Q2 2020 El Pollo Loco Holdings Inc Earnings Call
Actual officer.
Now I would like to turn the conference over to Larry Roberts. Thank you operator, and good afternoon by now everyone should have access to our second quarter 2020 earnings release, if not it can be found at www Dot El Pollo Loco Dotcom any investor Relations section.
Before we begin our formal remarks.
I need to remind everyone that our discussion today will include forward looking statements.
Leading statements related to the impact of the Koby 19 pandemic honor business and strategic actions, we are taking in response.
As well as our marketing initiatives Cashel expectations capital expenditure plan and plans for new store openings.
These forward looking statements are not guarantees of future performance and therefore, you should not put undue reliance on them.
These statements are also subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect.
We refer all of you to our recent SEC filings for a more detailed discussion of the risks that could impact our future operating results and financial condition.
We expect to file our 10-Q, the second quarter of 2020 Tomorrow and we encourage you to review that document and your earliest convenience.
During today's call, we will discuss non-GAAP measures, which we believe can be useful in evaluating our performance.
The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP and reconciliations to comparable GAAP measures are available in our earnings release.
Before I turn the call over to President and Chief Executive Officer, Fernanda Coca I'd like to note that Bernard and I are of course in different locations today.
Please bear with us if you experienced any slight delays or minor audio quality issues. Bernard. Please go ahead.
Thanks, Larry Good afternoon, everyone and thank you for joining us today I hope that you and your families are staying safe and healthy.
We're very pleased to be here today to discuss our second quarter results.
As you know the quarter began in the midst of decoded 19 pandemic and as you can imagine our results reflect some formidable challenges.
However, they also reflect a clear trend of momentum in our business and I'm convinced that many of our actions over the last few months will serve our business well over the longer term.
As I discussed on our last call with the onset of a pandemic, we moved quickly to transform our business in accordance with state and local restrictions.
We rapidly shifted our operational focus to drive throughs where available.
Hey, guys mobile pickup and delivery.
At the same time, we've worked tirelessly to implement or update multiple procedures in order to protect our employees, our franchisees and our customers.
Make no mistake our approach from the beginning has been to ensure that we not only weather the storm, but also continue to differentiate our brand and be a source of comfort and reassurance. During these stressful times.
I'm proud that our actions and priorities have supported our employees franchisees customers and communities in which we do business, while also delivering solid and improving financial results.
Overall system comparable restaurant sales were negative 9.7% in the second quarter. However, we experienced accelerating and consistent comparable restaurant sales momentum throughout the quarter.
April was our most challenging month with system wide comps decreasing negative 26%.
However, we recovered significantly in may.
Posting a decline of only negative 6.3%.
And delivered positive comps in June of plus 0.6%.
Additionally, I'm happy to report continued progress in July.
With third quarter to date system comps up approximately 3%, although we have seen a bit of softening late in the month in our core Los Angeles restaurants, while we continue to see strong sales comp performance in our outer markets.
For the second quarter. We also delivered a strong restaurant contribution margin of 19.6%, which was a key driver of our pro forma EPS of 20 cents and was just 30 basis points lower than last year, despite the lower sales.
We have relentlessly focused on delivering operational efficiency throughout the pandemic and have made adjustments to our labor deployment and food cost management processes, and we are more efficiently servicing our customers both on and off premise.
The improvement results during the quarter were driven by executing against the five key strategies that we laid out on our last call, which are one grow delivery.
To increase family meals sales three build our digital ecommerce business.
For promote value and five improved drive through execution.
I couldn't be more pleased with the progress we've made against each of these initiatives.
With regard to delivery.
In the quarter, we introduced an industry first our free delivery for however, long as necessary commitment to our customers, which we were able to implement in partnership with Postmates.
We recognize the free delivery is an invaluable service for many of our customers right now.
Which is why we are excited to announce that we will be extending this offer until at least the end of this calendar year.
