaurant level margins declined for the quarter compared to the prior year largely due to accounting changes an increase in food cost restaurant wages and other operating expenses as a percentage of sales dark will provide additional color on margin trends and his financial review.
On a full year basis absent of accounting changes and estimated impact severe storms.
Oil restaurant adjusted EBITDA margins would have improved slightly to approximately 22% compared to 21.9% in 2018.
Turning to the Taco Cabana comparable restaurant sales fell 8.1% during Q4, the grant brands comp decline consisted of 7.1% decrease in comparable restaurant transactions and a 1% decrease in average check.
Although the Texas market continues to underperform, the general compared to segment performance in the rest of U.S.
It goes performance was below Black box, Texas benchmark for the markets in which we operate.
These top line results are disappointing, but in no way to reflect the level performance. We think we can ultimately ci with this brand.
As noted the Q4 challenges we're focused around issues that were partially self inflicted we are ready making progress each of those issues in Q1.
The operations initiatives to improve guest satisfaction were critical and aimed at reducing item in day part availability to simplify operations and improve the speed of service.
Our drive-thru order cycle time for seven minutes compared to the quick serve average of five minutes. During Q4, we eliminated all day breakfast cut the weekend breakfast time availability eliminated I answered the menu that were highly high complexity from the operations perspective, all aimed at improving speed of service.
Those changes and other operating initiatives to improve guest satisfaction are working we have reduced the dry through order cycle time to five minutes and made significant improvements in guest satisfaction.
And the first quarter of 2020 or in just the beauty introducing select items back to the menu and expanding some daypart choices to regain sales traction without sacrificing customer satisfaction games, we achieved.
You're already seeing a pickup in sales I know you I don't those items, we added back and the Dayparts we expand.
It goes restaurant level margins in Q4 were highly challenge given the weakness in sales and higher cost of sales.
For the year restaurant level adjusted margins would have only decreased by 50 basis points to approximately 11.2% absent of accounting changes and impact of named storms.
Again, Derek will provide additional details a margin performance in his financial review in 2020, we expect to improve margins by 200 to 300 basis points versus 2019, driven by cost saving initiatives across all food and operating expense categories.
Turning now to where plans for 2020, our primary focus this year will be topline growth with additional focus on improving margins at Taco Cabana.
We have identified three key areas of focus across both brands that I will highlight before I cover specific growth plans for each concept.
First we're going to grow our base business at both oil and Taco by one improving our menu marketing and promotion innovation to further leveraging our loyalty programs, which are growing rapidly currently 290000 members for Pollo tropical and 200000 members for Taco Cabana.
Up significantly from the beginning of 2019 and three by optimizing menu and promotion pricing using statistical analysis, providing provided by a leading consulting firm that specializes in retail pricing.
Second we will continue to accelerate our online and off premise growth opportunities.
This encompasses catering online ordering and delivery.
We made progress in off premise in 2019 building infrastructure for future growth and achieving strong sales growth across both brands.
Despite our high sales growth rate are off premise penetration as a percentage of sales is still low compared to our competitors at 5.6% proposal and 4.2% at Taco. This gives us confidence we have significant upside in 2020 and beyond in those chance.
In catering we now have an infrastructure in place combined with incremental marketing plans that drive high growth in this channel.
Our direct Salesforce is very close to being fully step we now have easy cater b to b online ordering product up and running at both brands.
We expect significant growth in this business in 2020.
I mentioned, our progress in the first quarter 2020 to add additional delivery service providers across both brands and we expect strong delivery service growth in 2020 in at both brands as we ramped up our activity with these providers.
As noted online ordering is also a great opportunity for us with roughly 2% penetration in total as percentage of sales in both brands.
This penetration is very low compared to our key competitors and we believe that online sales growth will be incremental to our dine in business.
With our efforts to improve ease of access and installation of rapid pick up station that high volume stores by the end of Q1, we expect online growth to accelerate over the course of the year at both brands.
Third we will continue to invest in technology and infrastructure to improved guest satisfaction and remove barriers that prevent our customers from accessing our brands in all channels and occasions whenever they want wherever they want.
