Q1 2025 El Pollo Loco Holdings Inc Earnings Call
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Operator: Good day, ladies and gentlemen, and thank you for standing by. Welcome to the El Pollo Loco First Quarter 2025 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.
Good day, ladies and gentlemen, and thank you for standing by and welcome to the El Pollo Loco first quarter 2025 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.
Operator: Please note that this conference is being recorded today, May 1, 2025.
Please note that this conference is being recorded today may one that 2025.
Ira Fils: And now I would like to turn the conference over to Ira Fils, the company's Chief Financial Officer. Thank you, operator, and good afternoon. By now, everyone should have access to our first quarter 2025 earnings release. If not, it can be found at www.elpolloloco.com in the investor relations section.
Speaker Change: And now I would like to turn the conference over to <unk>, The company's Chief Financial Officer.
Speaker Change: Thank you operator, and good afternoon by now everyone should have access to our first quarter 2025 earnings release, if not it can be found at www Dot El Pollo Loco Dot com in the Investor Relations section.
Ira Fils: 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 growth opportunities, strategic and operational initiatives, expectations regarding sales and margins, potential changes to our product platforms, capital expenditure plans, expectations regarding kiosk rollouts, the ability of our franchisees to drive growth, expectations regarding commodity and wage inflation, remodel plans, and our 2025 guidance, among others. These four looking statements are not guarantees of future performance and therefore you should not put undue reliance on them. These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we currently expect.
Speaker Change: 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 growth opportunities strategic and operational initiatives expectations regarding sales and margins potential changes to our product platforms capital expenditure.
Speaker Change: Plans expectations regarding kiosk rollouts, the ability of our franchisees to drive growth expectations regarding commodity and wage inflation remodel plans in our 2025 guidance among others. These forward looking statements are not guarantees of future performance and therefore.
Speaker Change: You should not put undue reliance on them.
Speaker Change: These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we currently expect we refer you to our recent SEC filings, including our Form 10-K for the year ended 2024 previously.
Ira Fils: We refer you to our recent SEC filings, including our Form 10-K for the year ended 2024 previously filed, as well as our Form 10-Q for the first quarter to be filed for a more detailed discussion of the risks that could impact our future operating results and financial conditions. We expect to file our 10-Q for the first quarter of 2025 tomorrow and would encourage you to review that document at your earliest convenience.
Speaker Change: File as well as our Form 10-Q for the first quarter to be filed for a more detailed discussion of the risks that could impact our future operating results.
Speaker Change: Our results and financial conditions.
Speaker Change: We expect to file our 10-Q for the first quarter of 2025 Tomorrow and would encourage you to review that document at your earliest convenience.
Ira Fils: During today's call, we will discuss non-GAAP measures which we believe can be useful in evaluating performance. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP and reconciliations to comparable GAAP measures are available in our earnings report. which is available in the investor relations section of our website.
Speaker Change: During today's call, we will discuss non-GAAP measures, which we believe can be useful in evaluating performance.
The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP and reconciliations to comparable GAAP measures are available in our earnings release, which is available in the Investor Relations section of our website.
Ira Fils: 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 gap financial measure because without unreasonable efforts, we are unable to predict with reasonable certainty the amount of or timing of non-gap adjustments that are used to calculate income from operations and company-operated restaurant revenue on a forward-looking basis.
Speaker Change: 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 VITAS without unreasonable efforts, we are unable to predict with reasonable certainty.
Speaker Change: The amount of <unk>.
Speaker Change: Or timing of non-GAAP adjustments that are used to calculate income from operations in company operated restaurant revenue on a forward looking basis.
Liz Williams: Now, I would like to turn it over to our CEO, Liz Williams. Thank you, Ira. And good afternoon, everyone. As we enter the second year of our brand turnaround, I am proud of what we have accomplished thus far and remain excited by the future of El Pollo Loco. As you know, a brand turnaround is never easy, even in the best of environments. And the dynamic and challenging consumer environment we are facing to start the year is only adding another layer of complexity. Progress takes time, and to ensure we achieve our ambitions of long-term, sustainable growth, we are committed to taking no shortcuts.
Speaker Change: Now I would like to turn it over to our CEO Liz Williams.
Liz Williams: Thank you IRA and good afternoon, everyone.
Liz Williams: And we entered the second year as a brand turnaround I am proud of what we have accomplished thus far and remain excited by the future about play a locale argued.
Liz Williams: As you know a brand turnaround is never easy even in the best of environments and the dynamic and challenging consumer environment. We are facing to start the year is only adding another layer of complexity.
Liz Williams: It takes time and to ensure we achieve our ambitions as long term sustainable growth. We are committed to taking no shortcuts, while we acknowledge our first quarter results were underwhelming, we remain confident in the steps we are taking and are excited about that.
Liz Williams: While we acknowledge our first quarter results were underwhelming, we remain confident in the steps we are taking and are excited about the initiatives we have planned for the remainder of the year, including our upcoming brand relaunch and our menu innovation pipeline, both of which I will speak to in a moment. While the restaurant industry may be choppy in the near term, we continue to believe we are positioning El Pollo Loco to drive substantial long-term shareholder value. During the first quarter, we delivered proof points that reinforce our conviction in the brand's long term opportunity, including proving that menu innovation can drive trial to the brand through the launch of Mango Habanera.