As a result of this free delivery program with Postmates and our other partnerships with Grubhub jordache and new breeds.
We have achieved record delivery sales with delivery as a mix of our total sales more than doubling since the beginning of year.
Briefly touching on the other four key strategies.
While family Neal mix has declined as entre and individual chicken meals sales have improved.
They are still growing more than 10% year over year and account for over 30% of our sales mix.
Our ecommerce business has more than tripled since the second quarter of 2019 and has doubled since the beginning of this year.
Our return to marketing our five dollar fire drill combos was well timed and very successful as evidenced by the consistent improvement in our sales results.
Finally, our drive through execution has never been better as we saw improved accuracy and service times, even as our mix increased to over 75% of sales.
As we entered the second half the year, we will continue our efforts against these five strategies, especially with regards to digital ecommerce.
In September we will be Relaunching, our local rewards loyalty program and a big way with new program enhancements that we believe will grow acquisition and increase engagement.
Local rewards the cornerstone of our digital flywheel is a huge opportunity to both increase loyalty program membership and drive incremental sales through highly segmented relevant campaigns.
Year to date, we have increased total loyalty member spend by 7%.
And year over year have increased it by 11.9% due to segmentation and targeted offers.
Our relaunch will include a new three signup offer that can be redeemed immediately upon joining.
A lower threshold to redeem loyalty rewards with a five dollar award being issued for every $50 spent.
And additional program enhancements to significantly build upon the 1.9 million loyalty members currently in the program.
For the first time ever we will be promoting our local rewards program via an integrated marketing campaign that includes television social media digital and in restaurant point of purchase materials.
Local rewards currently represents 10% of our sales next year to date and we are currently on pace to deliver our year end goal for loyalty to comprise 12.5% of sales and become a more meaningful contributor to comp sales.
Additionally in September we plan to launch curbside pickup.
Through this new program customers will be able to order through our app and have their orders delivered to their car with the restaurant being notified of their arrival through the help of GPS.
We believe the addition of curbside pickup will provide additional peace of mind for our customers to safely access our offerings as curbside service is seen as one of the safest ways to access food off premise.
The launch of this program will also receive dedicated television as well as digital and social media support.
Since the pandemic began in March we haven't introduced any new products choosing instead to maintain simplicity for our operators by focusing on our core menu.
Our current focus on summertime tow starters, which we launched at the beginning of July is a continuation of that strategy.
In this particular case, we took two existing products in our menu.
Mine them for new consumer insights and reposition them in a fresh and relevant way.
Our advertising presents them to our customers as a great choice for the summer given that these products use fresh in season produce and ingredients.
As a demonstration of our growing social media listening capabilities. We also took the online feedback that our customers gave us to make our chicken list polio, Taco and burrito products, which we launched last February vigen by removing an egg enzyme in the sauce that our meatless chicken alternative protein.
Cooked in.
We are proud of the fact that we managed to respond to what our customers were telling us and quickly reformulated and re launch these products in a matter of only four months.
We are equally proud that this reformulated recipe is certified vigen by the American Vegetarian Association and that we are the first national chicken brand to rollout a vague in chicken alternative product system wide.
We continue to be very excited about our ability to expand better for you product innovation.
Allowing us to appeal to a broader set of customers and build upon our commitment to making healthier eating more accessible and affordable.
We have a lot more planned in our pantry regarding better for you products that we are eager to share in the near future.
Finally in September we will return to new product innovation, introducing a new lineup of burritos, which will include both Quito nviant options.
We believe these portable on the go products will service well given the amount of business, we are generating in our drive throughs.
Our primary focus for the balance of year in operations will continue to be enhancing the drive through experience for our customers.
We've already made good progress, but we believe that there is even more room to improve speed and accuracy.
We also continue to train restaurants on proper labor deployment and food preparation.
In addition, the operations team is leading a project to reevaluate our equipment laid out at the drive through station as well as explore new equipment and technology to drive further efficiencies.
