Q2 2023 El Pollo Loco Holdings Inc Earnings Call
Good day, ladies and gentlemen, and thank you for standing by welcome to El Pollo Loco second quarter 2023 earnings Conference call. At this time, all participants have been placed in a listen only mode and the lines will be opened for your questions. Following.
The presentation. Please note that this conference is being recorded today August three 2023.
And now I'd like to turn the conference over to IRA Fils, the company's Chief Financial Officer.
Thank you. Thank you operator, and good afternoon by now everyone should have access to our second quarter 2000, and twenty-three earnings release, if not it can be found at www El Pollo Loco Dot 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 our strategic and operational initiatives.
Spectation regarding cash flow sales and margin potential changes to our menu platforms capital expenditure plans future.
Share repurchases expectations regarding commodity and wage inflation remodel plans expected new store openings franchise partnerships and our 2023 guidance among others. 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 currently expect we refer you to our current our 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-Q for the second quarter of 2023 Tomorrow and would encourage you to review that document at 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.
Our earnings release, which is available in the Investor Relations section of our website with respect to the restaurant contribution margin outlook, we will be providing on today's call. Please note that we have not provided a reconciliation to the most directly comparable forward looking GAAP financial measure because.
Without unreasonable efforts, we are unable to predict with reasonable certainty the amount or timing of non-GAAP adjustments that are used to calculate income from operations in company operated restaurant revenue on a forward looking basis.
Now I would like to turn it over to our President and CEO Larry Roberts.
Thanks, Sarah and good afternoon, everyone.
I'd like to start by thanking our El Pollo Loco team members and our franchise partners for that.
Hard work they put in everyday to make this brand great.
Well that dedication of everyone in the organization, we would not have been able to achieve the outstanding improvements we've seen across our operational metrics, including drive through times, social media ratings and customer complaints for both company and franchise restaurants.
These efforts helped deliver restaurant contribution margin of 16, 9% an improvement of 190 basis points compared to last year's second quarter adjusted earnings per share of 23 cents.
While our system wide comparable restaurant sales decrease of three 4% was below our expectations, primarily due to the lapping of our extremely successful beef theory promotion last year. We are encouraged by the positive trend we've seen to start the third quarter with system wide comparable restaurant sales growth of one point.
8% over the past four weeks ending July 26.
This includes comparable sales growth at company restaurants of 2.1% <unk>, 0.4% decline in transactions.
We believe that our improved sales performance is to some extent driven by refocusing on our famous fire grilled chicken through our current promotions, including our new double chicken chop salads, and our new summer family meal that includes eight pieces of fire grilled chicken three large sides tortillas and fresh salsa.
Notably guest feedback on our new chops.
It's been very strong with quality taste healthy and overall ratings among the highest we've seen for some time.
Most importantly this.
<unk> emphasize a major differentiator for our Pollo loco relative to our competition.
As a freshness ever food and the healthier options, we offer on our menu.
This differentiation consistently shows up in our consumer research and as highlighted by last week's recognition in the 2023 USA today 10, Best Reader's Choice Awards as we were voted by readers as a best restaurants for quick healthy food.
Going forward, we will continue developing products and advertising campaigns that drive this differentiation versus our competition.
While we continue work to determine whether there is incremental opportunity for alternative proteins, including a carnitas promotion in the fourth quarter. We will primarily focus on what makes L. Polk unique which is our fire grilled citrus marinated chicken and freshly prepared entrees that our guests crave.
In addition to our promotional activities with the launch of our double chop sales promotion, we have reallocated media spend towards those channels that more effectively drive sales. This reallocation is based on a recently completed media effectiveness study that includes reducing spend on several digital channels, while increasing our more traditional channels.
By T V.
We will continue to adjust our media allocation based on further analysis to ensure we are maximized sales from our media spend.
As we previously highlighted we believe an additional menu platforms are a significant opportunity for us to grow incremental sales with the largest one being catering today catering sales represented about 1% of our total system sales.
Given how well our food travels we believe catering can reach 5% of our system sales mix within the next one to two years over.
Over the past two months our team has been hard at work revamping, our catering program, including the development of a new catering menu that provides more options for customers. In addition to our chicken on the bone offerings.
This work is largely completed and we're now developing the market materials and training program. We are required to roll out the new program later in the third quarter.
