Q4 2020 Fiesta Restaurant Group Inc Earnings Call
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Thank you for same day.
Countries Australia.
Welcome.
Fourth quarter net.
Earnings Conference call.
At the reminder.
And at the moment.
And the conference is being recorded.
After the presentation, there will be an opportunity to ask questions.
These charges will be provided for you at that time.
You asked the question.
The conference call at least.
The question.
Peter.
I would now like to turn the call for.
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Thank you.
Restaurant groups fourth quarter of 2020 earnings release.
GAAP net margin.
Okay.
The access code can be found at the Companys website.
At.
Hum.
Investor Relations section.
Again, I'd like to take that.
During the call today.
The company will make various statements that are based on the stock.
These forward looking statements include without limitation.
Regarding the company's future financial position and the results of operations.
For the strategy that projected costs and plans and objectives of management for future operations.
The results may differ materially.
Such forward looking statements.
We can give no assurance such forward.
Looking statements from close.
To be correct.
The factors.
Absolutely.
Okay.
For the forward looking statements can be found in the company's SEC filings.
Note that during today's conference call certain non-GAAP financial measures.
The company used for.
Evaluating it.
Any discussion.
Patients should not be conservative price yet.
The substitute for results prepared in accordance with GAAP and reconciliations to comparable GAAP measures is available in the copies of the company's.
The release on the call.
The President and Chief Executive Officer.
Stockinger, Chief Financial Officer Dirk Montgomery.
The trend for the rich.
Thank you David.
At first sight.
Thanks.
And the other participants on the call today.
The new chip.
Capex.
Free cash.
In the fourth quarter.
2020 priorities.
The status of sales driving initiatives for each of them.
And an overview of our key priorities for 2021.
Well the.
<unk> provide a financial update.
Yeah.
2020, we are pleased with the strong progress.
Okay.
I kind of bias.
When the epidemic.
We continue to place the safety of our end customers.
We maximize liquidity through increased restaurant EBITDA margin.
Working capital efficiency.
Okay.
And we made important investments.
In our digital platform that we expect for reasonable.
Yes.
Okay.
As a result of Covid.
With regard to.
The other sales channels.
Okay.
The sales.
The closures.
Representing approximately 45% of.
Of our pre Covid.
For the quarter.
The generation right.
Sales growth.
Yes.
For the person.
First of last year.
And more than tripled our.
Our delivery of restaurant sales.
Compared to the fourth quarter of 2015.
T.
From a margin perspective.
Continue.
Great quarter.
The adjusted EBITDA margin.
At both brands compared to the.
The fourth quarter.
At <unk>.
The margin improvement.
The improvements in cost reductions.
Labor efficiencies.
Okay.
Line.
And the pre tax income was $1 5 million for the quarter.
Consolidated adjusted EBITDA, a non-GAAP non-GAAP measures.
42% versus last year's at $14 6 million.
After excluding the extra week in the 2020 fiscal year.
The consolidated adjusted EBITDA.
74 per cent compared.
The impact of the extra week in fiscal 2020 of them consolidate adjusted EBITDA.
At at $2 $9 billion.
The overall financial position improved.
From the store.
Okay.
With the reduction.
From $1 48 for March 18, 2020 at the store.
Okay.
273 3 million.
2021 net.
Okay.
Our non-GAAP financial measures.
The reduced from $74 4 million at the start of the pandemic.
Down to $23 3 million as.
As of January three 2021.
On November 23rd we entered into the new senior credit facility agreement.
Which replaced our prior senior credit agreement with the more flexible and longer term loan.
2025 that provide greater liquidity and will also allow us to continue our investments in growth.
The consumer facing and digital initiatives.
We made very good progress selling our 16 owned properties over the quarter by the end of the year closed sales at <unk>.
The spec transaction uncertainty.
The properties generating net proceeds of $26 $8 million and expect the maintenance.
The 83 properties in the first half.
From 2021.
No assurance that the anticipated the remaining property sales.
Yeah.
In addition, we.
Great.
For your cash flow from it.
The operating activities.
The board.
Millions of dollars.