These include holding equipment and tablets capable of taking credit card payments, which will be used in the drive through lngs.
Before I turn the call over to Larry I'd like to reiterate again, how incredibly proud I am the extraordinary efforts of our employees and franchisees.
Our business and industry are facing challenges the likes none of us has ever seen before and our employees and franchisees has consistently demonstrated the ability to rise to the occasion to overcome them.
They're resilience teamwork passion commitment to the brand and each other is what helps us get through adversity and set this up for a promising future.
While the coded crisis will likely continue to present challenges I feel very good about where the brand is positioned today and the plans we have to grow sales by strengthening our off premise strategies and leveraging product innovation to appeal to our core customers and expand our reach over the next 12 to 18 months.
Now I'd like to turn the call over to Larry to review, our second quarter results in more detail.
Thanks Bernard.
As discussed last quarter, one of our priorities during the covert 19 pandemic has been to augment our liquidity and as a cautionary measure we fully drew down our $150 million revolving credit facility, adding 34.5 million dollar cash to our balance sheet.
During the second quarter, we generated cash from our operation and as of June 24th 2020, we had $60.3 million in cash and equivalents in 138.8 million in debt outstanding.
We continued to be cash flow positive and expect to pay down a substantial portion of our debt in August provided there is no significant deterioration in market conditions.
Before we get into our second quarter results.
I'd first like to provide update and our store development.
During the quarter, we opened one new company operated restaurant in Las Vegas, and two franchise restaurants, one in Tucson, Arizona and the other in southern California.
As a reminder, we have temporarily halted company operated new unit development and remodel activity and as a result, do not expect any additional new company owned or franchise restaurants in 2020.
We're also pushing ahead with our new asset design, which better exemplifies and communicate our Ellie next positioning at the moment, we expect to remodel a two restaurants in the fourth quarter using the new design, which will then be used for all new bills and our next round of Remodels in 2021.
Now onto our financial results.
For the second quarter ended June 24th 2020, total revenue was $99.6 million compared to $113.7 million in the second quarter of 2019.
Company operated restaurant revenue was $87.7 million compared to $100.1 million the same period last year.
The decline in company operated restaurant sales was driven by an 8.5% decrease in company operated comparable restaurant sales, which we believe was largely a result of the impact of the cobot 19 pandemic as whether the sale of 16 company operated restaurants to franchisees the closure of.
[music] restaurants during or subsequent to the second quarter between 19, and a $700000 decrease due to temporary closures primarily related to the cobot 19 pandemic.
This was partially offset by an increase revenue generated net three new restaurants opened during the same time period.
The decrease in company operated comparable restaurant sales was comprised of a 25.4% decline in transactions, partially offset by an approximate 22.5% increase in average check during the quarter our growth pricing versus 2019 with 4.5 per se.
Yes.
Franchise revenue was $6.7 million during the second quarter compared to $7.9 million net prior year period.
This decrease was primarily due to a franchise comparable restaurant sales decrease of 10.6%, which we believe was largely due to the co benign heme pandemic. The closure eight franchise locations during or subsequent to the second quarter of 2019 and a decrease in fees received for franchise restaurants late.
Due to our use of our point of sale system.
The decrease was partially offset by the opening two new franchise restaurants and revenue generated from 16 company operated restaurants, so by the company to franchisees during the same period.
Turning to expenses.
Food and paper costs as a percentage of company restaurant sales decreased 170 basis points year over year to 26.1%.
Improvement was predominantly due to higher menu prices and lower food and paper usage, which was largely result of dining room closures and effective waste management.
These were partially offset by unfavorable sales mix.
Labor and related expenses as a percentage of company restaurant sales increased 20 basis points year over year to 29.4%.
The increase in labor expenses was due primarily to higher hourly wages in California, especially in Los Angeles sales, the leverage and labor costs associated with the cobot 19, pandemic, partially offset by increased menu prices and operating efficiencies.