In addition to the ease of access initiatives with bottle rocket 2020, we'll be investing in a number of initiatives, including upgrading kitchen display systems to improve order cycle times and improving our Pos order entry process to reduce our processing times.
Now I'll provide more color on brand specific growth initiatives.
Well for oil Tropicana, we have been testing a large number of potential new items, that's possible LTL items to ensure a strong pipeline of ideas are available for each promotional window.
We're testing new chicken fried chicken and chicken fried stake.
Multiple types of Empanadas bigger deal and coconut shrimp as just a few examples.
Our marketing calendar. This year is filled with traffic drivers in check builds for each promotional window.
With the balance of value premium priced products and up sell items.
We also working on the development plans to increase traffic and sales and specific restaurants with Geo targeted ads couponing local store marketing Tac tactics and charity food drops.
Oil Tropicana is also coming off a strong quarter in Q4 for catering.
Sales up 33% compared to the year ago.
Still we see a big untapped opportunity to capture B to B customers and are therefore targeting accounts with potential recurring orders and b to C customers with our parties by coil platform, which places greater emphasis on party platters various sizes designed to meet the need of any and formal family or social.
Gathers.
2020 catering marketing plans include investments to build additional awareness local store marketing programs and b to b marketing, including partnership programs with easy cater.
In 2019, we invested in infrastructure, including salespeople catering hub operation units and delivery vehicles to ensure that offerings up holds our high standards for delicious fresh flavorful food that we're known for within our restaurants.
As we expressed previously we believe the current online ordering process is too cumbersome 'cause it takes too many steps for consumers to complete.
Streamlining the design and making the experience near frictionless across all platforms, including our mobile App and loyalty program will improve sales.
Our digital penetration currently is very low compared to our competitors and this is a big opportunity.
On the delivery front, we're in the process of lunching partnerships with who briefs and other delivery service providers appointed to supplement our ongoing partnership with jordache this quarter to maximize exposure to oil in the delivery channel.
Our current penetration and delivery is very low at 2.5% of sales and has the potential to be 10% or more as a percentage of sales in the future with incrementality.
To increase efficiencies, we have created rapid pick up for those ordering online and pick up themselves for delivery.
This is Pete this feature has been well we see has now been rolled out to all oil tropical locations.
Across the entire coil tropical footprint, we're leveraging partnerships and brand events to drive top mind awareness traffic and brand affinity.
In fact, we just signed a multiyear deal with the Miami that includes traffic building promotions community events and the license facility in the American Airlines Arena and the sharing of the loyalty programs. This partnership will include a number of store traffic activation ideas that drive store traffic.
Throughout the year.
In terms of unit development, we plan to open four to eight units in 2020 with two stores being company owned in our core market.
The remaining units will be franchise with commitments underway for nontraditional units in Florida universities Highway system rest areas airports and two international locations in Ecuador.
In summary, we expect to generate positive comparable restaurant sales for the Europe oil and low to mid mid single digit total revenue growth versus 2019.
We expect this gross the bill growth to build sequentially over the course of 2020, as we ramp up off premise sales opportunities and we implement improved pricing and promotional opportunities.
Turning now to Taco Cabana, we intend to stabilize sales in 2020 by continuing to optimize King Daypart choices.
Proving our value promotions and increasing our focus and resources on new product innovation.
In addition off premise growth will be key to our revenue growth plans.
We believe that value offering promotion strategy combined with attractive LTL shows and check building had add ons is a proven formula for success in our segment and we need to continue to perfect our tactics.
Those areas at Taco.
It became clear to us over the course of Q4 that PC time value promotion was not driving targeted transaction growth and negatively impacting checkout.
This contrast appointed Tropicana, where the everyday platform has performed as intent. We therefore eliminated TC time promotion earlier this month and are planning to offer targeted value offerings within each promotion window over the course of 20 Twond.
Moreover, we believe our new product and LTL innovation needs improvement and therefore filling a pipeline of 15 to 20 potential new items that have been or being qualified including in store test in advance of the launch we are about evaluating new creative items that fit our operating platform and leverage.
