Q2 2020 Del Taco Restaurants Inc Earnings Call
Thank you for standing by welcome to the fiscal second quarter 2020 conference call a webcast for del Taco restaurants.
I would now like to turn the call over to Mr. Rafael growth managing director I see our.
Thank you operator, I think you all for joining us today.
With me is John capital lot, President and Chief Executive Officer.
Do you break Chief Financial Officer. After we go after our prepared remarks, well open the line for your questions [laughter], Let me remind everyone that part of our discussion today will include some forward looking statements. These statements are not guarantees of future performance and therefore undue reliance should not be placed upon.
Well, you're not undertake to update these forward looking statements that are later date and refer you to today's earnings press release, and RPC filings for more detailed discussion the risks that could impact del Taco its future operating results and financial condition.
<unk> earnings Press release also includes non-GAAP financial measures such as adjusted net income adjusted EBITDA.
Restaurant contribution how long would reconciliations of these non-GAAP measures to the nearest GAAP measure however, non-GAAP financial measures should not be considered that alternative to GAAP measures such as net income operating income that cash flows provided by operating activities or any other GAAP measure liquidity.
Financial performance I would now like turn the call over to John Capitola, Chief Executive Officer.
Thank you Raphael and we appreciate everyone joining us today.
He began by reiterating what I said on our previous call. Our restaurant teams our franchise partners and our support staff are doing an exceptional job supporting our people serving our guests and strengthening our brand.
Couldn't be more proud we're thankful for their efforts and dedication and I'm very pleased that this focus is driving business results.
Specifically system wide same store sales per slightly positive so far in Q3 led by our franchise base there with sustaining positive same store sales trends across a broad 14 stay geographic footprint.
Yes trends coupled with funding for all franchisees, who sought PPP lounge strengthened our franchise financial health to date, 70% of franchise restaurants voluntarily repaid all of the royalty and sublease rents that we deferred earlier this year and all remaining restaurants around repayment program.
Sounds to enable full repayment before the end of 2020.
Despite 100% of company operated dining rooms remaining closed since the start of coded and challenge trends in the breakfast Daypart company same store sales trends continue to improve sequentially and or negative approximately 2% during the first five weeks of Q3.
Despite over 90% of our company restaurants regarding in California, and Las Vegas, Workover 19 exposure is currently substantial.
Although we're very pleased with the company same store sales recovery during and since the second quarter, where even more proud of the restaurant level cost controls and flow through achieved during fiscal Q2.
Typically the food cost reduction very modest labor and related de leveraged despite absorbing a dollar, California minimum wage increase and operating expense adjustments allowed us to limit our overall restaurant contribution margin contraction to 260 basis points. Despite the cobot 19 reduction in company restaurants sales.
We're very pleased with this outcome and we expect further sequential improvement in our year over year restaurant contribution margin performance in both Q3 and Q4.
Importantly, our recent sales and profit trends, coupled with the deferral of certain non essential capital expenditures put us in a position to reduce our outstanding debt net of cash at the end of the second quarter by over $9 million compared to the end of fiscal 2019.
This resulted in a relatively stable net debt to adjusted EBITDA leverage ratio at Q2 compared to year end and we currently have over $12 million in cash on hand.
Due to our financial stability continued operations sales and profitability improvements we've been fortunate to not have to furlough any restaurant employees.
He said, we reinforced our people centric culture by paying company General managers healthy Q2 bonuses for their leadership and introduced an enhanced employed pre meal program to reward our dedicated teams for serving their communities. We are proud that our resilient business model has kept our teams employed and productive.
These results have not only stabilized our business, but also put us in a position to further our brand acceleration through operational improvements digital transformation brand initiatives and a continued focus on development led by franchising.
Starting with operations I'm, not surprised by our ability to rise to the occasion and overcome recent challenges.
The del Taco culture is very special built upon our people driven approach serving others as a core value.
Our culture is truly a strength of this organization and enables us to be innovative execute rapid change and employee new best practices that enable to recovery and future acceleration of our business.
As we contemplated the new normal we set goals to stand out as a trusted brand for safety and sanitation as well as simplifying operations to drive efficiencies and we are accomplishing both.
Since the cobot 19 impact we maintain the operations in our drive through takeout and rapidly expanding delivery channels.
These service modes provide gas the convenience they want in a limited contact or contact list manner.
Due to this advantage, we chose not to reopen company operated dining rooms in order to streamline our focus on the service nodes that are currently more relevant to our gas.
The majority of our franchisees also adopted a similar approach.