Occupancy and other operating expenses as a percentage of company restaurant sales increased 200 basis points to 25%, primarily due to sales deleverage and increases occupancy costs and marketplace delivery fees.
For the balance of year, we expect our operating cost increase as we reopened dining rooms increase transactions relative to check growth incur costs for personal protective equipment, and sanitation and returned repair and maintenance trash pickup and other spending to normal level.
General and administrative expenses increased by $1.1 million year over year to $10.5 million.
Included in Jumei is a 2.5 million dollar accrual related to an agreement in principle to resolve the longstanding lawsuit involving a contract dispute with one of the company's franchisees concerning asserted territory right.
Also included are approximately $37000 of expenses related to legal expenses associated with a third security litigation executive transition costs compared to approximately $554000 in the second quarter of 2019.
Excluding the costs associated with the Securities litigation settlement accrual executive transition costs gene a expenses in the second quarter of 2020 decreased approximately $865000 year over year to 8% a total revenue increase.
The 23 basis points versus the prior year.
The dollar decrease in Gionee expenses was primarily due to a decrease in bonus expense and other general and administrative expenses.
During the quarter 2019, the company received insurance proceeds of $10 million related a settlement of a previously disclosed securities class action lawsuit and recorded a loss on the sale of restaurants.
Zero point $9 million.
We recorded a provision for income taxes of $752000 in the second quarter 2024, an effective tax rate of 12%. This compares to a provision for income taxes of $5.7 million at an effective tax rate of 28.7% and prior year second quarter.
We reported GAAP net income of $5.5 million or 16 cents per diluted share the second quarter compared to net income of $14.1 million or 37 cents per diluted share in the prior year period.
Pro forma net income for the quarter was $6.9 million as compared to pro forma net income $8.7 million in second quarter last year.
Pro forma diluted earnings per share were 20 cents for the second quarter of 2020 compared to 23 cents net prior year period.
A reconciliation of pro forma net income and earnings per share to the comparable GAAP figures. Please refer to our earnings release.
And finally, given the uncertainty surrounding the duration of the impact of Cobot 19, we're not yet providing guidance at this time, we hope to have more visibility and be able to revisit the topic of guidance in the near future.
This concludes our prepared remarks like to thank you again for joining us on a call today and we're not happy to answer any questions that may have.
Thank you all now conducting a question answer session.
Your question. Please press star one on your telephone keypad confirmations Lalonde. Your line is in the question.
Okay sorry.
So what are your questions when they can.
And do you think because then maybe necessary to pick up your hands at the port pressing the 13 one moment. Please open your question.
Our first question comes from the line Jack Corrigan with Suntrust Robinson Humphrey.
But your question.
Hi, guys. Thanks for taking the question.
First just a quick bookkeeping question.
Can you disclose with the systemwide sales were in the quarter.
Can you talk about the impact you've seen from re closing dining rooms in California. Tom is there any divergence in the sales trends in those markets first and if your other markets. Thank you.
Yes, so first of all the system.
Sales for the quarter were $203.3 million so to over 3.3.
Million dollars.
And then our terms though.
Robot.
At the end turned to the.
Closures and the impact on comp sales I mean, it really minor impact obviously, if you have to close a restaurant during the day and lines of versus prior year. The minor impact I can't say as of yet we've seen any impact in terms of the comp sales loan we reopened a restaurant.
So far they seem to reopen at roughly the same sales levels. That's certainly something we keep an eye on as we move forward.
And then has to be and just to be clear on that point almost all our dining rooms are closed virtually all of them.
Beyond just.
California.
Okay lowered the kind of the trigger point be for reopening dining rooms, and what do you think though due to your margins at that point.
Well I think your couple trigger points one is.
I think you'd have to have at least 50% capacity allowance I.
I don't think it makes sense to open up at anything less than that.
The other thing is we'll look to zibo, we estimate you probably need somewhere around a.
A 2% to 2.5% comp lift when you open and dining room.
To achieve breakeven so thats, something we watch and certainly the first time around.