Liz Williams: We have planned for the remainder of the year, including our upcoming brand relaunch and our menu innovation pipeline.
Liz Williams: Both of which I will speak to in a moment.
Liz Williams: While the restaurant industry may be choppy in the near term. We continue to believe we are positioning I'll play a lockout to drive substantial long term shareholder value.
Liz Williams: During the first quarter, we delivered proof points that reinforce our conviction in the brand's long term opportunity, including proving that menu innovation can drive trial. He was the brand through the launch of Mango habanero.
Liz Williams: identifying opportunities to further improve our operations and provide an even better customer experience through the investments we made last year. and opening two new restaurants in Q1 while firming up our path to at least 10 openings in 2025 and a further acceleration in 2026.
Liz Williams: Identifying opportunities to further improve our operations and provide an even better customer experience through the investments we made last year.
Liz Williams: And opening two new restaurants in Q1, while firming up our path to at least 10 openings in 2025, and a further acceleration in 2020 six.
Liz Williams: As we look forward, let me start by touching on what will drive growth in both the short and the long term. Our signature fire-grilled, citrus-marinated chicken continues to be the core strength of El Pollo Loco. It's the foundation of our brand-that-wins pillar. From our chicken family meals to our more handheld items, like tacos, burritos, and our delicious tostadas and salads, we need to remind both new and waxed consumers that El Pollo Loco stands for quality and flavorful food that is quick, convenient, and offers value for the money. To that end, we started the year by showcasing our first chicken innovation in many years, Mango Habanero Fire Grilled Chicken.
Liz Williams: I believe afford let me start by touching on what will drive growth in both the short and the long term.
Liz Williams: Our signature fire grilled citrus marinated chicken continues to be the core strength and they'll play a laptop.
Liz Williams: It's the foundation of our brand that when Taylor from our chicken family meals to our more handheld items like Taco Burrito, and our delicious Tristan and saw that we need to remind both new and lapsed consumers that all play a locale stands for quality and flavor.
Liz Williams: Full FID that is quick convenient and offers value for the money.
Liz Williams: To that end, we started the year by showcasing our first chicken and innovation in many years mango habanero fire grilled chicken.
Liz Williams: Our guests love it. Mango Habanero is delivered on taste and drove trial for new guests, giving us a proof point on the opportunity we have with flavor innovation and menu innovation more broadly. This gets us excited about our next several flavorful, affordable, and quality products in the pipeline. In a few weeks, we will launch our new Fresca Wraps and Salads, followed later by our Quesadillas at the end of June. Our new quesadilla combo, which features all white meat chicken, shredded jack cheese with a choice of our signature avocado salsa or creamy chipotle sauce, includes guacamole for dipping paired with chips and a drink.
Liz Williams: Our guests love it.
Liz Williams: Oh habanero deliberate on taste and drive trial for new gas, giving us a proof point on the opportunity we have with flavor innovation and menu innovation more broadly.
Liz Williams: This gets us excited about our next several flavorful affordable and quality products in the pipeline.
Liz Williams: In a few weeks, we will launch our new frasca wraps and salads, followed later by a case of D. As at the end of June.
Liz Williams: Our new Quesadilla combat, which features all white meat chicken shredded Jack cheese with a choice of our signature avocado salt that or creamy chipotle sauce included whack, a mole wafer dipping paired with chips and a drink.
Liz Williams: All of that targeted at a combo price point of $9.99, a tremendous value while delivering on quality and flavor. Combined with an a la carte pricing in the mid $7 range, these price points offer a solution to the number one consumer opportunity that we see, price and affordability. The Quesadilla is also a product that fits very well with a younger consumer due to its portability and convenience. The feedback from our test has exceeded our expectations, not just from consumers, but also from our team members due to operational simplicity. We believe so much in this new quesadilla that we proactively accelerated the rollout to early summer to get this amazing product in the hands of our consumers even faster.
Liz Williams: All of that targeted at a combo price point of 919.
Liz Williams: A tremendous value, while delivering on quality and flavor.
Liz Williams: Combined with an Ala carte pricing in the mid $7 range. These price points offer installation to the number one consumer opportunities that we see price and affordability.
Liz Williams: The case of India is also a product that fits very well with a younger consumer due to its portability and convenience factors.
Liz Williams: The feedback from our test has exceeded our expectations not just from consumers, but also from our team members Q2 operational simplicity.
Liz Williams: We believe so much in this new cases that we proactively accelerated the rollout to early summer to get this amazing product in the hands of ARX <unk> Sanders even faster.
Liz Williams: While our culinary team has done a nice job rebuilding the innovation pipeline, we have also been laying the groundwork for our brand transformation. Over the last few months, we have conducted third party research, which confirms the equity we have with consumers centering around quality, fresh ingredients and cooking in our restaurants. This work also reemphasizes that we have an opportunity to offer even more affordable chicken options like quesadillas, wraps, strips, sandwiches, all to meet that on-the-go lifestyle of so many consumers. Fortunately, our product pipeline is geared to meet these consumer needs. We see an opportunity that you QSRs can address with quality.
Liz Williams: While our culinary team has done a nice job rebuilding the innovation pipeline. We have also been laying the groundwork for our brand transformation.
Over the last few months, we have conducted third party research, which confirms the equity we have with consumers centering around quality fresh ingredients and cooking in our restaurants.