Popular and innovative recipes from the past, including such as such items as 10, Pico shrimp until boss in France sausage.
We are also reevaluating, our marketing creative and promotion strategies and our PR firm support.
Finally, we need that we had the needed infrastructure to support in place that drive significant growth in Taco Cabana spun off premise sales in 2020.
And our implementing marketing plans to build awareness and trial in those their channels, including a heavy focus on catering and delivery market.
To summarize we are optimistic about our momentum as oil tropical the key the future up yes. It is nurturing the existing polio business and positioning our lead concept to achieve its full potential.
We believe we're making progress a talk on the issues that impacted Q4 sales and have also significant off premise growth opportunities that we will capitalize on over 2020.
We are targeting comp store sales to stabilize in the second half of the year as we implement the growth initiatives.
Noted and we lap over softer 2018 costs.
Lastly, I am proud of our industry, leading executive team with Dirk Hope Lou Tony Patti and Willy I feel confident of the bright future Fiesta as this team hits its stride in working together.
With that let me turn the call over the dark to go over our financials in greater detail.
Thank you rich and good afternoon, everyone. So fourth quarter revenues decreased 4.9% from the prior year period to 159.5 million due primarily to the comparable restaurant sales decline at Taco Cabana.
We continue to make progress and off premise sales during the quarter, consisting of online catering and delivery off premise sales more than doubled compared to last year in the fourth quarter and as rich mentioned, we believe our penetration is still well below what it should be compared to our competitors to consolidated net loss was 21.1 million were 80.
Two cents per diluted share, including a 77 cents per diluted share negative impacts from several unusual items, including establishing a 13.5 million tax valuation allowance 8.4 million impairment charges and point 7 million close restaurant rent charges compared to a net loss of 7.9.
Hi million worth 30 cents per diluted share, including a 38 cents negative impact primarily from 14.6 million impairments and other lease charges in the fourth quarter 2018.
On an adjusted basis. The net loss was 1.1 name or four cents per diluted share and would've been key cents higher absent lease accounting changes just compared to adjusted net income of 2.2 million or eight cents per diluted share in the fourth quarter of 2018.
He sees a non-GAAP reconciliation table in our earnings release for more details.
Let us go through some of the significant county entries in the fourth quarter.
The newly Seachange to enter continued to impact our results of operations due to 18.6 million and deferred sale leaseback gains from which we no longer receive a benefit to rent expense fired sort adopting the new lease accounting standard we amortized to certain sale leaseback gains as a reduction to rent expense.
Amortization of deferred gains from sale leaseback transactions for three months ended December 32018, total approximately <unk> point Fourmillion end point 5 million disappoints, Apoquel and Taco Cabana, respectively.
Similar to last quarter, we have a number of closed restaurants for which we had previous reserves and whatnot and recognize time period expense under the previous accounting standard.
This reserve was recorded as an adjustment to why did you sell assets and we adopted the new lease accounting standard and rent expense related to close right restaurants is now recognize each tears.
Holes restaurant expense Naeem said, we encounter the three months ended December 29, 2019 to 25 million and point to name supports Apoquel, It's I think advance respectively.
Lastly record 88.4 million non cash impairment charge, primarily related to Taco Cabana restaurants and were subsequently closed in January 2020, which had an unfavorable impact on net income of 6.4 million or 25 cents per diluted share in the fourth quarter 2019.
Now turning to our individual brands at play Chop account comparable restaurant sales increased 26% compared to 1.9% decrease in the fourth quarter last year.
Series, including consisted of a 0.5, increasing comparable restaurant transactions or traffic and 0.1 increase in average chest inclusive of approximately point you in pricing.
As rich mentioned earlier put a top accounts continues to gain market share as evidenced by the outperformance compared to black box in both the comparable sales and a transaction basis.
We also experienced an estimated 60 basis point impact during the fourth quarter, some new store cannibalization within our core South Florida market. However, we do you need development as a positive for the brand overall since it allows us to enhance the guest experience while growing our cheney share in the market.