When we reopened dining rooms.
We did feel like we're seeing a comp lift from that of course now as a parent highlighted you most of our dining rooms are now closed.
I think Houston is the only market, where there is still open.
Okay, great. Thank you.
Thank you. Our next question comes from the line of Andy Barish with Jefferies. Please proceed with your question.
Just a quick follow up on that.
You Bernard and talked about a little California weakness kind of late in the month of July.
Is that all associated with passers, there's something else you you want to pointer.
Yes, so last seven to 10 days of the month, we started to see a bit of a softening trend in primarily the Los Angeles Orange County area.
Particularly the loss the core Los Angeles area.
It's tough to say at this point, whether it's going to be a trend or not it's too soon to tell but we do think that it is related to.
Higher level of Covance cases naturally occurring in that part of the world.
And then if I look at other macro factors.
Unemployment and that part of the world. It is that 19.5%, which is nearly double that of the national average. So we think those two things might be having an effect, but it's again.
Too soon to tell.
Gotcha and then.
On the impressive margin performance.
For the time being as you kind of have gotten back too.
To previous average unit volumes or close to.
[music].
You know are these large and sustainable I mean, they're basically at levels. We we've seen in the past.
Yeah, and even though I mean.
First let me step back to talk about if you look kind of really drove the.
Second quarter margin performance, and then I'll talk a little bit more kind of what we're thinking balance of year, although it's obviously very very hard to tell.
But in a second quarter.
Really what drove the great margin performance was one obviously, we got some great leverage from the pricing, we took especially on our.
Crude costs.
And any other we saw was.
Really strong labor efficiencies.
A large part of it was driven by the fact that you have low transactions in high check and we have a labor model based on transaction so that really helped.
The flow through on that.
But I also have to say he knows it's easy to say the model works that way, but the operator is it a fantastic job of really managing labor.
To the tables that we used to manage labor it lower rarely challenging times. So those were.
Probably the two big factors that really drove the strong margins during the second quarter.
And as I look out balance of year, it's very very difficult to tell you, what's going to happen and how does that check versus transaction mix change.
But I do caution that's why I put it in my opening comments was I do look at sea some costs that will increase.
Balance here one is.
If transactions and I would hope that transaction will come back and drive more of the growth back half the year versus check that will add some labor to our model.
Some of the.
Personal protection equipment costs, those will be there if we opened dining rooms, there's potential for some extra costs I'm not sure if they're going to exit costs. So yes.
I don't want to say that the current margins will flow through for the full year, because I do think ehrsam costs that will come into play back half the year that could have a slight downside impact on margins, having said that I still do expect that the operators in some of the benefits that we've gotten through this crisis.
We'll continue especially around the the food cost management and some of the benefits that we've seen from.
So closing and dining room closing salsa bars, and those things. So I do think that some of those will continue on but I do think is going to be some cost pressures back half the year and also don't forget that we did have a.
As a minimum wage increase in July that will also had an impact back half a year and of course, a lot of that will play on how much pricing we decide to take.
In Q3 year Q4.
Which we're currently looking at and how much we think we can take given the current market conditions.
Thanks, and then just one final one.
What did the tasks on curbside show you too.
Kind of moves forward.
On that and roll it out and how much what percentage of the company owned stores our system.
As is able to do curbside.
We're still in the midst of evaluating all of that but.
We feel good enough about how to incorporate this technology pretty slim seamlessly.
In our existing App by partnering with the company a technology partner call radius networks, who does this for a broad array of companies in our industry.
We're hoping that.
You know, we will penetrate the vast majority of restaurants throughout the system with this initiative.
Given that it's part of our App experience it will be a mandatory program, where it can be accommodated.
And it dovetails very very nicely.
With our local rewards relaunch in September and the refresh of the App that comes along with that I will naturally also include curbside service.
Which is a GPS enabled.
Program so.
We're feeling optimistic about it we still have some things to figure out between now and then.