Now I will highlight Q4 results at <unk>.
That is to accelerate sales in this changing environment at each brand.
We made continued progress during the fourth quarter undeveloped better business model designed to enable our customers.
Our brand safety of course.
Sure.
Wherever and however, they choose.
Two focus areas of the court.
For further enhancing our digital platforms.
For the dry food.
Bill.
Bill.
And part of consumer.
Back at our new.
At both brands.
Both brands currently at.
Sure.
Got it.
For agents.
Okay.
Right.
Compared to the ratings.
Great.
For now.
Total online sales across both brands group therapy.
The 7% in the fourth quarter versus 2019.
In addition check averages for online orders in place.
At the new apps relaunched have increased by 42% at boyo dropped the cow at 18% at Taco Cabana.
In the fourth quarter, we began the implementation of enhancing our curbside pickup ordering to include Geo fencing functionality, which enables the restaurants to know when the customers arrive for pickup enabled communication to customers that their order is ready.
Very important to our customers and create the ability to run location based consumer.
Promotions, we expect the implementation on Geo fencing to be completed in the first half of 2021.
Regarding the drive through channel. We believe this channel will continue to be very important and we began an initiative in the fourth quarter to upgrade our infrastructure as we move forward, replacing our current drive through technology with industry, leading digital technology the.
The first phase of the drive Thru initiative began in the fourth quarter with improvements in faster upgraded payment devices and improve connectivity in a remote ordering devices called pods to take customer orders faster and further back in car lines.
These upgrades will improve order cycle time during peak drive thru demand periods and we are encouraged with the early results of this initiative, which will continue into 2021.
Our approach to opening dining rooms will continue to be based on two key criteria and the location by location basis, our ability to maintain safe health environment to our team members and guests and our ability to generate a profit of dining room sales based on incremental staffing while not deteriorating margins.
Partly in response to what we believe is growing consumer interest we began to open dining rooms at both brands in late February for.
For your job of Cal recently opened its dining rooms with the exception of for units Taco Cabana, apparently at 63 dining rooms open and all our patios are now open.
We are evaluating sales trends weekly to determine which units should be open for dining business now.
Now I'll highlight the Q4 results and the status of our initiatives to accelerate sales in this changing environment at each brand.
Starting with Pollo tropical the fourth quarter comparable restaurant sales showed strong acceleration sequentially over the course of the quarter with fourth quarter comp sales of eight 2% down and December comp sales of minus six point for at.
After adjusting for the impact of tropical storm EDA.
For your sales would have been even stronger with the adjusted fourth quarter comp sales approximately 40 basis points higher.
The improvement in sales trends compared to the fourth quarter of 2020 comp sales also continued into January of 2021.
At the drive thru and off premise channels again showed strong growth versus 2019, and the fourth quarters.
Drive through comparable restaurant sales grew 24% above last year during the quarter end delivery growth.
Led the off premise channel deliver.
The delivery comparable restaurant sales for the quarter more than tripled versus last year and accelerated by 8% compared to the third quarter.
Driven by both improved check and traffic from improved marketing and promotions.
On the menu innovation front.
Our new line of five Cuban inspired fresh sandwiches performed well in the fourth quarter.
Handheld category mix more than doubled to over 10% and sandwich check averages and margin dollar contribution where both the accretive compared to the company averages all resulting in absolute sales growth for the brand compared to pre launch sales.
We also brought back an increase in lapsed customer visits compared to prior promotional windows.
We plan to further expand this line and we recently launched our new Miami E. Spicy crispy chicken sandwich, which we are co marketing with the Miami heat N B a basketball team.
From a margin perspective, Pollo grew restaurant level adjusted EBITDA margins of non-GAAP measures from 19, 2% in 2019 to 21, 8% in 2020.
The 2020 margin rate includes an extra week in our fiscal year.
After adjusting for the extra week Pollo restaurant level adjusted EBITDA margin would have been 29% of sales were at 170 basis point improvement over last year.
Turning to Taco Cabana fourth quarter of restaurant comparable sales improved 420 basis points from the third quarter comps down to 10% down.
