Q4 2022 El Pollo Loco Holdings Inc Earnings Call
Speaker 1: I.
Speaker 1: The H.
Speaker 2: 2022 earnings conference call. At this time, all participants have been placed in a listen-only mode and the lines will be open for your questions following the presentation.
Speaker 2: Please note that this conference is being recorded today, March 9, 2023. And now I would like to turn the conference over to Ira Phil, the company's Chief Financial Officer. Thank you, operator, and good afternoon. By now you should have access to our fourth quarter 2022 earnings release. If not, it can be found at www.elpoyologo.com in the investor relations section. Before we begin our formal remarks, I need to remind everyone that our discussions today will include forward-looking statements, including statements related to the
Speaker 2: risks and uncertainties that could cause actual results to differ materially from what we currently expect. All right.
Speaker 2: We refer you to our current recent SEC filings, including our Form 10-K for a more detailed discussion of the risks that could impact our future operating results and financial condition. We expect to file our 10-K for 2022 tomorrow.
Speaker 2: and would encourage you to review that document at your earliest convenience.
Speaker 2: 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.
Speaker 2: and reconciliations to comparable GAAP measures are available in our earnings release.
Speaker 2: Now, I would like to turn it over to our President and CEO , Larry Roberts.
Speaker 3: Thanks, Error.
Speaker 3: and good afternoon everyone.
Speaker 3: We were pleased with our performance in the fourth quarter as system-wide comparable restaurant sales increased by 4.7%, including a 6.5% increase at company-owned and a 3.5% increase at our franchise locations. These results were driven by the success of our stuffed quesadilla promotion that resonated well with both new and existing customers.
Speaker 3: as well as a continued improvement in our company-owned and franchise restaurant operations.
Speaker 3: In fact, our system restaurant operations in the fourth quarter were the best they had been all year. Last visit excellence and social media scores reached new highs for the year while customer complaints were at their lowest levels. The continued improvement in our restaurant operations are reflected in our brand track results in which we made significant progress against our competitive set across all five key attributes.
Speaker 3: which are food and menu quality, service, environment, value, and overall brand experience.
Speaker 3: Our strong results on value were especially reassuring given the year-over-year pricing at company-owned restaurants in the fourth quarter was 10.6%. It again demonstrates that value is determined by more than just price and consumers recognize the lengths we go to at El Pollo Loco to serve delicious food that is freshly prepared.
Speaker 3: every day in our restaurants.
Speaker 3: Another highlight of the quarter was the opening of the first of Pollo local restaurant in Colorado in November .
Speaker 3: The opening set a new weekly sales record for Apoyo Loco, and the restaurant's average weekly sales are still well above expectations four months after opening.
Speaker 3: We are very excited for our franchise partners and look forward to continued success as they, along with other franchisees, build restaurants in Colorado.
Speaker 3: While we continue to be pressured by inflation, our teams did an admirable job managing their businesses, delivering a restaurant offering profit margin of 14.7%, which was 230 basis points better than the third quarter, an adjusted net income earned for share of 16 cents. As we look ahead,
Speaker 3: We're excited to build upon this momentum in 2023 as we continue our focus on our four strategic pillars, which are one embed our unique a party local culture to build awareness and own our lane. Three deliver exceptional service properly and four accelerate development.
Speaker 3: Throughout 2022, we've made significant progress in creating a servant led leadership culture, predicated on recognition, graduate interaction with team members, and career development, while still maintaining accountability.
Speaker 3: We also implemented programs to create greater support center appreciation for the work our restaurant teams do every day.
Speaker 3: Another pillar of the culture we're building in a Polar Loco is to provide greater support to the communities in which we operate. Along these lines, in November , we announced a new partnership with Feeding America to raise money for the Feeding American Network of Local Food Banks.
Speaker 3: Through this campaign, which runs until June 30th, El Pollo Local aims to raise $400,000 through a limited-time round of campaigns.