Our narrowed focus on drive through takeout and delivery channels has led to improved service scores and greater labor efficiency in our restaurants, which has been aided by increased visibility provided by our new workforce management system.
Next is 2020 progressive we have planned a number of innovation initiatives expected to enhance existing restaurant operations and provide consumers new reasons to visit del Taco.
Let me start with our digital transformation, which will continue to be an important part of our strategy.
Our del Taco mobile App and delivery have enabled enhanced engagement would guess and expanded our ability to provide them with greater convenience.
Yep database has now grown to more than 1.1 million registered users up 28% from 880000 at the end of 2019, which is in part due to a regular disruptive offers only available to app users to drive more trial in frequency with this technology, we just launched Dell daily Smile.
While summer whereby every day. This summer guests can receive del Taco offers and supplies deals from other partners that are only available in the out as an example of that last Friday, all del Taco App users received an offer for a free Samsung smart phone on what we called Freephone Friday.
We're also aggressively promoting Dell delivery as a contact list ordering option with Postmates Jordache and Grubhub and recently with our new partnership with you breach.
Delivery is available across all company restaurants in more than 90% or franchise restaurants through one or more D.S. peas, and represented approximately 7% a system wide sales during the second quarter.
We believe being one of the few brands to partner with all four leading delivery platforms to maximize consumer convenience channels and leverage the trend toward at home delivery provides a clear advantage.
In June we reinstated the traditional advertising media to highlight our everyday value barbell strategy with a focus on our dell's dollar deals menu more recently, we pivoted our messaging to innovation with the launch of fresh guacamole as our newest premium ingredient.
Freshwater builds on our strategy of delivering fast casual fresh quality ingredients with fast food speed convenience and price.
We plan to use fresh squawk as a QSR plus point of difference by making it available across our barbell menu strategy as a side or product modification as well as within new products designed to highlight the signature ingredient we.
We featured it as part of the recent launch of the new Epic Brito lineup, which allows the guests to choose chicken cornea SATA or beyond me for any of our epic burritos, along with simplified product builds to ease operations execution.
Early returns from this new ingredients feature extremely high guest satisfaction scores, along with increased epic burrito product mix.
Underscores our ability to deliver value and convenience even at the premium end of our barbell menu.
Next week, we'll introduce new crispy chicken as part of an overarching combined solutions event.
As a reminder, our combined solutions approach pairs catalytic marketing activity with operational enhancements and it has been a key part of our same store sales growth playbook for over the past decade.
This combined solutions event is centered around the core idea of Dells daily Smile.
In this current Tobin World, we could all use another reason to smile, and we are bringing that to our guests through new products a series of giveaways and an improved guest experience.
We'll be the first national Mexican QSR with a crispy chicken offering and we are launching it in new products across our menu barbell, including a dollar crispy chicken talk though which will be our first New addition to the dell's dollar deals menu under $5 epic Burrito with fresh block.
The product launch will be supported by a new marketing approach and brand voice developed by our new advertising agency Skiver and CMO Tim Hackbart.
We're already seeing significant improvements in our consumer engagement across social and digital channels as a result of their early work over the past month.
Our new approach that delivers must watch brand creative has increased social engagement and bus by up to four times.
For example, we recently launched a new sprite poppers beverage, which is driving impressive social media sharing of our creative content and inspiring a significant significant amount of user generated video reviews and experiences across tick tock Youtube and other social platforms trending it as a must tried beverage this summer.
Finally, we are using the cobot 19 period to invest in our future and are not simply waiting for when the pandemic is behind us to consider next steps.
Rather we intend to reach the other side better position to capitalize on new opportunities that will emerge from this crisis.
A key area of continued investment and focus will be technology, we've made great strides through our digital transformation over the past year and a half and plan to build upon that momentum as we recognize the importance of technology to drive the guest experience and meet future guest expectations.
This effort will leverage our restaurant technology assessment to help ensure all system wide restaurants are well positioned to adopt future enhancements such as developing and testing a loyalty platform to better leverage our 1.1 million plus app users as well as testing incremental new service modes for the brands, such as curbside pickup and others.
Strategies that allow the gas to order ahead, and conveniently access del Taco food in a contact list manner.
Turning to development, thus far in the third quarter, we have opened two franchise and one company restaurant and have up to three additional franchise openings planned later this year.
Looking ahead, we anticipate favorable dynamics may occur across our development efforts as a result of the pandemic such as additional new franchise interest in drive-thrus, increasing <unk> real estate availability and potential development cost deflation.