But given that it is a pretty prevalent technology throughout the industry, we're leaning in a little bit prior to the holidays to launch it in September.
Okay. Thank you very much.
Thank you. Our next question comes from the line of Matt what price so with within Heim. Please proceed with your question.
Thank you.
Just talk about how much.
Well, how much was delivery I heard you say tripled.
Or doubled some so the started covered what does it as percent of sales now.
So all digital ecommerce sales or slightly above 9% if you take a look at delivery.
It's a little bit above 6%.
So two or three quarters or so of your digital is delivery.
And at 6% and then where Larry where do we find on the income statement the lion share the expense of the free delivery.
I'm, assuming you're bearing the cost about would that be in other operating expenses in the restaurant.
Yes.
But on that but on that free delivery program to be clear.
Unlike other brands in the industry that pay.
Their third party marketplace partners for free delivery.
What I want to communicate here is that we actually Andrew to very unique deal.
With Postmates in this regard to wear on behalf of our system.
We entered agreement, where we technically don't pay for it in a traditional sense, we bartered our media.
Two.
Be able to provide free delivery for the length of time that we have and we do it in such a way where we go deeper than brands typically do in this space.
By really.
Doing more than just slapping on a third party delivery logo onto our communications, we actually had throughout the quarter a dedicated television spot that showed a postmates delivery driver doing a contact was delivery.
In the commercial itself, we go deeper with our delivery partners, where they feel that we're able to do is humanize the transaction for them in a way that they don't typically get from other partners and so they are willing to go.
Do more for us in that regard so.
So in terms of pain for free delivery in a traditional sense.
We havent done that.
Although so there is not yet, but thats just to clarify though that the percent of check that is normally charge.
Eight on free delivery that is it costs that we incur and that is on the other operating expenses.
Is there an offset in marketing are the for is the franchise AD fund.
Contributing an offsetting not or are you spending that franchise that fund on traditional advertising.
It's it's not an incremental expense onto the AD fund its what we would have spence.
Regardless.
Okay and then.
I'm sorry to answer this in the last question about the curbside, but did you say, how many stores 100% of your stores be getting in theory, curbside, even those with structural or even a limited only to those without structure.
No we are going to try to put it in as many stores as we reasonably can naturally you know theres. Some comes some landlord restriction issues and things of that nature, but we think we can get it in is in many stores throughout the entire system.
And then my last clarification, 3% July but then you said, but you have seen some ally.
Headwind since summary closures of happen. So are you still positive in July even as the most recent weekly data with la.
Sort of edits apex of re closing.
So I mean, you've got go ahead.
Okay. So the approximately 3% or in the earnings release, we 2.8% that is.
Basically quarter to date, which is mostly July and a little bit of June.
Yes, okay. So it does include Elyse, Okay, what's the best yet yes, okay. Okay excellent. Thank you so much.
Thank you once again as a reminder, you would like to ask a question. Please press star one on your telephone keypad. Our next question comes in the line of Mary loaded with Baird <unk> Company. Please proceed with your question.
Thanks. This is true north on from marrying phone for taking the question can you just discuss how you're thinking about the unit development outlook on the other side and depend on liking what seems like it could be a more favorable real estate environment do you think you'll be able to resume or even accelerate growth in 2021.
And then they changed their real estate strategy at all.
Yes, so I would say in terms of changing strategy.
A couple of things one is.
As we've highlighted before we are really looking at the new acid design as recall go back.
Earlier calls we are working on new asked design.
With the outbreak of the Kobe 19, we are we looking at it and looking to make but I would call some tweaks.
Probably in terms of a trade off between dining room and.
Maybe more emphasizing audit areas.
Off premise options such as the drive through takeout and no thing. So we are we look at design and as I highlighted turns remodel program, we are targeting to get at least two remodels with this new design.
In the fourth quarter. So the good read on it and then move into 2021 with this new design, which we use the both remodels and Newbuilds in terms of.
Overall.
Development strategy.