Liz Williams: This work also reemphasize is that we have an opportunity to offer even more affordable chicken options like quesadilla wrap strips sandwiches.
Liz Williams: All to meet that on the go lifestyle of so many consumers.
Liz Williams: Fortunately our product pipeline is geared to meet these consumer needs.
Liz Williams: We see an opportunity that you <unk> can address with quality, we are well positioned in this growing chicken category with our unique twist of Mexican flavors and we are looking for to unveiling. The first part of our new brand campaign later this month as we evolve.
Liz Williams: We are well positioned in this growing chicken category with our unique twist of Mexican flavors and we are looking forward to unveiling the first part of our new brand campaign later this month as we evolve our brand to be more modern with an updated brand aesthetic as well as a new approach to marketing and brand positioning. Ultimately, this effort will allow us to show our passion for chicken, our fresh ingredients, and our quality food. We know it takes some time for all of the brand touch points to ripple throughout the system, and we are excited as we take the first step, which we know will have a positive and elevating impact.
Liz Williams: Our brand to be more modern with an updated brand aesthetic as well as a new approach to marketing and brand positioning.
Liz Williams: Ultimately this effort will allow us to show our passion for chicken, our fresh ingredients and our quality food.
Liz Williams: We know it takes some time for all of the brand touch points to ripple throughout the system and we are excited as we take the first step, which we know will have a positive and elevating impact.
Liz Williams: This brings me next to our Hospitality Mindset Pillar. Improving our four wall operations remains our top priority in transformation, and we can accomplish this by building upon standards and accountability. We have a clear goal and set of actions to get our consistency and quality of service to match that of our food quality. As we mentioned on our last call, we implemented a new customer feedback system with a best-in-class partner, Service Management Group, or SMG, to enable us to improve our closed-loop customer feedback system, provide better customer service, and more clearly benchmark customer feedback with other leaders in the restaurant industry.
Liz Williams: This brings me next to our hospitality mindset pillar, improving our four wall operations remain our top priority in transformation and we can accomplish this by building upon standards and accountability.
Liz Williams: We have a clear goal and set of actions to get our consistency and quality of service to match that of our food quality.
Liz Williams: As we mentioned on our last call, we implemented a new customer feedback system with a best in class partner service management career or SMG to enable us to improve our closed loop customer feedback system provides better customer service and more clearly benchmark test.
Liz Williams: Or feedback with other leaders in the restaurant industry.
Liz Williams: This initial feedback we have received thus far has highlighted an opportunity we have to better serve our customers. particularly through order accuracy and hospitality. We know that when we are properly staffed with the right people in the right places at the right time, we provide our guests with excellent experiences. We are focused on driving consistency across the system, both company and franchise. to ensure that our customers are getting the correct order every time. We truly believe that customer service drives transactions, and customer loyalty only grows with better service. We are optimistic that improvement will positively impact sales and transactions as we move forward.
Liz Williams: This initial feedback we have received thus far has highlighted an opportunity we have to better serve our customers, particularly through order accuracy and hospitality.
We know that when we are properly staffed with the right people in the right places at the right time, we provide our guests with excellent experiences we.
Liz Williams: We are focused on driving consistency across the system.
Speaker Change: Company and franchise.
Speaker Change: To ensure that our customers are getting the correct order every time.
Speaker Change: We truly believe that customer service drives transactions and customer loyalty only grabs with better service. We are optimistic that improvement will positively impact sales and transactions as we move forward.
Liz Williams: Shifting to winning economics, we continue to focus on substantially improving our unit economics through methodical cost savings and asset modernization initiatives. Despite the headwinds of the first quarter, we remain confident in our ability to drive strong restaurant level contribution margins for the full year in the range of 17.25 to 17.75% as our teams continue to identify additional opportunities on an ongoing basis. One example I want to highlight that illustrates how we continue to improve our margins and our operations to strengthen our business model and to also drive new unit development is our recent distribution transition.
Speaker Change: Shifting to winning economics, we continue to focus on substantially improving our unit economics through a methodical cost savings and asset modernization initiatives.
Speaker Change: Despite the headwinds of the first quarter, we remain confident in our ability to drive strong restaurant level contribution margin for the full year in the range of $17 two five to $17 seven 5% as our teams continue to identify additional.
Speaker Change: No opportunities on an ongoing basis.
Speaker Change: One example, I want to highlight that illustrates how we continue to improve our margins and our operations to strengthen our business model and to also drive New unit development is our recent distribution transition.
Liz Williams: After many years with the same distribution partner. We seamlessly shifted to PFG at the beginning of the year. Not only does this transition support our improving business model, but this partnership and enhanced distribution footprint sets us up for future growth outside of the seven states we operate in today. In addition to our improved restaurant level margins, we are also making progress on our first new build with a targeted cost below $2 million. This prototype, which we are calling ICONiC, not only showcases an enduring yet modern and efficient design that is uniquely El Pollo Loco, but it also helps us achieve our goal to reduce build costs and drive improved cash-on-cash returns as we grow our footprint across the country.
Speaker Change: After many years with the same distribution partner.
Speaker Change: We seamlessly shifted PFG at the beginning of the here not only does this transition support our improving business model, but this partnership and enhanced distribution footprint sets us up for future growth outside of the southern States we operate in today.
Speaker Change: In addition to our improved restaurant level margins. We are also making progress on our first new belt with a targeted costs below $2 million.