Speaker 3: Ultimately, 90% of the nations made through this campaign will be distributed to food banks around our restaurants and the communities we serve.
Speaker 3: Our charitable organization, Aplio Local Charities, is matching the first 100,000 Roundup transactions.
Speaker 3: In addition, a poly-local charity is finalizing an agreement to support a large charitable organization in Orange County, which we expect to announce shortly.
Speaker 3: While Pollo Local Charities has existed for many years, we plan to significantly increase its fundraising capabilities in order to amplify its impact on our communities. We believe these types of initiatives reinforce the familiar culture we are building throughout our system.
Speaker 3: Our second pillar is build awareness and own our lane.
Speaker 3: The Pollo Loco is a differentiated concept founded upon our famous five grilled chicken and entrees, sauces and dressings that are made fresh in the restaurant every day. These are served with the speed and convenience of fast food restaurants.
Speaker 3: It's through the combines our authentic Mexican roots with the culinary culture of Los Angeles.
Speaker 3: Our strategy is to continue driving this differentiation while working to attract younger consumers to the brand through our product offerings, advertising, and remodeled restaurants. A great example of this strategy was our over suffocation of these promotions during the fourth quarter, which included three options, one of which was beef.
Speaker 3: Overestubcatedeas achieve they make it almost 7% of total sales with beef being the top performer.
Speaker 3: Their promotion success will at least partially do to the continued use of TikTok to reach younger consumers, which achieved over 10 million views during the module.
Speaker 3: We are very encouraged by the performance of both over-stuff case ideas and beef, both of which, as a potential, be permanent menu items and help us attract younger consumers.
Speaker 3: Recognizing that many consumers are increasingly budget conscious, we also focused on value offerings during the fourth quarter with the promotion of our $24 family fees and revised fire grill comp meals starting at $5. Both resonated well with consumers and further highlighted the need to provide value offerings to maintain frequency.
Speaker 3: among budget-constrained consumers.
Speaker 3: As we entered 2023, we introduced loco burrito grillers at the beginning of January and started marketing our double tostada salads in late February . Both promotions included shredded beef options as we continued to test our way to permanently serving shredded beef at our restaurants.
Speaker 3: Our local burrito grillers are handheld and come with local dipping sauce comprised of cheese and a special consummate.
Speaker 3: While this is our third consecutive year promoting Desadus, we continue to see incremental growth of this platform and with a prepromotion sales mix of about 13.5% it is now our highest selling non-chick on the bone menu.
Speaker 3: Adding a shredded beef option enables us to pair a fan favorite with a continued development of shredded beef on our menu. To further enhance our value offerings, in addition to our $24 family fees and fry our grilled combos starting at $5, we will be introducing three Pollo Bowls priced at $5 beginning in late March. These screen well with consumers and provide a more efficient and efficient way to serve their customers.
Speaker 3: And we believe they resonate well with cost-conscious consumers while providing attractive margins.
Speaker 3: While menu innovations can continue to be a key element to our brand, we're implementing several initiatives this year to further differentiate our unique offerings as well as broaden our consumer base.
Speaker 3: First, we've hired a new creative agency, Organic, who are tasked with building awareness and driving our differentiation by bringing a fresh look and new energy to our advertising across all media channels. This new approach recently debuted through their current test out of promotion.
Speaker 3: Second, in April we will be launching a completely revamped app and loyalty program. These upgrades will make it significantly easier for consumers to order food from us and our loyalty program will provide additional options for engagement and food redemption.
Speaker 3: Third, we are evaluating our menu approach with a menu board test that will include an add-on panel to drive higher check and product platforms like Overstuffed quesadillas.
Speaker 3: Over time, we believe we can drive more sales by building on past product successes, instruction, the menu towards permanent platforms versus six to eight weeks limited time offerings.
Speaker 3: Lastly, we believe dessert and catering present significant opportunities for incremental sales that we have not aggressively pursued. As a result of many businesses returning to work and group gatherings increasing, we decided to revamp our catering offerings to adjust to the evolving landscape of the way consumers eat in groups.