To help capitalize on these opportunities we are aggressively working a menu of and your strategy designed to expand our prototype capabilities to provide more flexibility both in terms of real estate access and enhancing our targeted new unit return profile.
This planned restaurant prototype expansion will including modernized design improved functionality and other operational enhancements.
In addition, we're continuing our test remodel program in the back half of 2020, which is driving encouraging sales lifts and returns. We believe the combination of expanded real estate and prototype opportunities along side, a comprehensive future remodel program will benefit future company and Fran.
Hi, guys development, including attracting new franchisees.
To conclude we stabilized our business and believe our franchisees are healthy our brand positioning of fresh flavorful food grade value and convenience is exactly what the consumers looking for these days and we can provide these relevant attributes to the limited and no can tap channels without the reliance of art.
Dining rooms.
Although sales volatility may persist, our underlying trend is undeniably strengthening and absent a major step back from the pandemic. We believed that the worst of it may be behind us in terms of same store sales and restaurant contribution margin performance at the same time, we're investing in our business to strengthen our guest engagement through technology.
Gee to improve our ability to provide even greater convenience well also evaluating how we can realize the emerging real estate opportunities to grow our brand through expanded prototype capabilities. We look forward to sharing more information on these topics now I'll turn the call over to Steve to review, our second quarter financials.
Thank you John total revenue decreased 13.9% to 104.6 million from 121.5 million in the year ago second quarter.
System wide comparable restaurant sales decreased 10.1%, including the 12.6% decrease a company operated restaurants me, 7.2% decrease at franchise restaurants.
Second quarter company restaurant sales decreased 15.1% to 95.3 million from 112.2 million in the year ago period. This decrease was driven by the decrease in complete operated comparable restaurant sales as well as fewer company operated restaurants compared to last year, primarily due to our.
Re franchising activity.
Sanchez revenue decreased 2.5% year over year 4.5 million from 4.6 million last year. The decrease was driven by the negative franchise comparable restaurant sales, partially offset by additional franchise operated restaurants compared to last year, primarily from our refranchising activities.
Turning to expenses food and paper cost as a percentage of company restaurant sales decreased approximately 60 basis points year over year to 26.9% from 27.5%. This was driven by our menu price increase of nearly 4%, which exceeded food inflation of approximately 3%.
Looking ahead, we continue to expect food inflation to step down sequentially, particularly during the fiscal fourth quarter and to be we have not experienced any material supply chain issues impacting product availability.
During the second fiscal quarter. Despite the one dollar increase in California minimum wage to $13 an hour and the loss of leverage on fixed elements of labor such as general manager salary and benefits due to the Kobin 19 related reduction company restaurant sales, our labor and related expenses as a percentage of company restaurants.
Sales increased by a relatively modest 80 basis points to 33.2% from 32.4%.
Our operations team very efficiently managed our variable early costs to align with the reduced consumer demand with a very streamlined focus on drive through operations, while the dining rooms remain closed. In addition, the quarter included reduced workers compensation expense based on favorable under.
Wind trends.
We view the modest de leveraging on this key line item is a strong outcome all things considered.
Occupancy and other operating expenses as a percentage of company restaurant sales increased by approximately 240 basis points to 23.5% for 21.1% last year.
This increase was primarily due to increased third party delivery fees and de leverage across our fixed occupancy costs from the Cobra 19 related reduction in company restaurants sales, partially offset by reduced advertising expense as traditional media spending was slowed during the second quarter due to covert night.
Team.
Based on this performance restaurant contribution was 15.6 million compared to 21.3 million in the prior year and restaurant contribution margin decreased approximately 260 basis points to 16.4% from 19.0% last year.
Overall, we're pleased with our restaurant margin performance and whether the operating environment in the covert 19 related reduction in company restaurants sales.
Looking forward, we believe we're well positioned to further minimize restaurant contribution margin contraction based on improved comparable restaurant sales coupled with sequentially less commodity inflation and the continued focus on managing other restaurant expenses.
General and administrative expenses were 9.4 billion down from 10.8 million last.
But as a percentage of total revenue increased 10 basis points to 9.0%. The decrease in dollars was primarily driven by reduced performance based management incentive compensation lower stock based compensation expense and other gionee reductions.
Adjusted EBITDA was 12.1 million down from 16.7 million last year and decreased as a percentage of total revenues to 11.6% from 13.8% last year.
Depreciation and amortization was 6.3 million up from 5.8 million last year. The increase primary primarily reflects the addition of new assets, partially offset by the impact of Refranchising as a percentage of total revenue depreciation and amortization increased 120 basis points.