Speaker Change: This prototype, which we are calling iconic not only showcases an enduring yet modern and efficient design that is uniquely I'll play a lot.
Speaker Change: But it also helps us achieve our goal to reduce those costs and drive improved cash on cash returns as we grow our footprint across the country.
Liz Williams: We now have this prototype available in a remodeled format and will be under construction this summer on this new build. Speaking further on our unit development effort, we remain confident in our plan to open at least 10 new restaurants in 2025, including 2 restaurants that have already been opened. This would represent the largest system-wide unit growth since 2022. And as a reminder, the majority of these new openings will be outside of California. They will be spread across our emerging markets with restaurants that are under development today in Arizona, Colorado, Idaho, New Mexico, Texas and Washington.
Speaker Change: We now have this prototype available in a remodeled format and will be under construction. This summer on this new bill.
Speaker Change: Speaking further on our unit development effort, we remain confident in our plan to open at least 10, new restaurants in 2025, including two restaurants that have already been opened this would represent the largest system wide unit growth since 2022.
Speaker Change: And as a reminder, the majority of these new openings will be outside of California, They will be spread across our emerging markets with restaurants that are under development today in Arizona, Colorado, Idaho, New Mexico, Texas and Washington.
Liz Williams: Notably, our next opening will be our 500th restaurant, and it will be outside California. It'll either be in Arizona or Colorado Springs. We'll know in just a couple weeks.
Speaker Change: Notably our next opening will be our 500th restaurant and it will be outside California, it'll either be in Arizona, or Colorado Springs will now and just a couple of weeks it will be a fitting tribute to what is yet to come and I'll play a logo celebrates our 50.
Liz Williams: It will be a fitting tribute to what is yet to come as El Pollo Loco celebrates our 50th year this year. As you know, there have been a lot of conversations recently about the impact of tariffs on build cost and how it will impact our industry as a whole. We continue to monitor the situation. More broadly speaking, we are fortunate to have a flexible restaurant format, which allows our company development and our franchise partners. The ability to take advantage of restaurant closures that are out there in the industry and convert them to El Pollo Loco.
Speaker Change: This year this year.
Speaker Change: As you know there have been a lot of conversations recently about the impact of tariffs on build cost and how it will impact our industry as a whole.
Speaker Change: We continue to monitor the situation more broadly speaking we are fortunate to have a flexible restaurant format, which allows our company development and our franchise partners the ability to take advantage of restaurant closures that are out there in the industry and convert them.
Liz Williams: This helps us achieve a reduced build cost and deliver outsized returns relative to a new ground up build, and it does help to mitigate some of that potential cost inflation. Despite the current macro uncertainty, the momentum we are seeing in our development pipeline gives us increased confidence in further acceleration of our openings into 2026.
Speaker Change: To all play out logos this.
Speaker Change: This helps us achieve a reduced build cost and deliver outsized returns relative to our new ground up bill and it does help to mitigate some of that potential cost inflation.
Speaker Change: Despite the current macro uncertainty the momentum we are seeing in our development pipeline gives us increased confidence in further acceleration of our openings into 2020 six.
Liz Williams: Remodeling is also an important part of our development strategy and our brand transformation as we modernize the El Pollo Loco brand. To that end, we continue to utilize a two-tiered approach on remodeling. This includes a low-cost five-year refresh investment and a more extensive 10-year remodel investment. Our goal is to touch roughly half of our total system over the next four years in partnership with our franchise partners. For the year, we are now expecting to remodel between 60 to 70 system-wide restrooms. eight of which have already been completed to date. We are pleased with the early sales and the economic returns on these remodels, and we look forward to sharing more exciting updates on our development as the year progresses.
Speaker Change: Remodeling is also an important part of our development strategy and our brand transformation as we modernize the L play a local brand too.
Speaker Change: To that end, we continue to utilize a two tiered approach on remodeling. This includes our low cost five year refresh investment and a more extensive tenure remodel in Boston.
Speaker Change: Our goal is to attach roughly half of our total system over the next four years in partnership with our franchise partners.
Speaker Change: For the year, we are now expecting to remodel between 60 to 70 system wide restaurants, eight of which have already been completed to date.
Speaker Change: We are pleased with the early sales and the economic returns on these remodel and we look forward to sharing more exciting updates on our development as the year progresses.
Liz Williams: In closing, I remain excited for what we have in store for 2025. We are starting to see many green shoots from our efforts to revitalize our brand. While we recognize we are operating in a challenging economic climate, our focus remains squarely on growth and what we can control, offering the highest quality chicken with the best customer service. We have an amazing team and we are ready to capture the opportunities ahead and make El Pollo Loco the nation's favorite fire-grilled chicken restaurant.
Speaker Change: In closing I remain excited for what we have in store for 2025, we are starting to see many green shoots from our efforts to revitalize our brand.
Speaker Change: While we recognize we are operating in a challenging economic climate, our focus remains squarely on growth and what we can control offering the highest quality chicken with the best customer service, we have an amazing team and we are ready to capture the opportunities ahead and make all play a logo.
Speaker Change: The nation's favorite fire grilled chicken restaurant.