Really haven't changed that much.
Obviously, we put things on hold for now this year we had.
Quota one company in a couple of franchise restaurants are in process. So those got completed and opened.
We expect anything back half this year, but then moving into next year would look to get back to a more normalized schedule, which would be an acceleration from what it was in 2019.
In terms of real estate.
I think as I've highlighted before it's still not clear whether or not for those looking for drive throughs, whether we'll really see alive, great real estate deals are more become available because I think when you look at the marketplace.
See that drive to have done well and a lot people are going to look in for drive-thrus. So I don't I don't think that part of it is going to change that much I think for me one of the question is is.
The big opportunities might be in lines, but do you want to go within lines given the reemphasis on.
Off premise consumption. So that's something went the way, but I don't expect to see.
Drive to pad become more available because the cover 90, because I think.
A lot of people, we looking for drive through who should always habit. So I just don't think thats going to change that much I don't see real estate availability being a big win for us going forward.
Okay. Thanks for all the color and then are you willing to quantify how much that youre planning to pay down in August nothing changes in the current environment.
Well, we're still talking about I guess I'd just highlight the fact that we've got $60 million debt as of the ended the quarter.
We continue.
6 million cash we continue to build cash at this time. So I think we'll look to keep a certain minimum amount of cash probably a little bit more than we used to keep.
Just.
They ghastly sure we're getting through this thing, but if you do the fact that will be well probably in the mid sixtys in cash and want to keep just a little bit more than we used to.
You can I think figure out how much will have to pay down.
In August.
Again, assuming that the market conditions remain pretty stable.
That's helpful I'll pass it on.
Thank you. Our next question comes from the line I pod, Rob with CL King and Associates. Please proceed with your question.
Hey, good afternoon, and congrats on a nice quarter in a tough environment.
Thanks.
You spoke earlier in the call Bernard about.
Value being one of the colors on the promo timing around.
A $5 fire grilled combo was was well timed can you talk about the success of the program that we get back to kind of the incidence is that we saw last fall of kind of that 8% to 10% of sales trust in the early reads on the success of promoting value put that program skeptical.
Yes.
So we think naturally given the environment that discretionary income is tightening up a bit. So naturally this offer has more relevance now than maybe it even did a year ago, when we launched it.
When we launched it last year naturally it had the benefit of a full promotional effort behind it it was going to headline of the that promotional window.
And because of the strengths is and the media effort that we put behind that.
We sustained a very high mix of let's call it 8% to 10% in any given week, it's probably averaged around nine ish or so.
Lately, we've seen a mix lift on that program since we returned to it it was probably trending somewhere around let's call it six or seven and now we see it more consistently delivering closer to seven or eight.
Which is actually quite frankly, what we want to see because.
This time around if I take a look at our sales mix across our entire portfolio. It's a lot more balanced. So naturally this is a leading to check degradation in the same way that it was say a year ago.
So right now we're happy with where it as we still think we can get more mileage out of it by putting a little bit more emphasis behind at certain leg certainly in a market like la where I think discretionary incomes by tightening up a bit more.
So we're kind of we're very pleased with where with where it's coming in but to put a finer point on your question it's probably.
Gone up and in mix by about I'd say any one to two points since we relaunched.
Okay, Great and then just Dovetailing on what you said in the comments there, but also touching on the unemployment rates and pellet County, just thoughts of what you what you're watching as far as stimulus rolling off, especially the enhance unemployment benefits and.
Anything that you're doing promotionally.
To drive any further value messaging in the face of out or just.
Yes, what do you guys watching foreign what do you have ready to react to it if it is a.
A bigger issue of kind of spending drop off our drop in ticket when some of the enhanced benefits roll off at the end per month.
Well I mean, I think we'll always evaluate the situation to determine if theres, something we need to tweak or optimize on the slide but but to be.
Honest with you I think we feel really really good about the fact that we havent really had to change strategies because very early on in this pandemic. The five strategies that I talked about we really assiduously worked on to put in place and then execute with excellence across the system on particularly Anneli. So you know drive through capacity.