6.0%.
Interest expense was 1.3 million compared to 1.7 million last year. The decrease was primarily due to decreased one month LIBOR rate compared to last year, partially offset by a higher average outstanding revolver balance during the second fiscal quarter the company reduced its outstanding revolving credit facility borrowings.
Around a 145 million consistent with the balance at the end of fiscal year 2019, and the company currently has over 12 million in cash on hand, the remaining availability under the revolving credit facility is currently 87.7 million. In addition at the end of second fiscal quarter or.
Balance sheet debt net of cash totaled 133.8 million compared to 143.4 million at the end of fiscal year 2019, representing a reduction of approximately 9.6 million Andy relatively stable net debt to adjusted EBITDA leverage ratio.
This performance has allowed us to maintain meaningful financial cushion with respect to our lease adjusted leverage and fixed charge coverage covenants, which we currently expect to maintain.
Net loss was 0.6 million or two cents per diluted share compared to net income of 2.1 million or six cents per diluted share of last year.
We also reported adjusted net loss, which excludes sublease income per close restaurants restaurant closure charges and loss on disposal of assets and adjustments to asset held for sale. Adjusted net loss was 0.1 million or approximately zero per diluted share compared to adjusted net income of 5.4 million or.
15 cents per diluted share last year.
As a reminder, we have already withdrawn or guidance for the 52 weeks fiscal year ending December 29, 2020, However, as I said earlier, we expect to demonstrate sequential improvement in year over year restaurant contribution margin trends during the third and fourth fiscal quarters due to our comparable restaurant sales.
Recovery, coupled with sequentially less commodity inflation and the continued focus on managing our other restaurant expenses.
That concludes our formal remarks as always thank you for your interest in del Taco and we were happy to answer any questions.
Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad a confirmation Tony will indicate your line is in the question Q you May Press Star too if you would like to remove your question from the Q for participants using speaker equipment. It may be necessary to pick up your handset before pricing.
There are keys.
Our first question comes from Nick Setyan with Wedbush Securities. Please go ahead.
Hi, Thanks, and congrats on a on a very solid margin well above I think even more bullish expectations.
Can you maybe just parse out.
To what extent weaken ex weaken or we can expect to see some permanent and in some of the improvements.
And to what extent maybe.
Some of that trend line is transient in nature.
Then separately specifically on the other opex, how should we think about.
The fee impact of third party fee impact going forward.
[noise] sure. Nick This is Steve you know as we mentioned the real good news is looking forward, we absolutely expect sequentially less restaurant contribution margin contraction in both Q3 and Q4, so compared to the 260 basis points of contraction we saw in Q2, although.
We do expect some continued contraction, it's going to definitely moderate over each of the next two quarters now that certainly assumes that same store sales performance remains in line with recent performance overall certainly the strengths of our company same store sales along with commodity trends on certain items that we have not yet contracted.
Yes, that's going to influence our ultimate restaurant contribution performance over the next two quarters. So overall, we like to see that food reduction on a percent basis.
We think that old maintain labor you know 80 Bips de leverage despite.
Significant negative comp influenced by coded.
Just speaks to the very good discipline within that labor and blade the bucket.
So we're real pleased with that you expect to see that continue.
Then even occupancy another you mentioned delivery that certainly is.
The most notable point of pressure on a percent basis advertising was also.
A good guy that somewhat offset that but then now to your your loss of leverage on all your fixed occupancy costs that was the other notable pressure points. So.
Overall on that's kind of some of the puts and takes and we're pleased to have a good outlook in terms of much less contraction as we move forward throughout the year.
Are there any learnings.
In terms of labor.
You know given some of the efficiencies you're seeing I mean is there potential to permanently.
And maybe less staffing lower hours and still have the same productivity relative to pre coated.
Yes, it's definitely a journey, we delivered a very efficient outcome on the first day in week of Cove. It no we weren't that efficient, but we real quickly I mean, John talked about how nimble. This organization is through a real strong culture. So yeah. We quickly adjusted I think it showed in that.
Performance and the focus is really just trying to maintain that if not improve it.
But we're absolutely chronically learnings along the way.
You know probably are going to inform future strategy to see the leaves no need to be Sarah that lack of a dining room is playing a big rolling that long term the dining room isn't asset that will be an asset in the future not immediate future. So that definitely played a role.
But there's certainly a lot of smaller learnings along the way, notably we talked a couple times about having rolled out a skew the art workforce management system, that's absolutely, giving great real time visibility, allowing your finance an obstacle even really help.