Turning to the branch profitability for the fourth quarter restaurant level adjusted EBITDA, a non-GAAP measure is defining our FCC volumes decreased 2.0 by 1.9 million to 17.2 million or 19.2% of restaurant sales from $19.1 million, 21% restaurant sales.
In 2018.
There was a 24 million negative impacts associated with adopting the new lease accounting standard.
What is full year restaurant level adjusted EBITDA margin rate as detailed in the press release was slightly below last year, including the full year negative impact of lease accounting and 1.5 million and the estimated impact of names summer storms <unk> point Sixmillion.
As I am seeing non comparable to the prior year.
Absent those non comparable items, the polio restaurant level adjusted EBITDA margin rate would have been up slightly to 22.0% compared to 221.9% in 2018.
As a percent restaurant sales in the fourth quarter player traffic count experienced higher cost of sales due to increases in LTL food costs restaurant wages and related expenses due to higher medical and workers compensation expenses.
R&D expense due to the news accounting standards and other operating expenses. The other operating expense increases included higher third party deliveries. He is contracting cleaning services and repair maintenance costs more than offset by the impacts of the reclassification real estate taxes, some operating expenses to read.
Yeah were partially offset on the positive impact from higher comparable restaurant sales.
Nipigon portion of the year over year, increasing contracted cleaning services and repairs and maintenance costs or considered nonrecurring.
Adjusted EBITDA, a non-GAAP measures defining let's see filings decreased by 1.8 million to 10.6 million supports apoquel in the fourth quarter 2019 or would have been point 4 million higher absent accounting changes, resulting from adoption of the new lease accounting standard.
In addition to the lower restaurant level adjusted EBITDA referenced a moment ago. We also experienced a higher DNA expense due to timing of incentive compensation accrual adjustments and investments in off premise for.
It's I take advantage of comparable restaurant sales decreased 8.1%.
Compared to 5.1% increase in the fourth quarter last year. This year's decline consisted of a 7.1% decrease in comparable restaurant transactions.
1% decrease in average check.
Turning to the brands' fourth quarter profitability restaurant level adjusted EBITDA, a non-GAAP measures to find interesting to see balance decreased at Taco Cabana by 3.4 million to 5.5 million or 8% in restaurant sales from 8.9 million or 11.8% restaurant sales in 2018.
There was a point 5 million negative impact associated with adopting a new lease accounting standard.
Second is full year restaurant level adjusted EBITDA margin rate as detailed in the press release was below last year, including a full year negative impacts of the lease accounting standards of 1.9 million any impact of name summer storms or <unk> point 1 million, both items being non comparable to prior year.
Absent those non comparable items, the Taco restaurant level adjusted EBITDA margin rate, we've been down only 50 basis points is 11.2% compared to 11.7% in 2018.
The impact of closing underperforming stores and efficiency initiatives are expected to significantly improve taco restaurant margins in 2020.
As a percent of restaurant sales in the fourth quarter Taco Cabana incurred higher cost of sales due to increased just came promotional activity and higher commodity costs advertising expense other operating expenses, including high repairs and maintenance costs and delivery fees and higher rent genius, New accounting standards. In addition to the negative impact of.
Lower comparable restaurant sales.
Significant portion of the year over year, increasing repairs and maintenance costs well considered non recurring.
Adjusted EBITDA, a non-GAAP measures to find interesting she filings decreased to Taco Cabana by 3.7 million to negative point 3 million in the fourth quarter 2019, but we've been point 5 million higher absent accounting changes, resulting from adoption of the new lease accounting standard.
In addition, we also experienced higher gene expenses g., the timing of incentive compensation accrual adjustments in investments outside of the support.
During the quarter. We also recorded 8.3 million of impairment charges, primarily related to the 19 underperforming Taco Cabana restaurants that were closed at the beginning of year.
Turning now to a few additional financial items.
Under our current share repurchase program, we repurchased 23 million shares during the fourth quarter.
In total we repurchased approximately 1.4 million shares of common stock in 2019.
Please note that the number of shares repurchase and the timing of repurchases will depend on a number of factors and it's a program also has no time limit.