The improvement in sales trend compared to the fourth quarter comp sales also continued into January of 2021.
At the drive thru and off premise channels again showed strong growth versus 2019 in the fourth quarter.
Drive through comparable restaurant sales grew 26% above last year during the quarter and the delivery growth led the off premise channel.
Delivery comparable restaurant sales for the quarter more than tripled versus last year and accelerated by 13% compared to the third quarter.
Driven by improved traffic from promotions and improved marketing.
Our Margarita platform continues to be a driver of check growth in the drive thru and Taco as develop the calendar of Margaret of promotional events for 2021 to continue the leverages the revenue growth opportunity from this platform.
In addition in 2021, we will be expanding alcohol sales with select third party delivery service providers as a way to differentiate our brand and drive incremental sales dollars per order.
As I mentioned in the third quarter, we have refocused, our culinary and menu innovation to focus more on developing the developing differentiated and authentic Tex mex recipes that are true to the heritage of Taco Cabana 40 year old plus brand.
In the fourth quarter, we introduced the higher quality line of Enchiladas that performed well in the fourth quarter.
In July of the category mix grew from the historical averages of two 5% to over 7% for the quarter.
Actual out of check average were accretive to the company average and drove total brand check growth compared to pre launch results and also grew gross margin dollars per transactions versus the prelaunch period.
We plan to continue to improve this category and watch it did additional differentiated new items over the course of 2021.
From a margin perspective.
Taco grew adjusted restaurant EBITDA margins of non-GAAP measure.
From 8% in 2019 to 13, 6% in 2020 the.
The 2020 margin rate includes an extra week net fiscal year after adjusting for the extra week Taco adjusted EBITDA margin would have been 12, 1% of sales or 410 basis points above last year.
My last topic is an overview of our 2021 key priorities.
In 2021, we will continue to concentrate on non dine in sales channels to match the evolving changes in customer behavior.
We'll focus on creating a guest experience a great guest experience across all channels.
We are planning to make further enhancements to our digital platform and improvements in the speed and ease of use for off premise sales channels, such as enhanced digital drive thru experience.
<unk> technology is designed to improve curbside speed and infrastructure changes designed to improve our order cycle times for drive thru and delivery orders.
We intend to continue to drive traffic and check through differentiated new menu introductions effective L T OS and improved marketing.
We also believe the reopening of our dining rooms will also be a key component in driving sales in 2021.
In addition.
We are continuing the process of refining the pollo tropical brand assets we.
We have completed qualitative research and are in the process of completing the quantitative phase of our research.
The results of this research will allow us to develop an enhanced brand positioning and provide a clear brand strategy for both existing and new markets.
In part the Covid and the brand refinement effort that is in process, we paused, our new restaurant development plans in 2020.
However, we intend to resume new restaurant development in the future development.
The development of new restaurants will incorporate what we have learned during the COVID-19 pandemic.
And our market research.
During 2021, we plan to complete planned brand positioning and operating model refinements for Pollo tropical and that we believe will enable future geographic expansion through both company owned and franchise locations.
Our primary focus for Taco Cabana in 'twenty, one will be to continue to improving existing unit average sales and continue to improve the margins.
In summary.
We are pleased with the strong fourth quarter results and.
And we are optimistic about 2021 and believe that our growth initiatives will build momentum and accelerate sales over the course of 2021.
I want to thank our team members for ensuring that we are stronger today.
When then when the crisis began and are ready to capitalize on opportunities that are way beyond the crisis.
I'll now turn it over to Dirk to cover the financial highlights in more detail.
Thank you rich and good afternoon, everyone I'll start by reviewing our fourth quarter results and then provide you with an update on our financial plans for 2021.
We were very pleased with our fourth quarter performance in terms of sales profit growth and margin improvement.
Total revenues decreased six 6% to $148 9 million of the fourth quarter of 2020 from $159 5 million in the fourth quarter of 2019, driven by the comparable restaurant sales declines at both brands, which was due principally to the impact of COVID-19, along with the decrease in sales related to closed.
Restaurants at Taco Cabana.
Our fourth quarter same store comp sales trend improved from the third quarter 2020 levels.