Ira Fils: With that, let me turn the call back over to Ira for a more detailed discussion of our first quarter financial results. Thank you, Liz, and good afternoon, everyone. For the first quarter, and in March 26, 2025, total revenue was $119.2 million compared to $116.2 million for the first quarter of 2024. company-operated restaurant revenue increased 1.2% to $98.4 million from $97.2 million in the same period last year. The $1.2 million increase in company-operated restaurant sales was primarily driven by a 0.6% increase in company-operated comparable restaurant sales, as well as additional sales from the opening of two restaurants during or subsequent to the first quarter of 2024.
IRA: With that let me turn the call back over to IRA for a more detailed discussion of our first quarter financial results.
IRA: Thank you Liz and good afternoon, everyone.
Speaker Change: For the first quarter ended March 26th 2025, total revenue was $119 2 million compared to $116 2 million for the first quarter of 2024 compass.
Speaker Change: Company operated restaurant revenue increased one 2% to $98 4 million from $97 2 million in the same period last year.
Speaker Change: The 1.2 million increase in company operated restaurant sales was primarily driven by a 0.6% increase in company operated comparable restaurant sales as well as additional sales from the opening of two restaurants during or subsequent to the first quarter of 2000.
Ira Fils: The increase in comparable restaurant sales included a 4.6% increase in average check size and an approximate 3.8% decrease in transactions. During the first quarter, our effective price increase versus 2024 was about 4.4%. Franchise revenue increased 16.2%. to $13.2 million during the first quarter driven by a $1.8 million in IT pass-through revenue related to the franchisee rollout of our new point-of-sale system.
Speaker Change: And in 'twenty for the.
Speaker Change: The increase in comparable restaurant sales included a four 6% increase in average check size and an approximate three 8% decrease in transactions during.
Speaker Change: During the first quarter, our effective price increase.
Speaker Change: Versus 2024 was about four 4%.
Speaker Change: Franchise revenue increased 16, 2%.
Speaker Change: To $13 2 million during the first quarter driven by a $1.8 million in pass through revenue related to the franchisee rollout of our new point of sale system.
Ira Fils: which is offset by a corresponding expense in franchise expenses. In addition, the increase in franchise revenue was due to the four new franchise-operated restaurant openings during or subsequent to the first quarter of 2024.
Speaker Change: Which is offset by a corresponding expense and franchise expenses.
Speaker Change: In addition, the increase in franchise revenue was due to the four new franchise operated restaurant openings during or subsequent to the first quarter of 2024.
Ira Fils: The increase in franchise revenue was partially offset. by comparable restaurant sales decrease of 1.3%.
Speaker Change: The increase in franchise revenue was partially offset.
Speaker Change: By comparable restaurant sales decrease of one 3%.
Ira Fils: Looking ahead, second quarter to date through April 23rd, 2025, system-wide comparable store sales decreased 1.2 percent, consisting of a 0.1 percent decrease in company-operated restaurants and a 1.8 percent decrease in franchise restaurants. As we look to the remainder of the year, we currently expect a sequential quarterly acceleration in our comp trends in the third and fourth quarter, driven by our brand relaunch in mid-May and the launch of quesadillas this summer, combined with easing prior year quarterly compares as we move through the year. We remain excited about the long-term potential of the brand and believe our brand relaunch and menu innovations, like the launch of quesadillas, will serve as important foundations for growth over time, supported by additional initiatives currently under development.
Speaker Change: Looking ahead second quarter to date through April 23, 2025 system wide comparable store sales decreased 1.2% consisting of a 0.1% decrease in company operated restaurants and a one 8%.
Speaker Change: Decrease in franchise restaurants.
Speaker Change: As we look to the remainder of the year. We currently expect our sequential quarterly acceleration in our comp trends in the third and fourth quarter driven by our brand relaunch in mid May and the launch of case ideas. This summer combined with easing prior year quarterly compares.
Speaker Change: As we move through the year.
Speaker Change: We remain excited about the long term potential of the brand and believe our brand relaunch and menu innovations like the launch of case ideas will serve as important foundations for growth overtime supported by additional initiatives currently under development.
Ira Fils: Turning to expenses, food and paper costs as a percentage of company restaurant sales decreased 120 basis points year over year to 25.2% due to higher menu pricing, partially offset by commodity inflation of approximately 0.4% during the first quarter. We expect commodity inflation to be in the 1% to 2% range for the whole year. As a reminder, our commodity basket is largely domestic, with chicken being the largest component. Internationally, our largest exposures include avocados, tomatoes, various other produce items, and packs. Labor and related expenses as a percentage of company restaurant sales increased about 120 basis points year over year to 32.7%.
Speaker Change: Turning to expenses food and paper costs as a percentage of company restaurant sales decreased 120 basis points year over year to 25, 2% due to higher menu pricing partially offset.
Speaker Change: By commodity inflation of approximately one 4% during the first quarter.
Speaker Change: We expect commodity inflation to be in the 1% to 2% range for the full year.
Speaker Change: As a reminder, our commodity basket is largely domestic with chicken being the largest component.
Speaker Change: Internationally, our largest exposures include avocados and Tomatoes.
Speaker Change: Various other pro two items and packaging.
Speaker Change: Labor and related expenses as a percentage of company restaurant sales increased about 120 basis points year over year.