Speaker 3: We are committed to developing a robust catering program that we believe has the potential to drive significant incremental sales. While still early in the process, we are excited that catering opportunities ahead and will update you as the year progresses. That brings us to our third pillar, deliver exceptional service profitably. At 2022, our teams worked hard...
Speaker 3: to properly staff our restaurants and train our team members, and we've been reaping the benefits of these efforts. Crew member turnover during the fourth quarter was down to 100%, and 93% of our company-owned restaurants were fully staffed.
Speaker 3: All company operated restaurants are able to open all sales channels for all operating hours.
Speaker 3: As highlighted earlier, during the fourth quarter, we continued to see improvement in company and franchise operated restaurants brought through times, class visit excellence scores, social media ratings, customer complaints, and value scores. These metrics have continued to improve during 2023.
Speaker 3: This is not to say that we don't have pockets of challenge restaurants, but overall, the system is operating at high levels, which we believe will drive increased sales.
Speaker 3: With staffing challenges largely behind us and the significant improvement in company-owned restaurant operations, in 2023 we are expanding our operations focus to include bench building, enhanced training, and cost management. We believe that the key to building sustainable and consistent restaurant operations is through the development of Restaurant Leader Bench, including area managers, general managers, and business leaders.
Speaker 3: assistant managers, and shift leaders.
Speaker 3: To that end, we have put a renewed focus on leadership development, not only to benefit our current restaurant base, but also to ensure we have the leaders necessary for the continued growth of the Apollo Local brand. In addition to leadership development, at the team member level, we've completed the rollout of an enhanced eLearning platform across the system. This will not only improve the training our team members receive, but also improve the quality of their food and vegetables.
Speaker 3: but enable us to attract completion of the various modules, thereby ensuring employees are certified for the positions they are working.
Speaker 3: With improved staffing levels and customer service at company operated restaurants, we are now increasing our focus on better managing labor and food costs. This includes minimizing overtime, meal break penalties, staffing inefficiencies, and food waste. I am pleased to say that we're already making good progress against these since the start of the year.
Speaker 3: Simplifying our operations remains a top priority, and we're building upon the work we did last year by implementing several initiatives geared for reducing complexity and improving product quality.
Speaker 3: Soap tanks for cleaning grill filters and broilers will be implemented in company-owned restaurants by May and throughout the system this summer.
Speaker 3: A simplified new employee onboarding process will be rolled out to the company-owned restaurants in May, and we are revamping our operations manuals with a targeted rollout this summer.
Speaker 3: In addition to these, we continue to work to simplify the menu, reduce the time it takes to prepare salsa, and are testing dishwashers and ordering kiosks.
Speaker 3: We are excited by the progress we are making to simplify operations and it remains an area of huge opportunity. Thank you for your attention. We are excited to be able to make this happen. We are excited by the progress we are making to simplify operations and it remains an area
Speaker 3: Let's now turn to our last pillar, accelerate development. While we expect to continue developing four to six company-owned restaurants annually in our four markets, accelerating development will depend on franchisees both new and existing and will require us to successfully enter new markets.
Speaker 3: To execute this strategy, as we highlighted on our calls last year, we greatly enhance our franchise recruiting efforts.
Speaker 3: These efforts have resulted in dramatic increases in inquiries and prospects to meet our investment criteria. During the fourth quarter, we signed a development agreement with a new franchise group to open eight restaurants in the Kansas City area. This brought us to five new development agreements for a total of 25 restaurants.
Speaker 3: In addition, as mentioned earlier, our franchise partners successfully opened our first restaurant in Denver Market, which we believe is a great example of the success our franchisees can have in new markets driven by the strength of the Okoye local brand.
Speaker 3: We continue to work on a number of franchise development agreements and look forward to announcing additional partnerships as we progress through 2023.