The efficiencies you saw a play out on the piano today.
Got it and just last question the difference between the the cone comp and the franchise compromise that is down to a higher percentage of no drafted locations and the company on base or is there something else going on there.
Are you referring to the the same store sales differential.
Correct.
Yeah, you know really it's a geographic dynamics you know over the last few weeks in particular, we've seen just really strong positive same store sales trends in all three of our Pacific Northwest States all of our four four corners states.
As well as Michigan in all either of those states that are exclusively owned and operated by franchisees and that accounts for a good number of our system outlets. So really it's that outside of California outside of Vegas, where the company is based on more than 90%, that's what's really allowing the franchise overall same store sales trends.
To to outperform the company.
Notably if you look within California, or within the L.A. DNA area, both franchise and company does remain negative and there is slight outperformance in favour the company within California and that way so really it's more of a geographic dynamic.
Understood. Thank you very much.
Your next question comes from Nicole Miller with Piper Sandler. Please go ahead.
Thank you and good afternoon. Appreciate the update excited about the comp return I wanted to ask a big picture about the industry. We've had it seems almost enough companies report to think this could be a trend it seems with less mobility and clearly you're in the state of California, where that's the case that full service casual dining taking step back in comp.
But limited service is not going if anything comp recovery continues so I would just wonder what do you think about that and it is that is the case is this coming mostly through that drives your channels through the delivery channels or somewhere else. Thanks.
Yes, Nicole I mean, you know with us in particular and 90% of our sales are coming through on drive thru and delivery at this point and you know the remaining being carry out obviously, we don't have and the company restaurants dining rooms are not up when we have not reopened dining rooms, and I'm just a very small minority franchise restaurants, where it's even more there even able to open.
Dining rounds have so it's definitely a drive thru and delivery dynamic I think that speaks to where the consumer is today with the pandemic and on the convenience that has provided with QSR and our ability to kind of transact quickly when you're out in about three to drive through in a limited contact manner I think that's it.
Thats an important factor that we offer and you know the fact that even going into coded limited service restaurants, we're such a regular more regular everyday use for consumers I think that dependability was created over time, so I definitely feel like we're well positioned.
On all of those consumer factors and then you add in value and what we bring to the table you know and when people are a bit pinched or expecting to be of intention with their wallets.
I think we can we can absolutely continue to see momentum.
Given these dynamics in our business.
Thank you the second and final question you talked about the dollar increase in California minimum wage and somebody other conference call as they come up and acuity that your peers are taking price and I'm wondering if you're thinking this is an opportunity for your brand.
If you did say price in the comp in the quarter. If you could repeat that I might've missed it and then if you think there the pricing opportunity where in the menu or which platform might you take that.
Yeah in terms of menu price during the quarter, we were a menu price that close to 4% I'd say for the full year outlook remains that leaves three and a half the 4% area based on actions Weve taken to dates and then one pending potential action in the fall so three and half the floor certainly that was.
It up you know a while back to you know in part to help manage labor inflation that you referenced.
And as far as enterprise technically and Theres not I guess, it's kind of the same answer like not any margins because minimum wage went up or is that something you're considering.
No I think we're always we're always looking at it and trying to determine what the right amount to take is but obviously, we want to keep an eye on transactions, we want to keep an eye on the health of the consumer in the competitive set before we make those decisions and there's some levers that we would we do see as as opportunities.
Paul one in particular is I'm on the delivery fraud and down recently, we moved up our premium pricing and delivery at the at the start of Q3. So we had been running about 10% premium on our delivery on transactions. It certainly helps that model quite a bit and through testing and franchise testing.
We were able to see that there was some availability of taking an issue additional premium in that area. So we're able to target that a bit and get that up to closer to the 20% range on a premium side.
Which is similar to what we're saying you know across.
The competition as well as you know when we look at the consumer dynamic pre post those types of news it seems like convenience really trumps.
Carries the day, if you will with delivery so and that's an overriding factor that allows us to maybe absorb a little bit more of that about pricing through that through that channel.
Very helpful and appreciated thank you.
Next question comes from Alex lack of with Jefferies. Please go ahead.
Thank you guys everyone's well I'm just wondering what you see as the biggest opportunities right now to improve the service levels and capitalize on the higher demand you're seeing the current drive doing carry out model. Just wondering if there's ways you think you can improve.
Turning to speed and efficiency whether its.
Opportunities for it so improving equipment or processing fees or anything else you see out there.