Ira Fils: The increase in wages was partially offset by menu pricing and better operating efficiencies, primarily driven through improvements in labor deployment. Wage inflation during the first quarter was approximately 12% for all bar company owned locations. For the full year 2025, we expect waived inflation of between 4% to 5% for all our company-owned locations. Occupancy and other operating expenses as a percentage of company restaurant sales increased 150 basis points year over year to 26.1%. primarily due to higher rent and CAM, along with higher third-party delivery, related expenses, utilities, and higher other operating expenses. Our restaurant contribution margin for the first quarter was 16% compared to 17.6% in the year ago period.
Speaker Change: Just 32.7% the increase in wages was partially offset by menu pricing and better operating efficiencies, primarily driven through improvements in labor deployment.
Speaker Change: Wage inflation during the first quarter was approximately 12% for all our company owned locations for the full year 2025, we expect wage inflation of between 4% to 5% for all our company owned locations.
Speaker Change: Occupancy and other operating expenses as a percentage of company restaurant sales increased 150 basis points year over year to 26.1%.
Speaker Change: Primarily due to higher rent and Cam along with higher third party delivery related expenses utilities and higher other operating expenses.
Speaker Change: Our restaurant contribution margin for the first quarter was 16% compared to 17, 6% in the year ago period.
Ira Fils: The decrease was largely driven by a mismatch of pricing and labor inflation due to the April 2024 California minimum wage increase to $20 per hour. More specifically, rather than implementing a single large price increase, we chose to take multiple smaller price increases over time in advance of the wage increase. This pricing increase without the associated wage inflation provided an outside benefit to our first quarter 2024 restaurant contribution. Other contributors to the decrease included sales due leverage, along with higher occupancy and other operating costs I just mentioned. As Liz mentioned, for the full year 2025, we continue to expect our restaurant contribution margin to be in the 17.25% to 17.75% range, as the lower than expected first quarter margin is offset by incremental margin enhancing opportunities already identified by our team.
Speaker Change: The decrease was largely driven by a mismatch of pricing and labor inflation due to the April 2020 for California minimum wage increase to $20 per hour more specifically rather than implementing a single large price increase we chose to take more.
Speaker Change: Notable smaller price increases overtime.
Speaker Change: In advance of the wage increase.
Speaker Change: This pricing increase without the associated wage inflation provided an outside benefit to our <unk>.
Speaker Change: First quarter 2024 restaurant contribution.
Speaker Change: Other contributors to the decrease included sales deleverage along with higher occupancy and other operating costs I just mentioned.
Liz Williams: As Liz mentioned for the full year 2025, we continue to expect our restaurant contribution margin to be in the $17 two five to $17 seven 5% range as the lower than expected first quarter margin is offset by incremental margin enhancing opportunities already identified.
Ira Fils: In addition, I want to remind you that our restaurant contribution margin already contemplates the impact from tariffs, which we anticipate will be relatively minimal as our largest commodity cost chicken is domestically sourced and we have limited international exposure in the remainder of our commodity battle. General and administrative expenses decreased 80 basis points year over year to 9.5% of total revenue. The decrease for the quarter was primarily due to $1.2 million in restructuring and executive transition costs in the prior year, combined with $600,000 received from a legal settlement in the current year. These decreases were partially offset by $600,000 in special legal and professional fees related to shareholder activism, as well as a $500,000 increase in other general administrative expenses to drive our strategic initiative.
Speaker Change: By our team.
Speaker Change: In addition, I want to remind you that our restaurant contribution margin already contemplates the impact from tariffs, which we anticipate will be relatively minimal as our largest commodity cost chicken is domestically sourced and we have limited international exposure in the remainder of our commodity basket.
Speaker Change: General and administrative expenses decreased 80 basis points year over year to nine 5% of total revenue. The decrease for the quarter was primarily due to $1 2 million in restructuring and executive transition costs in the prior year combined with the 600000.
Speaker Change: Dollars received from a legal settlement in the current year.
Speaker Change: These decreases were partially offset.
Speaker Change: By $600000 in special legal and professional fees related to shareholder activism as well as a $500000 increase in other general administrative expenses to drive our strategic initiatives.
Ira Fils: During the first quarter, we recorded a provision for income taxes of $2.3 million for an effective tax rate of 29.7%. This compares to a provision for income taxes of $2.2 million and an effective tax rate of 27.1% in the prior year period. We reported gap net income of $5.5 million, or $0.19 per diluted share, in the first quarter compared to gap net income of $5.9 million, or $0.19 per diluted share, in the prior year period. Adjusted net income for the quarter was $5.5 million or $0.19 per diluted share compared to adjusted net income of $6.8 million or $0.22 per diluted share in the first quarter of last year.
Speaker Change: During the first quarter, we recorded a provision for income taxes of $2 3 million for an effective tax rate of 29, 7%. This compares to a provision for income taxes of $2 2 million and an effective tax rate of 27, 1% in the prior year period.
Speaker Change: We reported GAAP net income of $5 5 million or 19 cents per diluted share in the first quarter compared to GAAP net income of $5 9 million or 19 cents per diluted share in the prior year period.
Speaker Change: Adjusted net income for the quarter was $5 5 million or <unk> 19 per diluted share compared to adjusted net income of $6 8 million or <unk> 22 cents per diluted share in the first quarter of last year.