Speaker 3: In summary, while unfavorable weather is proven to be a headwind in early 2023, we are excited about the process of the Apollo logo this year. Our restaurant operations are as good as they have ever been and will continue to get even better. This is agent by the culture we are building throughout the Apollo logo system, we just focus on recognition, engagement, and the ability to be able to be able to be able to
Speaker 3: leadership development, and supporting our communities. Our brand positioning is clear, and in addition to strong marketing calendar, we're implementing several other sales driving initiatives that will further differentiate our brand and drive awareness with younger consumers.
Speaker 3: Finally, efforts to attract new franchisees to the Polylocha system are paying give-ins, and we are on our way to accelerating new unit development.
Speaker 2: was primarily driven by a 6.5% increase in company-operated comparable restaurant sales. The increase was comprised of a 7.3% increase in average check size, partially offset by a 0.8% decrease in transactions. During the fourth quarter, our effective price increase versus 2021 was a little over 10.5%. Looking ahead, including our quarter-to-date results, we are currently expecting first quarter 2023 system-wide comparable restaurant sales.
Speaker 2: to increase 0.5% to 1.5% inclusive of a company comparable restaurant sales increase of 3 to 4%.
Speaker 2: In addition, the last two weeks of the quarter will be rolling over our incredibly successful beef barrier promotion in the prior year. Franchise revenue was 9.4 million during the fourth quarter compared to 8.8 million in the prior year period. This increase was driven by a franchise comparable restaurant sales increase of 3.5% as well as the opening of 11 new franchise restaurants opening during or subsequent to the fourth quarter of 2021 and revenue generated from three company-owned restaurants.
Speaker 2: We continue to expect commodity inflation to decelerate to be between 3 and 5 percent for 2023. Labor and related expenses as a percentage of company restaurant sales decreased 40 basis points year over year to 31.9 percent as wage increases were offset by higher menu prices and lower overtime expense as staffing levels continue to improve. Labor inflation during the fourth quarter was approximately 8 percent. We continue to expect wage inflation of 4 to 6 percent for 2023.
Speaker 2: Occupancy and other operating expenses as a percentage of company restaurant sales increased 20 basis points year over year to 25% due to higher utilities and insurance expense.
Speaker 2: Our restaurant contribution margin for the fourth quarter was 14.7% compared to 12.4% in the third quarter of the year. Looking into 2023, we expect restaurant contribution margin to be in the mid-teens.
Speaker 2: General and administrative expenses improved 40 basis points year over year to 8.3% of total revenue as we gain leverage on the 6.4% revenue increase.
Speaker 2: Increases in legal settlement expense, recruiting expenses, and other general and administrative expenses were offset by a decrease in labor-related costs, primarily related to lower incentive compensation.
Speaker 2: We recorded a provision for income taxes of $2.3 million in the fourth quarter of 2022 for an effective tax rate of 26.4%. This compares to a provision for income taxes of $1.7 million and an effective tax rate of 21.5% in the prior year fourth quarter.
Speaker 2: We reported gap net income of 6.5 million or 18 cents per diluted share in the fourth quarter compared to gap net income of 6.2 million or 17 cents per diluted share in the prior year period.
Speaker 2: Adjusted net income for the quarter was $6 million, or $0.16 per diluted share, compared to adjusted net income of $6.1 million, or $0.17 per diluted share in the fourth quarter of last year.
Speaker 2: Please refer to our earnings release for a reconciliation of non-GAAP measures.
Speaker 2: Regarding development, during the fourth quarter, one new company restaurant was opened and two new franchise locations were opened.
Speaker 2: The one new company opening was in Las Vegas. One of the new franchise locations was in Colorado and the other new franchise location was in Utah.
Speaker 2: For the full year 2022, we opened a total of four new company restaurants and nine new franchise restaurants.
Speaker 2: During the fourth quarter, we remodeled two company restaurants and eight franchise restaurants, which brings our completed remodels for the year to six company and 16 franchise remodels.