For the player traffic count comp trends, improving 290 basis points, the down eight 2% for the fourth quarter and Taco Cabana same store comp sales, improving 420 basis points to down 10% for the fourth quarter.
As Richard noted our historical penetration of dine in sales has been approximately 25% in.
And strong off premise and drive to your growth for the quarter was offset by the dine in traffic loss.
Consolidated net income was point <unk> 9 million or <unk> <unk> per diluted share and included approximately 12 cents per diluted share of negative impact primarily from closed restaurant rent charges loss on extinguishment of debt and adjustments to the deferred tax valuation allowance.
This was offset by the favorable impact of approximately eight cents per diluted share primarily from the other income including gains on sale and the sale leaseback of restaurant properties, partially offset by closed restaurant related costs and site development costs.
This compares to a net loss in the fourth quarter of 2019 from $21 1 million or <unk> 82 point for 82 cents per diluted share, including a 77 cents per diluted share negative impact primarily from establishing the tax valuation allowance $8 4 million in impairment charges and <unk> $7 million at.
Closed restaurant charges.
On an adjusted.
<unk> basis.
Consolidated net income was $1 8 million for seven cents per diluted share compared to an adjusted net loss of $1 1 million or four cents per diluted share in the fourth quarter of 2019.
Please see the non-GAAP reconciliation table in our earnings release for more details.
Consolidated adjusted EBITDA, a non-GAAP measure increased 42% versus last year to $14 6 million.
After excluding the extra week in the 2020 fiscal year estimated consolidated adjusted EBITDA grew at 13.4% compared to 2019.
The impact of the extra week in fiscal 2020 on consolidated adjusted EBITDA is estimated at $2 9 million. This was the second quarter of consolidated adjusted EBITDA growth above prior year. Despite negative same store comp sales in both brands grew their adjusted EBITDA margins in the fourth quarter above 2019.
Levels now.
Now turning to our individual brands.
At Toyota up of California's quarter comparable restaurant sales decreased eight 2% compared to a 0.6% increase in the fourth quarter of 2019.
The fourth quarter decline resulted from the 19, 3% decrease in comparable restaurant transactions at an 11, 1% increase in the net impact of product channel mix and pricing the.
The increase in product genomics in pricing was driven primarily by increases in delivery online and drive through average check and sales channel penetration and menu price increases of one 1%.
After adjusting for the impact of the tropical storm at at point of sales improvement from the third quarter of 2020 would have been even stronger with adjusted fourth quarter comp sales of approximately 40 basis points higher.
For the traffic out of dining and counter takeout comparable restaurant sales decreased 52% from the fourth quarter of 2019 to the fourth quarter of 2020, due primarily to the negative impact of the pandemic on dine in traffic.
Closures of our dining rooms during most of the fourth quarter of 2020.
The decrease in dine in channel sales were partially offset by strong off premise channel growth.
Turning to the brand profitability for the quarter.
For your grew restaurant level adjusted EBITDA margins of non-GAAP measure from 19, 2% in 2019 to 21, 8% in 2020.
The 2020 margin rate includes the extra week in our fiscal year.
After adjusting for the extra week for.
Fourth quarter point of restaurant level, adjusted EBITDA margin would have been 29% of sales 170 basis points above last year.
As a percentage of restaurant sales for tropical experienced lower fourth quarter of cost of sales of 31, 3% compared to 32, 6% due to operating efficiencies lower promotions and discounts and price increases, partially offset by sales mix and lower rebates and discounts from suppliers.
Restaurant wages as a percentage of net sales also declined from 24% in the fourth quarter of 2019% to 23% in 2020, driven primarily by labor efficiencies and workers' compensation costs, Despite lower comp sales for the traffic count did an exceptional job managing food cost and labor to improve restaurant.
What level of adjusted EBITDA margins compared to last year.
At the restaurant operating expenses decline in the fourth quarter compared to 2019, due primarily to lower insurance expense and repair and maintenance costs, partially offset by increased delivery service provider fees.
Rent in the fourth quarter increased compared to 2019, due primarily to the impact of lease renewals at higher rates.