We're also evaluating partnerships with third party catering delivery services that will further drive the program.
After the initial rollout of the program will be testing the use of area case managers to determine the impact they can have on growing our catering business.
We are very excited about the potential of catering and believe it can become a $50 million to $100 million sales layer for the El Pollo Loco system over time.
In addition to our catering platform, we continue to make progress on our menu Board test, which includes several new menu items the creation of an add on panel and potentially a new value menu.
The goals of the new menu or to make it easier for consumers to navigate our menu and identify new items and platforms that will resonate with consumers to build sales over the long term.
Excited about the progress and expect to roll out a revised menu and menu board at the beginning of next year.
Ultimately growing comp sales depends on restaurants consistently delivering great food and service.
Along these lines I couldnt be more pleased the operational improvements we made this year across both company and franchise restaurants.
A few times customer complaints and social media scores continue to improve in the second quarter and is the best levels, we've seen in years.
As part of our efforts to continue improving the customer experience. We recently completed a recalibration process with each of our general managers to reiterate the importance of food quality and ensure consistency and continued availability of our fire grilled chicken across the system.
In addition, we continue to make progress simplifying our operations.
We expect to start rolling out new source of processing equipment to the system later this year.
<unk> test continues to yield positive results.
Began expanding the test of 10 more restaurants with a number of franchisees participating.
We believe these and other operational initiatives will further drive efficiencies and allow our teams to better serve our customers.
With regards to our company Culture Survey led leadership continues to be the foundation with which we operate and what better way to demonstrate our familiar culture than providing greater support to the communities in which we operate.
If you recall back in November we announced a new partnership with feeding America. The goal to raise $400000 for the feeding America network of local food banks.
Thrilled to report that through our limited time Roundup campaign, our restaurant teams were able to raise over $474000 as of June 32023, with our charitable organization I play a local charities matching the first 100000 roundup transactions.
90% of the eastern Nations are being distributed to food banks around our restaurants and the communities we serve.
Lastly, let me provide an update at our union expansions.
In recent quarters, we've seen positive momentum in our franchising efforts as showcased by the development agreements, we announced on our previous earnings call for Northern Colorado, New Mexico, and El Paso, Texas.
That said for 2023, we're reducing our unit guidance to two company owned restaurants, and three to four franchise restaurants.
Similar to what you've heard from others in our industry, we continue to face permitting and construction delays outside of our control as well as the ongoing economic uncertainty, causing franchisees to delay their development plans.
Discussions on new development agreements continue with both existing and potential new franchisees and we expect to make further progress during the balance of the year.
In closing we believe the initiatives we are executing against will drive same store sales increased restaurant margins over time to over 18% and attract high quality franchisees to our polyolefin system to drive New unit development.
Moreover, we expect to continue being in a position to return cash to shareholders as we did in the second quarter through our share repurchase program.
As we look to the back half of the year, we will continue to execute against our key strategies and position ourselves for sales and profit growth Lastly, I'd like to once again, thank our team members and franchise partners. They work they do each and every day they make a point of logo a truly special brand.
With that let me turn the call over to IRA for a more detailed discussion of our second quarter financial results.
Thanks, Larry and good afternoon, everyone for the second quarter ended June 28, 2023, total revenue decreased two 1% to $121 5 million compared to $124 1 million in the second quarter of 2022.
Company operated restaurant revenue decreased two 4% to $103 9 million from $106 5 million in the same period last year the.
The decrease in company operated restaurant sales was primarily driven by a two 3% decrease in company operated comparable restaurant sales, including a two 3% increase in average check size offset by a four 5% decrease in transactions.
During the second quarter, our effective price increase versus 2022 was approximately nine 5%.
As Larry mentioned earlier, we are encouraged with our improved sales performance in July with system wide comparable sales for the month, one 8%, including a two 1% increase in company operated restaurants through July 26.
Franchise revenue increased 5% at.
$10 1 million during the second quarter, driven by eight new franchise restaurant openings and four company operated restaurants sold by the company to existing franchisees in each case during or subsequent to the second quarter of 2022.
This was partially offset by a franchise comparable restaurant sales decline of four 1%.
Turning to expenses.
Food and paper cost as a percentage of company restaurant sales decreased 240 basis points year over year to 27, 4%.