Ira Fils: please refer to our earnings release for a reconciliation of non-GAAP measures. In regards to unit development, we opened two franchise stores in California during the first quarter. Regarding our remodeling effort, during the first quarter, we completed four franchised restaurant remodels. In addition, in April, we completed one company and three franchise remodels, bringing our total completed remodels to eight through the end of April. In terms of liquidity, as of March 26, 2025, we had $73 million of debt outstanding and $4.3 million in cash and cash equivalent.
Speaker Change: Please refer to our earnings release for a reconciliation of non-GAAP measures.
Speaker Change: In regards to the unit development, we opened two franchise stores in California during the first quarter.
Speaker Change: Regarding our remodeling effort during the first quarter, we completed four franchised restaurant remodels.
Speaker Change: In addition in April we completed one company and three franchise Remodels, bringing our total completed remodels to eight through the end of April.
Speaker Change: In terms of liquidity as of March 26th 2025.
Speaker Change: We had $73 million of debt outstanding and $4 3 million in cash and cash equivalents.
Ira Fils: Additionally, during the first quarter, we repurchased approximately 160,000 shares of stock for approximately $1.8 million.
Speaker Change: Additionally, during the first quarter, we repurchased approximately 160000 shares of stock for approximately $1.8 million.
Ira Fils: And finally, based on our results to date, we would like to provide you with the following guidance for 2025. The opening of 10 to 11 system-wide restaurants, including 9 to 10 franchise restaurants and up to one company-owned restaurant. Capital spending of $30 to $34 million. G&A expenses of $48 million to $51 million, including approximately $5.5 million in stock compensation expenses. and an estimated effective income tax rate of 29 to 29.5% before discrete item.
Speaker Change: And finally based on our results to date, we would like to provide you with the following guidance for 2025.
Speaker Change: The opening of 10 to 11 system wide restaurants, including nine to 10 franchise restaurants and up to one company owned restaurants.
Speaker Change: Capital spending of $30 million to $34 million.
Speaker Change: G&A expenses of $48 million to $51 million, including approximately $5 5 million and stock compensation expense.
Speaker Change: And an estimated effective income tax rate of 29 to 29, 5% before discrete items.
Ira Fils: This concludes our prepared remarks.
Operator: We'd like to thank you again for joining us on the call today, and we are now happy to answer any questions that you may have.
Speaker Change: This concludes our prepared remarks, we'd like to thank you again for joining us on the call today.
Speaker Change: And we are now happy to answer any questions that you may have operator, please open the line for questions.
Operator: 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 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you 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 key. One moment, please, while we poll for questions.
Speaker Change: Thank you we will now be conducting a question answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May Press Star two if you 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 <unk>.
Speaker Change: Darkies one moment please poll for questions.
Jeremy Hamblin: The first question is from Jeremy Hamblin from Craig Hallam Capital Group. Please go ahead. Great. Thanks for taking our questions here. So you noted on the call that you were expecting sequential improvements in Q3, Q4. I wanted to get an understanding of what your expectations might be looking like on Q2, same store sales. You know, given the environment that we're in, you know, do you expect comps to be kind of similar to Q1 or maybe a little softer? Any color you might be able to share would be great. Sure, thanks for the question. So as we've seen in the business and we've all heard from others this week or in the last couple of weeks that I've reported, the consumer pullback is real.
Speaker Change: The first question is from Jeremy Hamblin from Craig Hallum Capital Group. Please go ahead.
Jeremy Hamblin: Great. Thanks for taking our questions here.
Jeremy Hamblin: So you noted on the call that you were expecting sequential improvements in Q3 Q4.
Jeremy Hamblin: I wanted to get an understanding of what your expectations might be look looking like on Q2 same store sales.
Jeremy Hamblin: You know given the environment that we're in you know do you expect comps to be kind of similar to Q1, or maybe a little softer or any color you might be able to share would be great.
Jeremy Hamblin: Sure. Thanks for the question.
Jeremy Hamblin: So as we've seen in the business and we've all heard after mothers are this week or in the last couple of weeks that have reported that consumer pullback is real and at this point, we see these headwinds continuing as we go through Q2.
Liz Williams: And at this point, we see these headwinds continuing as we go through Q2. That being said, we're focused on what we can control. As an example, our brand relaunch couldn't come at a better time. We're really excited for that. And as I mentioned, we're moving up value and innovation with the quesadilla along with finding ways to feature more value across our menu, whether it's in our digital channels or just bringing it to the forefront for consumers so they can see it more clearly. And we're gonna do this while we reinforce our quality. We really think that distinguishes us.
Jeremy Hamblin: That being said we're focused on what we can control as an example, our brand relaunch couldn't come at a better time.
Jeremy Hamblin: Really excited and as I mentioned, we're moving up value and innovation with the Quesadilla, along with finding ways to feature more value across our menu whether its in our digital channels or just.
Jeremy Hamblin: Just bringing it to the forefront for consumers that they can see it more clearly and we're gonna do that's why we reinforced our quality, we really think that distinguishes us.
Liz Williams: So you'll see that amping up even more so as we go through Q2 and then Q3 and Q4. Our lap also does get easier as we go into the back half of the year as well, particularly in Q3 and Q4. Sure. And as a follow-up to that, so it sounds like you had some initial success with Mango Habanero in the launch in February. I don't know how long that that may have lasted and if that's kind of continuing in terms of how it, you know, it mixed. But I think you have the fresca wraps and salads coming here in May and then quesadilla launch in June.