It may also be modified spending superseded or terminated anytime by the board of directors that being said, we continue to see share repurchases at current price levels is a good investment and we'll also look to repay debt with any excess cash flow.
Total capital expenditures in 2019 were 41.2 million, which you may recall was at the low end of our original guidance. Our expenditures consisted of 19.3 million for maintenance 11.4 million from New company owned restaurant development 7.9 million for technology, and corporate and 2.6 million for restaurant remodel.
Yeah.
From a liquidity perspective, we have more than adequate borrowing capacity, it's 71.3 million available and our line of credit as of year end.
Our simple leverage ratio defines our revolver balance divided by adjusted EBITDA.
As defined in our loan agreement is 1.4 times and we intend to maintain our conservative balance sheet.
Turning now to our 2020 plans. Please note that this is a 53 week fiscal period, let's switch the 50, threerd week being in or last reporting period of year.
Ill briefly recap our financial goals for 2020 that includes the following.
Driven impart by strong off premise sales growth, we expect to return for TEP accounts of positive comparable restaurant sales in 20, Tony sequential growth in comps over the course of the year as we ramp up off premise sales and delivery catering and online.
We're working to stabilize sales at Taco Cabana and expect to achieve sequential comp sales improvement over the course of the year, although trends during the first half of the year are likely to be negative.
Food costs are projected to remain stable for 2020 versus the prior year based on current supply commitments, we already have in place across key commodity categories with respect to wrestle restaurant level adjusted EBITDA margins, we expect to maintain margins of polio and improve margins by 200 to 300 basis points.
Compared to prior year at Taco driven by the recent store closures and efficiency and operations simplification initiatives.
We plan to open 48.4 units and Tony Tony with two stores being company owned in our core geographies as rich mentioned the remainder Europeans are franchise units.
We are currently painful one closures this year and location that is in a challenging trade area it hasn't lease expiration.
I took advantage is expected to open one new unit in the first quarter.
Currently expect wanted to additional closures for the remainder of the year due to opportunities to actually locations that are in challenging trade areas.
2020 capital expenditures are expected to be at or below the 2019 level of approximately 41 million.
And finally, if we achieve our growth plans, we should generate excess cash flow after operating in Capex.
Which can be used for share purchases for debt repayment.
In closing, we expect 2020 to be a year of improvement, which our results build momentum over the course of the year.
We expect to finish the year with clear Tropicana, demonstrating sustainable topline momentum at Taco Cabana sales stabilized with much higher restaurant margins.
Thanks for listening and we will now open up the call to questions operator.
Thank you, yes, if you like to ask a question. Please press star one on your telephone keypad.
For me should tell indicate your line is in the question can you maybe press star to if he would like to remove your question from the Q.
And for participants using speaker equipment and may be necessary to pick up handset before for seamless thirties.
Our first question is from Joshua Levine with paper San <unk>. Please proceed.
Great. Thank you for taking the question wanted to see if we might be able to dig into the quarter to date trends that you mentioned at both brands in the context of the full year guidance. It sounds like pull your comps are positive and with an opportunity to build over the course of your given some of the initiatives that you outlined there could you provide some more color there in terms of if that's accelerate.
Sequentially.
Here in the first quarter and then as we think about Taco Cabana being negative in the ability to stabilize does that suggest that trends have further faded from where we ended the quarter and then how do you think about the timing of that in terms of that stabilization and then that returned to a positive or at least improve.
And in the second half year.
Sure Yes. Thanks for the question, so with where tried Macau.
We trends are positive quarter to date and they are sequentially improved over the fourth quarter just to give color on the quarter to quarter.
For a minute over the year. The reason that we're expecting sequential improvement improvement over the course of the years due to the fact that we're just now watching the additional delivery service providers.
On the delivery side and do any number of other things that will build on their momentum over the course of the year.
So certainly in the back half the year, we expect higher comps in the first half a year.
On Taco Cabana, we are seem to trend stabilize we are still down but the trend is better. We also continue to see.
Similar.
Satisfaction scores better than they were in the fourth quarter. So what we're seeing is what we'd hoped for stabilization of sales, even though there's still down.