Speaker 2: Looking into 2023, we expect to complete 10 to 15 company remodels and 20 to 30 franchise remodels.
Speaker 2: Turning to liquid as of December 28, 2022, we had 66 million of debt outstanding in 20.5 million in cash and cash opponents.
Speaker 2: Subsequent to the end of the quarter, we paid down 8 million on our 2022 revolver and as of March 9, 2023, our outstanding borrowings were 58 million.
Speaker 2: Turning to our 2023 outlook as we are providing the following guidance items.
Speaker 2: The opening of four to six company-owned restaurants and eight to 12 franchise restaurants.
Speaker 2: capital spending of $27 to $31 million, and G&A expenses between $42 and $45 million.
Speaker 2: And adjusted income tax rate of 26.5%.
Speaker 2: This concludes our prepared remarks. We'd like to thank you again for joining us on the call today. And we are happy to answer any questions that you may have. Operator, please open the line for questions. Thank you. We will now be conducting a question and answer session.
Speaker 3: If you would like to ask a question, please press star 1 on your telephone keypad.
Speaker 3: The confirmation tone will indicate your line is in the question queue. You may press star 2 to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Speaker 3: One moment please while we call for your questions.
Speaker 3: Our first questions come from the line of Drew North with Baird. Please proceed with your questions. Please proceed with your questions.
Speaker 4: Good afternoon, thanks for taking the question. My first one was just on Q1. I was wondering if you would be able to give some estimates about the weather impact for the first quarter so that we can gauge the underlying trend at least in the quarter today period.
Speaker 3: I'll probably give you a little bit more on top of that. First I'll start by highlighting that as we talked about earlier in the year that we really saw good momentum coming out of 2022.
Speaker 3: When we saw, you know, really for the quarter, you know, strong comps and actually comps had been improving from month to month starting in October , November , December , each month got stronger. And so we really felt like we were heading into the new year with a pretty strong momentum.
Speaker 3: If we now look at where we are quarter date.
Speaker 3: You know, really, company comp sales are up a little over 6%.
Speaker 3: franchisees are thinking right around half a percent positive, which is actually pretty strong given we're at the main that the weather impact.
Speaker 3: It's probably in the range of 2-4 percent in terms of same-source sales growth. That's really rain on top of cold weather during the quarter. Again, when we look at quarter date, we feel like the trends we saw in the fourth quarter have continued in the first quarter.
Speaker 3: Unfortunately, the weather has knocked us back a bit, but from a quarter day perspective, the comps are pretty good despite the weather. But as Ira highlighted in his comments, with the lap of the year coming up over the last couple of weeks of the quarter, that is going to bring the comp growth down for the quarter. That is very helpful. Thanks for all the color. And follow up on the...
Speaker 3: Well, we'll feel like we'll be able to drive positive comps. I mean, because what will happen is during the beginning of the quarter, we'll be lapping Birria from last year. But then we're also doing a Birria promotion during the second quarter. So you've got a little offset in terms of lap. I mean, Birria started earlier last year as our second module. But then we started Ad they were completely different views.
Speaker 3: This year is our third module, so there's a bit of a timing disconnect, but you should see early in the quarter, you know, laughing BIRIA from last year, so that will be an uphill battle on the comps, but then as of later in the quarter, we should start seeing that turn more favorable because we'll be launching BIRIA versus last year when we were onto something besides BIRIA. When you get into our number three section of the group, we'll find the next stage and meet with the path challengers. We'll talk a little bit about the systemod artery structure as being a modified Once on Parade model for Level-B whether that's
Speaker 4: Perfect. And then just one more from me here related to unit growth. Given a key component of the strategy from here is to fuel franchise led development. I was hoping you could provide some color on where franchise level profitability or cashflow sits today. Maybe how that compares to last year, 2021, or even pre COVID.
Speaker 4: perhaps just higher level any additional insights into how the conversations are going with franchisees and the sentiment there as you look to get back to 5% unit growth in the out years.