Due to higher menu prices, partially offset by increased commodity costs commodity inflation did moderate during the second quarter to approximately 1%, we expect commodity inflation to decelerate to between 1% and 2% for 2023.
Labor and related expenses as a percentage of company restaurant sales increased 10 basis points year over year to 31, 1%.
Higher menu pricing and improved labor management was offset by wage rate increases and the leverage lost on the comparable sales decline Les.
Labour inflation during the second quarter was a little over 4% and we expect inflation of about 4% for the full year 2023.
Occupancy and other operating expense as a percentage of company restaurant sales increased 30 basis points year over year to 24, 6%, primarily due to higher insurance costs and repair and maintenance expense, partially offset by lower utilities.
Our restaurant contribution margin for the second quarter was 16, 9% compared to 15% in the year ago period for the full year 2023, we expect our restaurant contribution margin to be in the 15 five to 16, 5% range.
General and administrative expenses increased 130 basis points year over year to nine 1% of total revenue the.
The increase for the quarter was primarily due to $1 1 million in restructuring costs recognized during the second quarter and a $300000 increase in labor related costs.
During the second quarter, we recorded a provision for income taxes of $2 7 million for an effective tax rate of 27, 9%.
This compares to a provision for income taxes of $3 1 million and an effective tax rate of 30% in the prior year period.
We reported GAAP net income of $7 1 million or <unk> 20 per diluted share in the second quarter compared to GAAP net income of $7 1 million or <unk> 20 per diluted share in the prior year period.
Adjusted net income for the quarter was $8 million or <unk> 23 per diluted share compared to adjusted net income of $7 6 million or <unk> 21 per diluted share in the second quarter of last year. Please refer to our earnings release for a reconciliation of non-GAAP measures.
<unk>.
During the quarter, we remodeled two company operated restaurants, and seven franchise restaurants for the year. We continue to expect to remodel 10 to 15 company operated and 20% to 30 franchised restaurants.
Turning to liquidity as of June 28, 2023, we had $60 million of debt outstanding and $10 2 million in cash and cash equivalents.
In addition, during the quarter, we repurchased about $1 million 272000 shares for approximately $11 9 million.
Finally based on our results today, we would like to provide the following update to our 2023 guidance the.
The opening of two company owned restaurants, and three to four franchise restaurants.
Remodeling of 10 to 15 company owned and 20 to 30 franchise restaurants capital.
Capital spending of <unk>.
22% to $25 million.
G&A expenses between 42% and 44 million inclusive of approximately $1 4 million in one time costs.
And an adjusted income tax rate of 26, 5% to 27, 5%.
This concludes our prepared remarks, we'd like to thank you again for joining us on the call. Today. We are now 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. If you would like to ask a question. Please press star one on your telephone keypad.
Information tone will indicate your line is in the question queue. You May press star two if he would like 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, one moment. Please I'll we poll for questions.
Our first question comes from Todd Brooks with Benchmark Company. Please proceed.
Hey, Thanks for taking my questions I appreciate it.
Laurie long lead off with a question just kind of reflecting on the comments that you made tonight here.
Shifting kind of tone or thinking about strategy.
Fire grilled working core menu focus being recognized for fresh and.
We worked with the marketing balance is youre talking about.
Repositioning with strategic change that Youre looking to make for the brand.
Going forward from here.
Thanks Todd.
Let me step back.
A number of points.
In my opening remarks, but I wanted to step back.
And talk about what are the really the key things we're focused on right now.
First and foremost to me is to continue the progression in operations.
Yes to me ultimately like I said in my opening comments.
You can't drive sales and profitability over any time period in a restaurant business without having great operations.
Good thing is we.
We fixed company operations service from where they were last year, we got the cost under control now in operations is really around raising the bar on food quality consistency across the system.
And we started doing that by retraining, we are starting to monitor.
Complaints around food issues, and making sure then we hold people accountable and address them as quickly as possible. So again, raising the bar in operations and really focused on food quality consistency and the major focus so that would be really the first thing I'd say.
On the marketing side.
More your question.
Really I see three things first of all refocus and drive our brand differentiation is all around chicken and freshness.
Our consumer insight data tells us those are the things that really differentiate us in front of consumers.
And so in order to do that the advertising campaign.
The content on your social and digital channels.