But also.
You know and improvement in ongoing customer satisfaction.
Great. Thank for that and then one last one on that on the Taco Cabana piece. The stabilization is helpful. I appreciate the color there and called out that we expect the first have to still be negative. It does that still kind of anticipate an opportunity for positive trends in the back half the or is that more vein exiting 2020 and run rate into 2020.
One.
Any color there would be helpful.
Sure I mean, it's difficult for us.
Predict the absolute pace of the improvement that.
Our goals for the year.
Back half of the year for Taco to have basically stable and trending toward flat traffic in the back half of the year. So if you combine that with the growth in the off premise.
Categories channels that should point us toward.
Certainly being in a position for comps to be flat to positive as we had some the second half of the year in 2020 into 2021.
Great. Thank you for that and as we think about the off premise opportunity is there anything inherent to the brands that have proven to be a challenge should we think about this is just maybe a little bit.
Late to the game because it just as users as the use of the ran it seems like both would lend themselves to a prime is pretty well, but I'm just trying to contextualize why both both French currently have such an opportunity or said differently why the current off premise makes it so low and any help there would be great and then if you could also comment on the pricing study that you're.
And with the third party in kind of any sort of general high level timelines around how we should be thinking about that as being a either driver or being able to influence 2020 pricing decisions.
Josh will it's rich.
I think if you remember over the last several years, we added to a lot of work on the foundation for the off premise and delivery that's more of a system.
Issue and the software issue when we had a bringing people like although and punch et cetera. So we were building the infrastructure from the ground floor.
It took us longer than we anticipated, which we mentioned last year. So we're late and again I agree with you. Both these concepts lend themselves to be extremely successful and delivery and online ordering again, we're in the midst of developing the new app.
With a bottle rocket coil, we expect to be at the end of the second quarter up is alive and then shortly thereafter, the next quarter, we'll have tacos up and running so again, we're just late in the game and that was more from a an infrastructure perspective, we just started.
With overreach this past week and we're pretty excited just to see what the results. We've had within three four days I'm. We're just really excited what we'd be able to get not just from them, but the other providers that we were now signed on with.
Yeah, and then just to speak on the pricing works and we're doing.
The initial work was focused on plan Tropicana you may recall that we haven't had Ed.
Really a significant price increase for each of the cow and basically two years and so.
One of the encouraging findings from the work that we've done to date is that we found that.
The value perceptions of our customers actually are higher now than they certainly where a couple of years ago, which gives us some some comfort that we have someone to take pricing.
We are planning to take a conservative pricing based on that work at a very kind of targeted level store by store.
That should kick in in the second quarter.
It's going to be a combination of absolute price increases at store level and then also continuing engine with fine.
Our promotion prices as rich said we.
We made it.
Small change in the point of time quarter chicken offer.
Fourth quarter will then make some additional small changes in that promotion platform the head tests and successfully.
In the first quarter [noise] from an overall process perspective. This is very much any place where we're going to be conservative test and then roll the changes so that we don't diminished traffic on the Taco side.
We're going to be doing the same work, but that work is gonna be starting the second quarter and won't be considered until the back half of the year, obviously, given the the traffic trends of that plan, we want to be extremely careful and making any price moves, but we do anticipate that the research that were Jane will will will appoint as to some opportunity.
It is what we're going to be very conservative on when we take those attacks.
Great. Thank you.
Thank you Jessica.
Our next question is from Brian Vaccaro with Raymond James. Please proceed.
Hi, Thanks, and good evening, certainly encouraging to hear the resumption of a share gains at pollo tropical and.
I'd say the growth in off premise and delivery is helping there, but it seems that value or the new products sintros, maybe gaining some incremental traction and breaking through a little better that Brad is that right and can you quantify any of that.
Fine that.
Brian its rich we were pleasantly surprised with the impact of our you know we had a special that we put out at a 29.
And you know pleasantly surprised to see the barbell effect and we actually saw people trading up from oil time.
To the a 29 special.
That opened up our rise significantly that people and again it was over fourth quarter December.
That they were willing to trade up it's more food it's different items.