Speaker 3: I've seen some franchise profit and loss statements, I don't see them all. The ones we've seen, their cash flows remain very strong. The great thing for our franchisees is if you look at over the past three years, their sales are up over 20% over a three year period.
Speaker 3: In terms of development and I'll call it the attracting new franchisees, again, good progress last year in our Uber.
Speaker 3: We feel good about what we're working against. I mean, these things always take a little bit of time as you're bringing new franchisees in the system, but we feel like, again, we'll get some more development deals done this year on that. So, we feel good about how we're progressing there. And then our existing franchisees are also interested.
Speaker 3: Yeah, I will say I think some are maybe trying to evaluate the economic situation with a potential recession, but again overall the sentiment in the system is very positive about where a political is and the sales are seeing and their profitability.
Speaker 3: Thanks for all the color. I will pass it on. Thanks. Thank you. Our next questions come from the line of Todd Brooks with the Benchmark Company. Please proceed with your questions.
Speaker 5: A few questions for you if I may. If you look at
Speaker 5: The weather headwinds which you highlighted in the quarter and and par set out how are the consumers that are making it into the restaurant behaving as far as How they're building checks how they're attaching Is third party delivery still mixing at the same level that it was and let's say the second half of 22 Yeah, so third party delivery is basically mixing about the same.
Speaker 3: are still ordering food to be delivered.
Speaker 3: Yeah, I think when you look at the overall customer base, as we highlighted last year in the fourth quarter,
And just, again, it just looks like the lower income consumer is managing or checked down a bit by the number of items they order. So again, drink mix is down, number of items per ticket is down just slightly. So there definitely seems to be a little bit of impact there as people are, you know, managing their budgets a little more tightly. Again, amongst low income consumers, I think when you get to the kind of the mid-level and higher levels, we're just not, you know, I think you're still.
Value mix is a percent of the menu. Have you seen that tick up as well, kind of pointing to maybe that consumer you were just referring to seeking out more value? Well, we did see the $24 family meal improve the mix on the dinner, on the family meals a little bit. So we felt good about that. You know, the $5 resonated well. The overall mix is probably pretty comparable to where it was previously. So at least it's been able to sustain that mix.
And the one that's got us the most excited are these, you know, $5 bowls. We went out and did some consumer screening around, okay, from a value perspective, what would consumers see as being the best value alternative that we could offer? And these $5 bowls were the clear winners.
And the great thing about them is we can do them at pretty good margins and make those offerings. So that's why we'll look at in a couple weeks going out and market these $5 bowls. And we do think that's going to resonate with the lower income consumer and get them back into our restaurants as frequently as they used to be. So...
As we move forward through the year, you'll see our effective pricing decline as some of the higher increases we took last year. So by the time to get to the end of the year will be, you know, carrying in the 4% pricing range. Okay, great. Thanks, Sarah. Thank you. Our next question has come from the line of Matt Curtis with William Blair. Please proceed with your questions. Hi, good afternoon. Thanks for taking my question. You know, with company on comps of pacing the franchise comp in the fourth quarter, I was just wondering what factors drove that? My name was it all really due to more normalize staffing and operating out of the shoulder for last year or was it something else?
to go to franchise locations, we're getting very service. So as we've made a dramatic improvement in company operations,
you know, I think one of the factors out there is we are seeing customers returning to the company restaurants because now they're getting a better experience. And so I think that is a factor.
And when we look at the.
average unit volumes in Los Angeles where we saw a big swing when the company operations were poor, a big swing from those average unit volumes in favor of franchisees versus company restaurants, and now those have swung back quite a bit. So there's the indication that, yeah, the improvement we made in the company operations
has moved the entire system up, but I do think there's more consumers now coming to company locations that had previously gone to franchise locations because our company operations just weren't where they needed to be. So hats off to our company operators for the big improvements we've made.