Product used in the menu all have to be geared towards driving that differentiation. So to some extent, yes. I mean, that's something we would talk about but we are now going to be really really focused on driving that in the business.
In addition, our marketing is going to be around the new sales channels, which I talked about catering being the biggest one big opportunity gigabit out there get that done and we got to make it into a a five maybe even 10% system sales type of number on catering and the last one is the loyalty program, which.
We relaunched it we need to get the loyalty program to be a real incremental sales driver in the business and it's kind of stalled out a bit so we need to figure out how we're going to really use that to drive incremental sales.
Third I would say is really around the assets.
As a brand if we're looking to modernize and really push the freshness cues, we really have to remodel our assets and so we've been doing that we need to continue doing that and make sure that we don't.
Luiz Stefan and perhaps even accelerate on the Remodels because again.
We've got too many assets out there where people, especially newer customers just won't come to us because of the asset base.
I guess the fourth one I would call the economics and we talked about that is we have to get back to 18% and quite frankly, my target, 20% margins in the business and so we've got a game plan to get there and so we'll deliver against that game plan.
Next would be around development.
We're going to be franchise driven in development.
Got to improve the economics.
That is from the margin work, we're doing but we also got push ourselves to find ways to get our building costs down.
And then we need to increase efforts to attract new franchisees into the system and make sure that they opened successfully so a lot of work going on there.
Then last one which we talked about just real briefly as well.
We are a cash flow generator and we need to continue returning cash to shareholders.
We've done that through a special dividend yet our recently completed share repurchase program, but we will continue finding the best ways to return cash to shareholders. So I break it down into I guess that was six areas that we're just really really focus on and to your point around the brand is not necessary shift in focus, but I think the theory of.
<unk> was a.
Great last year.
It may have been that business distraction for us.
We're just getting back to are the key things that we really do great, which we know is around chicken and how we prepare our food.
The entree items to sources to sauces, all of those things in the restaurant are fresh and so we just need to drive that differentiation.
That's great to hear and I guess, a follow up on one of the.
The pillars that you just laid out there.
Kind of a potential internal goal wanting to get back to 18, but potentially getting back to 'twenty one.
What's the unlocked to do that is that AAV driven in your mind are there.
It feels like you've extracted a lot of efficiencies out of the business and the operations already.
Is this a volume driven recovery to that type of restaurant level margin.
I think it's.
A bit of both but honestly.
I'm trying to do it without relying on sales I think sales will be the Ana. So it's looking at where we can find efficiency. So you always are looking at the new SASSA.
Processor equipment, I think das opportunity.
He asks.
Pushing those tests that could be a huge opportunity to drive.
Improvements in there.
I think there is on the sales line I mean, especially catering I think we estimate for every 1% catering sales, we get about a 30 basis point improvement in margins.
Somewhere in that range. So it's a combination of both but we're not just saying hey, we've got to grow sales.
We want to make sure that we're also doing it on the cost side.
Okay, great I'll jump back in queue. Thanks, Larry.
Our next question comes from Jake Bartlett with Trust. Please proceed.
Great. Thanks for taking the question.
So remind my question is about the momentum in the business.
I understand the difficult compare from.
Last year in the second quarter.
But there wasn't a deceleration versus 19 kind of let's say looking at a four year stack on same store sales. So I'm wondering what you think is driving that and you might see to the macro environment, how logos position in that but.
But just just trying to understand.
The underlying momentum in the business.
And really what's driving that.
Yes, so Jay cabin I think actually right now we're seeing a change in momentum in the business I mean.
Yes, we provided a four week look as of.
But July 'twenty, six 'twenty, seven I can't remember, which day it was.
But actually the first week of that was actually negative that was fourth of July .
Weekend and.
The last was just a little strange way the fourth of July fell, but so that was a negative week. So then the last three years have been even better.
I think when you look at.
Call It last quarter.
Again, I highlighted that I thought we are seeing some pullback from lower income consumers in terms of frequency check.
So I think that was a driver and I think Barry itself just.
Didn't resonate the second time around and I think getting away from focusing on chicken actually hurt us.
The second time around area. So I think those are some of the factors that I've just really watching now the trends in the business now and you know there is some currency encouraging trends I don't want get too far out there in terms of everything.
Everything's great and.