But that that special has basically stayed on the menu and continued to do well. So we were surprised we took we took a little chance there we weren't sure exactly how well something at a 29 was going to do at the same time, you're offering a for 49 lunch special.
But that has been successful not only in core but throughout the entire chain.
All right that's helpful and sticking with the coil comps can you provide some more color on just what you saw regionally in the core South, Florida and some of the non core market.
In the fourth quarter yeah.
Brian That's a great question, we continue to be strong in core we're actually stronger in other markets outside of core.
Not only stronger in terms of comps being higher but also the market share improvements are higher outside of core then inside a core and especially led by which has led the company. All throughout 2019 was in the Orlando market. So we've seen a core continue to be strong.
But the you know the market share improvement is significantly higher outside the core led by Orlando.
And we did see.
Market share gains in every single market that we operate in.
All right, that's great and then shifting gears to Taco.
I know you're targeting two to 300 Bips the store margin improvement I think in 20, It said and I think a little more than half. The that is achieved by the nightfall closures that you completed in earlier in the year can you confirm that's right.
Then secondly can you provide more details on the efficiency that you've baked into that outlook at taco they seem to be fairly significant once a year assuming negative comps in 2020. So this will be some some.
More detail on quantification will form the officials have you baked and.
Yes, sure and so on the store closures, that's that's Directionally correct 150.
So 180 basis points on the closures the rest of the of the you assumed 320 basis points improvement is really through efficiency initiatives in both well three categories, some food costs operation services, and repairs and maintenance and.
We.
Have had very good success over the fourth quarter and ended the first quarter implementing those programs.
The combination of.
Efficiency initiatives, including renegotiating contracts with suppliers on finding ways to take cost out of the product without compromising quality.
Including things like change changing pack sizes.
But all of the food related activities are being down in a way that does not compromise our.
Our quality advantage, we think that we have against the competitive set.
It is being tested against consumers to make sure that and you know we don't we don't see any surprises before we roll those changes at all.
The efficiencies in repairs and maintenance in operation services are a combination of renegotiating contracts.
Ill say just being more efficient.
Point best practices on repairs and maintenance side. An example that is that we've now ensures.
The maintenance for the.
Our t. and machines, which are very customized and so that lends itself to a dedicated team of text is really know that machines inside it out and can also do other things. In addition to working on that and it at a general level over 70% of the channel efficiency.
As many initiatives have already been implemented at our in place. So we feel really good about our capability to achieve those are the that level margin improvement that we are that we guided.
All right it sounds like you've taken quite a deep dive at the store level, there and I guess any can you talk about any study or initiatives in place to drive efficiencies at the Gionee level do you feel like this is occurring at a reasonable infrastructure that's.
Necessary to the run the business and its current state or do you think there might be some opportunities that would you'd be willing to share what you've embedded in your twentytwenty guidance for DNA.
Sure so.
To answer the second part first of the we feel that the infrastructure that we put into place at the end of 2019.
Yes, what we need to drive growth in the business over the next couple of years in terms of.
Evaluating efficiencies that are efficiency opportunities in GSK, and we're really just getting started on evaluating.
What are opportunities are yeah across our three locations we've assumed in our plans for the 2020 year that we pretty much hold the line on the infrastructure investments that we made at the tail into 2019, so not not no significant.
Increases in DNA, there is a little bit.
Wrap around impacts thing.
Staffing we added it laid in 19 that wasn't there wasn't there a full year like myself.
But also.
Catering catering sales force.
Things things of that nature that really are going to drive.
A topline, but our focus and aging increases has been to really.
Make investments only in topline driving resources and hold the line on.
And kind of corporate level staff.
All right I'll pass it along thank you.
Thanks, Brian.
We have reached the end of our question and answer session I would like to turn the conference back over to management.
The thing remarks.
They again I just want to thank everybody I want to most importantly, thank the the teams. This has been a tough year, but the future as bright as far as we're concerned for both concepts for polio led by oil as well as Daqo. Thank you everyone. Good night.
Thank you. This does conclude today's conference you may disconnect. Your lines at this time and thank you for your participation.