Okay, great. And then I guess on restaurant level margins for this year, could you walk us through what your expectations are in terms of the cadence? I mean, can we expect it to be stronger in the second half of the year as the inflationary pressures dissipate to some degree? Or do you expect something else at this point?
Yeah, I think there's 2 things going on. I think if you just before we talk about that for a 2nd, and we did just think about it seasonally. Q2 tends to be just because of volumes our highest margin of the year with Q1 being the lowest and then the back half of the year tends to be around on the average.
But I think this year you will see a little bit of an increase as we move to the back on margins as we move to the back half of the year based on the timing of our expectations in regards to inflation.
year you will see a little bit of an increase as we move to the back on margins as we move to the back half of the year based on the timing of our expectations in regards to inflation. Okay great, thanks very much.
Thank you. As a reminder, if you would like to ask a question, please press star 1 on your telephone keypad.
Our next questions come from the line of Jake Bartlett with Truist Securities. Please proceed with your questions. Great, thanks for taking the question. Mine is about some of the cost in the labor line, you know, like over time that seems like it's normalized and that's helping the labor margin. If I look at kind of labor per operating week...
the year-to-year change was much less than it had been in prior quarters. So the question is, as you move into 23, what kind of a list, what kind of a margin tailwind do you have in the labor line that could offset some of the wage inflation that should continue? That's overtime training.
recruiting, just trying to figure out really what kind of leverage you can get in labor even with a little bit of wage inflation. Yeah, I mean, I'm trying to think what the precise numbers are.
But the bottom line is, I mean, we highlighted last year that overtime was significantly higher than where it is on average, which we are bringing down and getting back to our more normalized levels, meaning back to where we were back in 2019. COVID costs are coming down because we're not...
having to pay people who are out on COVID leave. Meal breaks another one. Meal breaks isn't as big of a number, quite frankly. So we're getting control of those food waste. So I think over time is probably the biggest result. I'll let Ira chime in if he's got any other thoughts. No, yeah, I think you know.
Larry, you made a comment about potentially moving to more of a platform approach to the menu versus six to eight LTOs. I know over the years you had been moving towards platform. Maybe just remind us or me where you stand in the evolution. I think back historically you had 10 LTOs.
you know, LTOs or kind of advertising windows, but where do you stand in terms of the cadence of LTOs and windows? And, you know, just maybe clarify the comment there. Are you planning on evolving that further so that it's less focused on LTOs? Well, I should clarify, you know, you're right. We used to do, we got up to 10 LTOs, we're now at 10 LTOs, we're now at 10 LTOs.
to it and really
Tested it and so like we said earlier is we do have a menu port test going on There are some additional what I'll call platforms. So there's an add-on menu To encourage people to trade up and buy additional items We're leaving quesadillas on the menu To see again how that does post promotion
But the idea is that you wouldn't go away from LTOs, but your LTOs would be more focused around actually building these platforms. So I think many times in the past, you know, we do LTOs and we just pull them out and it's well okay, but you got a bump in sales, but then you pulled it out and it didn't really grow what I call long term sales because it just came in and went out.
What I'd like to do is see, okay, so if I do a quesadilla platform, for example, and maybe it starts out at a, I'll make up a number, a 4% nix.
You know, over time, if I keep coming back to Casadeo's, can I get that up over time to a 5, 6, 7% mix?
I mean, it's really a lot like Tostados out. I mean, that's probably the best example of if you went back three years ago, Tostados were mixing about 8% of sales.
And then each year for the last three years we've come back and talked about to saw salads. So before the current promotion we had to saw salads up to 13, 13.5% mix on a standalone basis. And now the reason promotion can we get this up even higher to 14, 14.5% mix. So by having to saw this as a platform.
that you come and advertise every year, can you keep growing your sales that way versus again coming out with these one-time LTOs that come in, come out, and now you're back to where you were. So what you're trying to do is keep growing that baseline by keep building these platforms. And so that's the thing we're looking at strategically and we're testing it a bit with this new menu board.