Sales rank keep climbing, but definitely seeing better trends and I'd say, what's great is on the sales side, what we're seeing is the.
The change in trend is being led by law in Southern California.
So that's been great to see it.
It's been mainly lunch driven but dinner has also been positive and then we're also seeing pretty much consistently across the different demographic. So it seems to be pretty widespread and.
Again.
La Southern California, driven which is great to see so you know thats, where the majority of our businesses.
That's great to see.
I guess given that given the improvement I guess, maybe that means you don't need to.
Make any meaningful changes to the balance of value, but how do you feel.
You are positioned in terms of value.
Theres the menu innovation and the more premium side, but do you think you need to make any kind of.
Changes, there and any tweaks to get the get the balance.
Can be more effective in this environment.
Yes.
But first thing I will say that when we look at our value scores via our consumer surveys.
They are actually very strong right now.
Overall <unk>.
However, what we are doing is in the menu board test as we are looking.
Looking at providing perhaps a value panel.
So right now we are screening with consumers various options around value whether it's at <unk>.
Our $6 $7.
How does the screen and then we will get out and test that with consumers to see.
Do they drive incremental increment.
Incremental sales.
Don't want to see is a lot of trade down but doing it in a way that's got very good margins.
And look.
We look at those ones that screen the best with consumers. So we are looking at that and so that would be something.
We would look at either really back half of the year early next year.
It really seems to resonate we try to get that on the menu, but we got to test our way that other than that we still have our five dollar bowls, we've got fire grilled combos, which are all at pretty attractive value price point, so and like I said our value scores right now are strong with consumers.
Great and then my last question is just on margins.
<unk>.
A good quarter for margins restaurant level margins.
The commodity Inflations, we've taken down I think.
Your labor inflation, a little bit to four from four to five.
But at the midpoint of guidance I think Youre stayed the same for the annual number. So just wondering what the moving pieces are there and maybe within that I think pricing is going to make a difference. So if you could share what you expect menu pricing to be in the back half of the year.
Just to add onto this long question.
In the past you've given us some guidance for the current quarter, you gave us guidance for the year with restaurant level margins, but any guidance or any indication for the third quarter would be helpful.
Yeah, Yeah, Jake so our pricing plans are pretty similar to what they've been if you think about <unk>.
In Q2, we were at about nine 5% effective pricing year over year as you roll forward through the balance of the year Youll see that decline.
A lot of price towards the end of last year. So Q2, Im sorry, Q3, we should be about 7% a quarter and in Q4 will be about five five.
And if you think about how how margin plays out kind of for the balance of the year typically you see Q2.
As our best margin.
Quarter end, you see Q1 is our lowest margin quarter in the last couple quarters of the year tend to be similar to kind of like a full year number.
For the most part with Q with Q4 being a little better than Q3 as you typically see a little spike to the utilities. So just to give you a little.
Play how that plays out I think.
We feel really good about our visibility in regards to commodities and that's why we were able to bring.
The guidance down and our wage or wage rates have been pretty consistent as well. So we feel we have a lot of visibility.
From a cost standpoint, and a lot of than really what drives any differences as how sales move as Larry talked about it's about 30 basis points or so on the margin depending upon any 1% noted sir.
Great I appreciate it thank you so much.
Thanks Jake.
Our next question comes from Andy Barish with Jefferies. Please proceed with your <unk>.
Hey, good afternoon guys.
It sounds like from the prepared remarks.
You expect comps to still positive and the <unk>.
Back half of the year, even against some tougher laps.
I assume that.
That confidence is coming from sort of the promotional lineup, but is there anything else.
And I know Theres a lot of initiatives.
What's kind of gives you that.
That confidence at this point.
Yes, so I see as a key sales growth drivers in the back half of the year first of all I think getting back and refocusing on chicken.
The chops and then we have a case it is our next up in case it is performed.
Well last year, so that gives us confidence that we've got good promotions going on now and coming up next.
Yes, I expect that we'll continue to see improvement in operations.
Customer service.
One of the big opportunities is and this comes from focus groups.
I watched last week.
Is around.
We did focus groups with lapsed users.
And ask them.
Why do you stop coming to a pollo loco and these go back Dave last for a while and it's really around.
It wasn't around price points or anything like that it was around.
The last experience and I'll, probably a logo and so.