We also incurred incremental costs related to COVID-19 at point of 3 million during the fourth quarter, including quarantine PE and costs related to COVID-19 testing.
At Taco Cabana at fourth quarter comparable restaurant sales decreased 10% compared to an eight 1% decrease in the fourth quarter of 2019.
The decrease in comparable restaurant sales resulted from a 23% decrease in comparable restaurant transactions and at 10 points, 3% increase in the net impact of product channel mix and pricing.
The increase from product genomics in pricing was driven primarily by increases in drive thru and delivery sales channel penetration growth in average check for drive through versus last year.
And menu price increases of two 1%.
Taco Cabana dining and counter takeout comparable restaurant sales increased or decreased 72% for the fourth quarter of 2019 to the fourth quarter of 2020 due to the negative impact of the pandemic on dine in traffic and closures of our dining rooms during most of the fourth quarter.
The decrease in dine in channel sales was partially offset by significant off premise channel growth.
Turning to the brand's fourth quarter profitability Taco Cabana continued to improve margins in dollar profits in the fourth quarter compared to the fourth quarter of 2019.
Taco restaurant level adjusted EBITDA margins of non-GAAP measure grew from 8% in 2019 to 13, 6% in 2020.
For 2020 margin rate included the extra week in our fiscal year after adjusting for the extra week.
Fourth quarter Taco restaurant level adjusted EBITDA margin would have been 12, 1% of sales 410 basis points above last year.
As a percentage of restaurant sales Taco Cabana experienced lower fourth quarter of cost of sales of 28, 4% compared to 31, 7% in 2019 due to lower commodity costs operating efficiencies lower promotions and discounts and price increases, partially offset by sales mix and lower rebates and disc.
Accounts from suppliers.
The restaurant wages as a percentage of net sales also declined from 32, 4% in the fourth quarter of 2019 to 31, 6% in 2020.
Driven primarily by labor efficiencies that were partially offset by higher medical costs.
Despite lower comp sales Taco Cabana continued to improve efficiency at a sustainable level and managing food cost of labor to improve restaurant level adjusted EBITDA margins compared to last year.
At the restaurant operating expenses declined in the fourth quarter compared to 2019, due primarily to the impact of closed stores and lower repair and maintenance, partially offset by increased delivery service provider fees.
Ran in the fourth quarter decreased compared to 2019, due primarily to the impact of restaurant closures in the first quarter of 2020.
We also incurred incremental costs related to COVID-19 at 2.2 million during the fourth quarter, including quarantine PE and costs related to COVID-19 testing.
Turning to capital expenditures total annual capital expenditures for for 2020 were $18 4 million, which included $11 3 million for maintenance for $1 million for technology, and corporate and three point in 3 million for remodeling in development.
I'll close with the few comments on 2021.
Both brands started the year of building momentum with January sales outperforming fourth quarter comp sales trends for both brands.
Due to the severe winter storm that impacted Texas from February 14th of February 'twenty one.
2021, Taco Cabana February revenue and profit is expected to be negatively impacted compared to 2020 results.
All units for closed for a number of days during that period with significant reductions in traffic due to poor road conditions.
We estimate the loss revenue sales over the weather impacted period to be in the range of $2 5 million to three point out of million apiece.
Proximately 125 units were impacted at some level by the storm, including issues ranging from minor repairs to pipe water and equipment damage.
All of Taco Cabana units are now open.
<unk> advantage in the process of filing insurance claims for costs related to the winter storm.
Additional minimum wage increase the legislation of Florida will go into effect in 2021 with the graduated increases through 2025 for.
For 2021, we expect only a minimal impact on employee of traffic count wage rates as our current average wage rates at slightly above the required minimum for 2021.
In Texas changes in minimum wage requirements have not been passed yet if.
At the current proposed federal minimum wage schedule worthy past, we would expect of minimal impact in 2021 based on our current average weight wage rate being above the proposed the minimum wage.
We expect to offset the impact of future minimum wage increases beyond 2021 through a combination of prudent price increases and labor reduction initiatives, which are already underway.