But that's the way I feel like we should be building sales in the company versus these kind of relying on these one-time LTOs to beat prior year. Great. That's really helpful. My last question is on operations. I know there's a lot of moving pieces, especially as staffing has kind of had a big impact on your efficiencies and your ability to execute. But given the focus over the last years of simplification, you have...
Yeah, I mean, if I look where drive-through times are now, I'll be honest with you, I don't have the pre-COVID numbers, but we've got now company drive-through times down, total drive-through time is about four minutes. If you look at just and then franchisees are down to three and a half minutes.
I believe, I'd have to verify this, but those are probably better than where we were pre-COVID. But I can't say for sure. But I do know they're dramatically better from where we were like a year ago. And if we look at drive-through window times, we're down to probably the best levels we've been, at least on the company side. you you you you you you
in a long time. The franchisees continue to be a little better than us on that. The only thing I'll say is, when you look across all the operating metrics we look at, like I highlight on the call is, they're all at very high levels today.
I mean, I'll just give you a couple of examples. And again, it's hard for me to go back pre-COVID because I don't really have the numbers off the top of my head. But if I go back a year ago and you look at customer complaints, and again, we were struggling in company operations. We were at 12 complaints per 10,000 transactions.
We've cut that in half. You know franchisees have actually come down. They were doing pretty well about I think five and a half or so. You know they're down to three. You know our social media metrics now You know our franchisees are at four and we're getting close on the company side to four and that's Yelp and Google reviews. You know number of stars. So and those are
Again, I believe the best I've seen in a long time. So again, I think the system as a whole has made tremendous progress on operations. The franchisees, despite the fact they were already operating well at high levels a year ago have made even more improvements and the company has made dramatic improvements.
So, apologies for not knowing what the 2019 numbers were, but if I go back over the last year and look at the improvements we've made, they're huge. And I'm pretty sure that a number of things we're looking at are equal to, if not better, than where we were in 2019.
No, that's really helpful. I appreciate it. Thank you. Our next questions come from the line of Todd Brooks with the Benchmark Company. Please proceed with your questions.
Thanks. Just one quick follow-up here or question. Obviously, you're accelerating the remodel activity in 23 after getting a little over 20 done last year.
Can you share with us what we or investors should be expecting out of remodels? What's the early experience been?
Are we seeing it in In kind of operational performance at the store are we seeing it in a revenue left? Well actually you think about Accelerating remodel activity as a potential tailwind for the business. Thanks Yeah, I mean in general I think we said you know we should be seeing sales lists of the three to five percent range
on these remodels. I mean, that's the expectations with the high end being really what we're targeting, the 5%. You know, with COVID and things, it's been a mixed bag. But overall, we're kind of in that range of what we're seeing. We're getting very positive feedback from franchisees on the remodel, positive feedback from consumers.
But, in the end, somewhere in that 3-5% lift is what, and when I say 3-5%, that's versus the control group, is what we should be seeing in these remodels. And has the cost of the remodels, has that tightened up as you've gone through this first wave and what should we think about there for the cost of rolling out this next wave?
Yeah, I think we're still seeing it. It varies depending on what level of remodel we do. We have three different levels. And what we're seeing is we're doing more of, I'll call it level one, which is a lower level remodel, which includes a full
a full external remodel, but then internally some of the things like flooring and things we may not change out but still get other elements in there. So that's still running, you know, probably 250 to 300. You're kind of mid-levels like 350 and then if you go at the high level you're looking probably more the 4 to 450 range, maybe in 500.
I think most of the remodels now are really level one and level two.
Okay, perfect thanks Larry. Ladies and gentlemen, we have reached the end of today's question and answer session. I would now like to turn the call back over Mr. Larry Roberts for closing remarks.
Okay, well, I just want to thank everybody for joining us tonight and hope you have a great night and hope you're as excited about El Pollo Loco as we are. Thanks very much.
Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.