Come Super important.
The fact that we've now extended free delivery between now and the end of the calendar year becomes with Postmates becomes super important.
We're going to probably dial up some of the media weight and la against $5 combo, some more give it a little bit more of the allocation to make sure that message is getting across and resonating with our customers a bit more strongly.
Things of that nature will continue to refine and tweak I don't think you'll see US do you any kind of massive wholesale changes in the short term because quite frankly, we don't feel like we've had to do that but.
The situation is so incredibly fluid.
You got it really I used to say you know you can look at these things month to month, you've got to really look at it almost week to week in and really figure out how to optimize given the changing landscape, but we really feel good about the strategies. We currently have in place.
So I don't expect any massive change if you will.
Okay, great in the final one for me.
You talked about two at the the new Remodels opening in the fourth quarter.
You had a full quarter of experience here really optimizing off premise because of.
The real requirement to do it based on the environment.
And you touched on maybe some equipment solutions that are going to to be.
Implemented to help.
Other enhancer maintained the efficiencies that you've generated I guess now that we're moving forward with the two remodels.
More of a.
Remodel question versus new unit question, but what did we learned over the course of a quarter that really.
You're excited to be banking and delivery model I'm thankful that they hadn't been rolled out a couple of quarters going stub.
Yes, I mean, I think we're going on naturally take a very hard look as to what digital E. Commerce looks like in terms of it being a seamless experience.
From the end to end customer journey, and and so I think what you'll probably see on and we're still tweaking and refining this as we go because to your point it was a little bit of a reset.
We'll put more prominence behind our digital pick up naturally curbside will now factor into this I think we've learned quite a bit about.
Menu board placement and the drive through to get a maximum number of cars through the drive through so that menu board needs to come up earlier in the the stack in order to maximize drive through capacity.
In terms of seeding.
I think we're going to naturally like I'm sure many others in the industry become a little bit less dependent on dine in seats with more of the business, we anticipate going off premise. So we'll continue to looking at the model and figuring out how we can tweak and refine it to reflect the new realities of.
How the business has changed today.
But again to put a finer point on it I think you'll see much.
Sharper focus on off premise and the Digitization of our business as it pertains to delivery and digital mobile order pickup.
And the current entirely only thing on the only thing I'd add to that is it's not just the outside the restaurant and lobby. The restaurant is also the back of house.
And really looking at the back of house, knowing that off premise is going to get more emphasis then dining room and even take out was getting before so it's really looking at the back of house also especially around the drive through to make sure that we maximize the throughput as a drive through both from the outside and rapidly but also.
Inside the back half of the food preparation and have it ready to go as customers come to the window. So we can move through faster.
Okay, great. Thanks, Larry.
Yes.
Thank you. Our next question, there's a follow up from that difference that will pull benign. Please proceed with your question.
Thank you are just a quick one with respect to the franchise units.
Have you can you give the comment on how many of them got PPP aid and then in the context of how are their.
Cash flow margins are there any ones that might be.
At risk.
Or might need some further assistance or asking for.
Abatement or further deferral of payments.
No I mean.
I really don't know how many of them actually got the PE loans I don't think Thats something we've gone it asked them about.
I will say in terms of their financial health.
Obviously, we had not offered anymore.
Royalty abatements or deferrals.
They are held should be very very strong.
The next seen comp.
Our sales number very comparable ours.
And so of everything we hear and see is that the franchisees are are healthy and in pretty good shape at this point.
Excellent. Thank you.
Thank you.
One of our question and answer session I'd like to turn the call back over kind of therapy for any closing remarks.
Well I just want to thank everyone for joining us today I hope you in your family stay safe safe and healthy and we look forward to speaking to you very soon be well.
Thank you. This concludes todays teleconference. You may disconnect your lines at the time. Thank you for your participation have a wonderful day.
Okay.
One.
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Okay.