Now just a few comments regarding our full year outlook for 2021.
2021 comparable same store sales are expected to be positive for the year driven by the company's roads initiatives at expected increases in overall segment dine in traffic as the pandemic impact debates food.
Food costs are projected to remain stable in 2021 compared to 2020 based on current supply commitments, we have in place for calendar 2021 across key commodities.
Capital expenditures in 2021 are expected to be in the range of 33 of $38 million with the increase compared to 2020 levels, primarily driven by investments in our digital platforms, including digital drive thru upgrades.
In closing we finished 2020 with building top line revenue momentum improved margins and ample liquidity to continue to invest in digital and other revenue building initiatives. We look forward to continuing our efforts to be seamless omnichannel brands to our customers with the differentiated and quality menu at of value.
We are optimistic that our growth strategies will continue to build momentum in 2021.
Thank you for lessening and we will now open the call up to questions operator.
Thank you for will.
Now begin the question and answer session join the question queue. You May Press Star then one on your telephone keypad.
Share tone and knowledge in your request.
If youre using peek at from group pickup your handset before pressing any team.
So with all of your question you May Press Star then two.
Well the robots for a moment at callers join the queue.
Our first question is from Joshua long with Piper Sandler. Please go ahead.
Okay.
Great. Thank you for taking the question and thanks for the update particularly on Taco Cabana here into the first part of the year I might've missed it but curious if you could provide a similar update on coyote and head of follow up as well.
Yes, Thanks, Josh.
Did that for both brands, we saw improvement in comp sales trends in January compared to the fourth quarter trend so off to a good start in January for both brands.
Alright. Thank you then I imagine that the disruption there was probably primarily focused on Taco Cabana, just given its Texas centered.
Yeah.
For you there and anything to call out for Pollo in the February to date period anything worth noting.
No I mean, we certainly know no weather related impact in February for.
For.
For for Pollo.
Okay.
Great. Thank you and then as we think about the.
Top line recovery over the course of this year, we had a lot of good work has been put in and then at.
At each brand has been repositioned as well with a lot of exciting invest.
The investments there on the digital channel on the food side.
You know really across the whole spectrum here when you think about that guidance for positive same store sales for the year would you be able to provide more context your expectations around how that builds at obviously you'll have some.
I wouldn't say easy compares but you'll be lapping over some.
Some of the severely negative numbers in <unk> and in <unk>. So just kind of puts more context around how.
How we square at the brand momentum within what is you know on papers from negative comps from from prior year to that end up at at positive just for the year at any sort of book and you might be able to help put on that in terms of pace or magnitude would be very helpful from a modeling perspective.
Sure I mean, the the just because of the so let's start with the second quarter I mean, the second quarter of 2020 was was obviously extremely low with the third quarter being also very low. So we're expecting this year's comp sales too to mirror that in some sense in that we expect a much high.
Comp rate in the second and third quarters as we lap those numbers.
And I think really that's that's about all we can provide at this point I think is as rich mentioned, we see the initiatives that our growth initiatives. The that we described building in momentum.
At the course of the year.
Josh at the.
The key to me is we're now analyzing the business and by our channel for each channel the investment per channel the sales per channel the profit by channel and the fact that we are very close to breakeven right now, especially at Pollo.
On the Taco right now with the storm the fact that our dining rooms just opened.
And we've already seen the mix go up in the dining rooms reopening to now.
<unk> gives us a lot of.
Support that the sales should continue.
And now we're going to start comparing ourselves to 2019, I'm just not ready to give the guidance towards that but we are very excited about the momentum.
Great. Thanks, and one more from me in terms of all of the work you've been doing by channel can you remind us where we are where the brands are now in terms of pricing and really optimizing that margin structure by by channel given the growth of the delivery and the in the off premise at.
Segment as well.
Okay.
Sure. So just to speak to you know off premise price and I mean, we do have different pricing structure.
In off premise, particularly for delivery like most of our peers.
In terms of absolute pricing I guess capability as we've mentioned before our price increases over the last couple of years of been conservative and on the low side and so I think we feel like that combined with very high value perceptions of both brands puts us in a position to feel like we can.