With the improved as marine operations and the continued improvements will make we will really be targeting to bring lapsed users back into the restaurants back half of the year.
Yes, I do think the loyalty program will continue to make changes to that so that will be a driver and I think the realignment at the media spend that I talked about versus the first half of the year continuing to fine tune that to really get.
Focused on those channels.
<unk>.
<unk> delivered a strong sales.
It will be a driver and then I think the last one is going to be around catering, which will look to roll out the end of September so as move into the fourth quarter certainly go into the holidays, having a really strong catering platform I think will be a sales driver. So I think we got a number of good things on the agenda.
The drive that sales in the back half of the year.
And just just to follow up on the on the marketing I think you've got a new agency of record.
Not recalling the timing exactly but.
Creative from bad grid.
To be out there yes.
Yes, so that group started.
The first run was.
I guess February so our module too, but it was that was kind of a throw in there quickly put something together quickly.
So it wasn't a full blown here it is.
But they are now falling for us and the advertising. We have now is full on with a new agency the agency's names organic.
Really pleased with what we're seeing in terms of the look and feel the advertising Amy has got more energy with the music.
Now really focusing on the food has prepared done that before but for example, chop salads show that chicken being chopped and so doing those things and then we really re shot the whole family dinner promotion.
Advertising and really made sure that okay, we need families and so we've got families now in there.
Yes, because you are targeting moms, so the look and feel the energy the vibe and I think we've got a lot of the right ingredients in there that we want to have to really drive first of all.
Lately I caught more modern brand and more energy behind the brand and then also the product quality and the freshness of the food are really coming through in the advertising.
Got it and then finally just.
10, or so units from both company and.
And franchise.
Hi.
Didn't push now from this year are those expected to open in 2000 and for some of those kind of evaporated.
Some challenges out there or how do you kind of look with that.
<unk> to 'twenty four is it is it right to think of these 10 units kind of moving into next year.
Some are moving into next year, I would say somewhere around half of probably moving next year and half have just fallen through.
Either the development has stopped.
More the landlord with a different deal so.
Yes, so I'd say, it's half and half at this stage.
Okay. Thanks, guys.
Yes.
As a reminder, if you would like to ask a question. Please press star one on your telephone keypad.
Our next question comes from Jim <unk> with Baird. Please proceed with your question.
Great. Thanks for taking the question a number of mine have been asked already but I'll follow up on margins or the inflation outlook can you just update us on how much the commodity basket is locked for the balance of 2023 and perhaps any early reads on your contracting efforts for chicken looking out to 2024.
Do you see opportunity to lock in at rates below the levels paid in 2023 or what's your level of visibility to the inflation outlook for 2024 at this point.
I think.
More broadly we've.
The outlook next year positive just given.
We haven't seen a lot of pressure in regards specifically on the chicken side.
We don't we just started our quite frankly, our RFP process.
We will have more on that.
Quarter.
So, but we feel I think we've seen commodities decelerate substantially this year and we are definitely looking for 2024 to be a much more moderate.
Commodity inflation environment.
For the back half of the year like I think we're around 80% or so locked in on the chicken side really what's not locked as just the breast meat, which floats and we have a collar on that so again.
That the spot price on that has been very favorable.
We feel like we do have quite a bit of visibility to where we're headed from a commodity standpoint.
That's helpful and one clarification IRA the pricing metrics you mentioned earlier on in the call as we got to Q3 Q4 was that contemplating additional pricing as we got to September or assuming no changes in price as the new menu rolls out.
There is a 2% price increase built into that when the new menu.
Rolls out in the September timeframe.
Perfect and then one more from me just thought I'd give you the chance to update on the kiosk rollout. If you have any details to share I know it was expanded to additional locations. This past quarter. So it's still early but getting to a more critical mass of the test I guess.
And other brands have been successful with the rollout of kiosks. So maybe.
If youre willing to share can you speak to the benefits youre seeing on check or margins at this point in the units where the kiosk have been rolled out and perhaps the interest level from franchisees at this point.
Sure.
Yes, a little more detail on kiosk like I said, we have I believe it's 11 kiosk now in service.
That includes some franchise restaurants.
And company restaurants, what we have found is that.
To really drive TFS usage is important to have <unk>.
Cash machines, the ability to use cash to pay.
And so when we put those in we're seeing anywhere in our test restaurants from I'll.