Yeah of course say it is a a I'll tell you with the narrowed focus here on non really so much of the business coming through the drive through we have really been able to put a on a massive Polish on throughput and actually with the launch of crispy chicken that happens next week that we're really excited about.
We have this combined solution to that and you heard me mention in our prepared remarks, and with over 90% of our business coming through the drive thru and delivery, we want to make sure we're improving that experience in both these channels with this launch and so we are launching something that we're calling our throughput playbook and that provides.
You know really specific tactics on a store by store basis to enable the growth of car counts during peak periods. So things like the you know the playbook includes things like options for.
The use of Collins to extend our drive through Q line as an example, or deployment of technology, where we use an outside order taker, where we might have some more challenged drive through stacks to get that person out there getting that order ended the kitchen sooner and we're doing some training on kitchen efficiency best practices as well that we've mined from our top or.
Forming store so it's a it's a massive focus in on the delivery front, we are setting up defined to delivery stations in our kitchens to have all the key elements needed in one place and adding additional information to the stickers, we use to tcl all of our orders to enhance order accuracy and then a piece that obviously.
Is over the top of all this that will additionally, help that is continuing to be worked through and some of that some of these elements will roll with combined solutions and crispy chicken next week.
Is that we've been working hard to simplify the operation. So we've we've completed our first phase of menu simplification.
Creating more efficiency indication kitchen, we deleted five skews as of next week and over a dozen menu items over the last couple of promotion, so well put trying to put our operators, our franchisees and a great position to be able to maximize that efficiency through the drive through.
That's great and then a follow up on previous question. It's just to get a sense for the restaurant level margin run rate at current volumes and slightly negative company same store sales. It just seems like yeah, the second quarter pretty impressive restaurant level margin the comp down.
You know I guess considerably and now.
Getting back towards flattish so.
Logistics back.
Yes, I would expect that margin to sequentially increase not just year over year seat the sequential increases you could.
Give some more clarity to that.
Yeah, we're certainly looking at much less contraction as we move forward.
That said if you look at the Oh, the 16.8% that we're lapping Q3, a year ago. You know some contraction can take you know certainly at or below what we just put up for Q2.
A couple of dynamics there.
Remember Q3, we will have reinstated our full suite of advertising and media Q2 that was largely subdued due to some cuts that we made so the marketing on a percent basis, we'll kind of spike back up.
Going the other way Fortunately will have obviously a lot less you know.
De leverage on your fixed occupancy costs. So weve seals, returning you know towards that more flattish area.
We're going to have a good guy there certainly, but then the other day and that gives you utilities do run high on a percent basis in the summer months due to higher energy consumption. So really that year over year contraction is going to shrink up quite a bit. The next couple of quarters longer term obviously looking.
To T driving that forwards. So that's some of the the puts and takes that are going on margin. Your Q3 is just a bit unique coming off of Q2 with advertising coming back higher energy costs. Then of course, the law the leverage shores up on your fixed costs. So so thats, where we are obviously seems sourcing deals I mentioned.
The big driver of where that margin goes and how quickly. It goes in the direction, we're pushing that towards.
Obviously, the comp recovery. So far is being done you know really despite that footprint on the company's side being over 90%, California in Vegas, where the meaningful historical breakfast day part where trends were just still tough there due to alter consumer behavior and of course, you know the sequential improvement is without dining rooms. So.
We feel good about the progression, but definitely a more to come.
Got it what kind of comp would you need to be able to hold the occupancy in operating.
Expense line flat just given all that the season.
Pressure there.
[noise] that one would be tougher to sweat and then labor I would say, particularly when we're in this more efficient.
I'm only mode.
So we would need more comp to get that to flatten out than the labor line. That's even despite the dollar of wage pressures. So it really speaks of the great job or operators are doing managing labor line.
Thats impressive thank you.
You bet there are no further questions I'd like to turn the floor over to John cap a solar for closing comments.
Okay, well, we appreciate you taking the time today with US you know I think we've been.
Working through the pandemic and is doing the team has been doing a great job, we've been demonstrating our ability to really focus on our employees, our gas and our brand.
And what we've been doing is resulting in a sending performance and you couple of hours consumed the consumer really adapting and being much more savvy in regards to how to navigate the shutdown safely and how to use technology to their advantage I think they'll talk wasn't brand is is sitting right in right. Now. So we appreciate all of you joining us today, we wish you all the best.
Yeah. Thank you for your interest in del Taco.
This concludes today's teleconference. You may disconnect your lines at this time and thank you for your participation.