Make at modest price increases without without negatively impacting traffic in 2021.
Thank you.
Thanks Joshua.
Once again, if you have the question. Please press Star then one on your California.
Our next question is from Brian Vaccaro with Raymond James. Please go ahead.
Hi, Thanks, and good evening.
[noise] about reopening the dining rooms, and I think he said at nearly all of the players currently are now okay. I understand the sterile literally just curious what the consumer response has been so far and if youre seeing any noticeable of moderate moderation in other segments.
Yeah again, it's too early to tell we just opened them up several weeks ago the.
Has gone up the sales mix the person from our from where we were pre to where they are now at its only taken at away from the dry food hasn't taken away from the other trade channels, which is important to us so.
Again, I firmly believe it is going to come back, especially in core, especially in the Tri County core area.
But it's going to take us a little time to me I'm, focusing more and more on those other channels because of the changing in consumer behavior. So anything we get at the dining room, even if it comes out of the the the.
At the drive thru with all of the effort, we're putting in the drive through the speed of service in all of the digital platforms is only going to help us incrementally.
Alright, great end can you help frame I guess the cost side of the heart.
Provision as you reopen dining rooms.
The team proud at how many hours, we need to bring back of physicians you need to bring back the service. The dining rooms is there anything from a Cogs perspective, the on may be the operating drain. So definitely those are sometimes of inflation if any other tools out frame, where you've been really great margins.
Along with a lot of other you know for.
The casual and quick service brands that had been optimizing.
The C in the dry foods really shrunk during COVID-19.
What's the reasonable expectation on the margin impact of the reopening.
Yet again, our goal is that the margins will not go down in terms of the peak periods you have to add one or two people from a you know of staff position.
In terms of the soda machines, we have removed all of our soda machines at coil as well as the sourcing islands net zero complaints on that so that those margins will stay we have not removed them yet at Taco, but we have not reopened them yet and the decision of when we made on that shortly.
Okay.
Okay. So you can add on the side of it.
And they'll have no impact on the cost of goods sold.
By opening up the dining rooms, yeah, I mean, we've been at the I.
I guess, the the one bright spot for them from.
Being in Covid now for almost the entire year the packaging costs for any packaging cost increases are largely behind us.
And so.
Yeah, I don't think we expect packaging cost increases and overall, we really expect the the impact of the dine in on our total unit margins two to be neutral.
In World, where our intent is to manage it that way.
Okay great.
<unk> guided the two.
'twenty one card you said stable versus 2020 levels does that mean stable inflation or do you expect stability on the Cogs ratio itself.
No I mean, when we you said stable we yeah, we expect Cogs to be flat on a rate basis compared to 2020 in 2021.
Okay, and so we're talking about at Cogs ratio and if I look at 2020 at a a sort of a tale of two halves where at.
Comp ratio was a lot lower.
In the second half compared to the first half.
So is there do you expect to be.
Closer to the second half of the first half for you.
Just curious what you're guiding for you because you started out at the high at 31, when you're finished at 30 EBIT across both brands combined for just trying to make sure I got that message.
Yeah, that's correct and it's at its a great question, Brian we actually expect to be.
Flat to our Q4 run rate there was a lot of noise in both brands earlier in the year, particularly when Covid hit and so we really expect to be flat versus the Q4 run rate.
Okay, and then on the G&A line.
That picked up a little bit here.
Sequentially in the fourth quarter I'm curious what your G&A expectations are at in 2021 and could you give an update I think there was.
Our review process that was underway on the G&A line on the any update on that front.
Yes, so we generally expect G&A to be.
Roughly flat in 'twenty one against 20, we are planning any significant increases in head count.
So and we're working to improve the G&A efficiency. So we do have.
<unk> of ideas that we're still refining on that front end.
So.
I think I think of flat assumption.
We feel is reasonable year over year.
Alright, Thank you I'll pass it along.
Thank you Sir.
This concludes the question and answer session and today's conference call. You may disconnect. Your lines. Thank you for participating and have a pleasant day.
Okay.
[music].
Yeah.
Yes.
Yeah.