Dining room transactions.
Meaning either some eating in the dining room or coming in and ordering for it to go.
We're seeing anywhere from restaurants, 75%, 80% kiosk usage.
And the Loews will be in the <unk>, but even those.
We're seeing increase in so overall, we're seeing.
Really good usage on the kiosks.
We're seeing nice average checklists.
And.
The other thing we're seeing is when you start getting up to.
50.
Percent plus in terms of usage you can start looking at labor hours. So we are pulling some labor hours out of those restaurants that have a high usage rate.
And so now given the success there we are rolling out.
10 more kiosks.
On the company side there'll be Las Vegas.
And the reason why I've chosen Las Vegas is because.
There is no EBT.
And Las Vegas, Southern California, We think the usage will even go further as we integrate EBT usage into the system.
And because we get a lot EBT sales here in California.
But vegas, they don't have EBT and so we're already in a couple of restaurants are we're seeing very high usage in Vegas and.
And in fact, I think we're going to basically test a restaurant, where it's just kiosk service.
And see what that does so we're trying to really push the envelope on the kiosk now similar to what other concepts had done.
See what theyre doing and.
I think theres, a big ability there too.
Both drive check and reduce labor hours in the restaurant.
Thanks for all the color I'll pass it on.
Sure.
Our next question comes from Jake Bartlett with Suntrust. Please proceed.
Great. Thanks. This is this is a fairly detailed question about compares but I just wanted to make sure I.
Getting it right. So so last quote last third quarter.
July was relatively weak weak relative to the quarter.
That wasn't going up against the opposite where July of 2021 was the strongest so last year might have been just related to the year before so.
The question is as we think about the rest of the quarter.
Where where sales can land.
Do you view the comparison is more difficult going forward or.
Maybe on a kind of a stack basis, where youre basis versus pre COVID-19. It's not so just wanted to make sure I don't get too carried away by the fact that compares seem to get considerably harder.
In August .
In September .
Yes.
Yes, Jay so the way I was looking at it actually is.
Throughout the.
The fourth of July week.
And looked at say the last three weeks plus.
And actually again, we were we are.
Were positive last year in that same time period year over year.
And then especially L. A.
Company restaurants, I mean, I'll just give you 2022 over this timeframe were up about one 6%.
L. A at this point we're up.
Close to five.
So.
I think we are lapping I don't think the numbers are as negative when you actually throw away fourth of July weekend and do the compares.
So I feel like there is good enough momentum there as we move through the quarter, the Alaska and more challenging so I still think we'll be able to deliver.
Positive same store sales growth, but I think thats prior one reason why.
We're just.
Don't get too far out there in front of your skis, so that deliver but certainly I think the trends over the last several weeks have been reassuring, especially in terms of la Southern California market.
Great.
Awful and.
Yes.
Thank you so much I appreciate it.
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 to Mr. Larry Roberts for closing.
Just like to thank everybody for joining the call Tonight and I Hope you have a great night.
And we will talk to you.
Next quarter. Thank you.
This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Uh-huh.
[music].
Mhm.
[music].
Uh-huh.
Oh.
Sure.
Okay.
Okay.
[music].
Hum.
Hum.
Uh-huh.
Okay.
Okay.
[music].
Yes.
Yes.
[music].
Okay.
[music].
Uh-huh.
Hum.
[music].
Uh-huh.
[music].
Hum.
Okay.
Hum.
[music].
Uh-huh.
[music].
Okay.
Okay.
Hum.
Hello.
Oh.
Okay.
[music].
Oh.
[music].
Hum.
Yes.
Okay.
Uh-huh.
Hum.
[music].
Oh.
Mhm.
Hum.
Uh-huh.
Okay.
Hum.
Uh huh.
Yeah.
Hum.
Uh-huh.
Hum.
Okay.
[music].
Hum.
Hum.
Uh-huh.
Okay.
Okay.
[music].
[music].
Okay.
Uh-huh.
Hum.
[music].
Uh-huh.
Okay.
Okay.
Yes.
Yes.
Okay.
[music].
Hum.
Okay.
[music].
Hum.
[music].
Tom.
Hum.
[music].
[music].
Okay.
Okay.
Hum.
Hello.
Oh.
Okay.
Yes.
Okay.
Okay.