Jeremy Hamblin: So youll see that amping up even more so as we go through Q2, and then Q3 and Q4 are our lap also does get easier as we go into the back half of the year as well, particularly in Q3 and Q4.
Speaker Change: Sure and as a follow up to that so it sounds like you had some initial success with mango habanero are in the launch in February.
Speaker Change: I don't know how long that that may have lasted and if that's kind of continuing in terms of how it you know it mixed.
Speaker Change: But I think you have the fresco wraps and salads coming here in May.
Liz Williams: In terms of thinking about how those products might impact, you know, comp trends, like how soon do you think, will you know whether or not those have been really effective new introductions? Yes, so Mango Habanero, you're right, it drove a trial by many, and it just showed us innovation. This consumer wants innovation. They want a reason to come in, whether they're a new or a lapsed user. Our next launch is our Fresca Salads and Wraps. That will be launching here in about two weeks. We're really excited about those products. They're portable, they're delicious, they feature everything that's great about El Pollo Loco.
Speaker Change: In case of Dia launch in June.
Speaker Change: In terms of thinking about how those.
Speaker Change: Products might.
Speaker Change: <unk> impact.
Speaker Change: Comp trends like how soon do you think will you know whether or not those have been really effective new introductions.
Speaker Change: Yes, so mango habanero youre right it drove and trial I buy buy money and it just showed US innovation. This consumer wants innovation. They want a reason to come come in whether there are new or lapsed user. Our next launch is our fresca salads and wraps that we'll be launching here in about.
Speaker Change: Two weeks.
Speaker Change: We're really excited about those products their portable they're delicious there.
Liz Williams: It's more of a leafy green product, whether it's in a salad or a wrap. And then the quesadilla will be the end of June. The quesadilla is more of that portable eat and is priced at a more value price point. So we think the combination of both Fresca Wraps and quesadilla will offer, it's likely two different consumers, some crossover, but it'll give options for both of those. So in the upcoming weeks, you'll start to see those products. Got it. Thanks for the color. And then just one more for me. I know you've made some investments in kitchen equipment this year.
Speaker Change: Yeah. They feature everything Thats, great about all play out with our it's more of a leafy green.
Speaker Change: Product, whether its in a salad or a rap and then the case it will be the end of June the case of Dia is more of that portable eat and is priced at a more value price point. So we think the combination of best best Fresca wraps and cases offer.
Speaker Change: It's likely to different consumers, some crossover, but it'll give them options for both of those.
Speaker Change: So in the upcoming weeks, you'll start to see those products.
Speaker Change: Got it thanks for the color and then.
Just one more for me I know you've made some investments in kitchen equipment. This year.
Liz Williams: I wanted to get an understanding of kind of the timing of when you would see that rollout potentially impacting your labor costs as we move throughout the year. And then as a related question, if you're, you know, kind of expecting four to five percent for the year and yet 12 percent in Q1, does that mean you're kind of looking at maybe two to two and a half percent year over year inflation the rest of the year? So, I'll start and then I'll hand the back part over to Ira. In terms of equipment, we've been rolling out equipment since last year and then into this year.
Speaker Change: I wanted to get an understanding of kind of the timing of when you would see that that rollout potentially impacting your labor costs as we move throughout the year and then as a related question, if you're kind of expecting 4% to 5% for the year.
Speaker Change: India, 12% in Q1 does that mean, you're kind of looking at maybe 2% to 2.5% year over year inflation the rest of the year.
Speaker Change: So I'll start and then I'll hand, it back part over to Iraq in terms of equipment, we've been rolling out equipment since last year and then into this year. So last year items like our SASSA the equipment that helped us simplify how we make SASSA in the back of our restaurants or kiosks.
Liz Williams: So, last year, items like our salsa, the equipment that helped us simplify how we make salsa in the back of our restaurants or our kiosks. Most recently, we've just finished in our company restaurants, rolling out holding cabinets, which not only improve the quality of the chicken, but they also allow us at closing time, as an example, to shut down the grills a little bit earlier, which you can imagine, you know, save some time in terms of labor. So, all of that equipment, most of that is in our company restaurants. We're also always looking for, you know, what's the next productivity idea?
Speaker Change: Most recently, we've just finished and our company restaurants, rolling out holding cabinets, which not only improve the quality of the chicken, but they also allow us at closing time as an example, just shut down the growth a little bit earlier, which you can imagine you know save some time in terms of labor.
Speaker Change: So all of that equipment most of that is in our company restaurants.
Speaker Change: We're also always looking for you know what's the next productivity idea.
Ira Fils: But in terms of those items, those are in. And then I'll pass it to Ira for the second part. Yeah, and Jeremy, you're right. So, if you think about, you know, the back part of the year, you really choose two through four. We are looking about a two to two and a half percent increase from wages. Because, and really, as we sit here today, we're fortunate that California has not mandated an increase. They can take it up to three and a half percent. But as we sit here today, and as I think that as we look, you know, really at, you know, the economic climate has shifted, I think, some of the thinking in regards to, from a legislation standpoint, what's needed from a minimum wage increase.
Speaker Change: But in terms of those items those are in and then I'll pass the Tyra for the second part, yes, and Jeremy you're right. So if you think about the back part of the year do you really Qs two through four we are looking at about a two to two 5% increase from wages, because and really as we sit here today.
Speaker Change: We are fortunate that California has not mandated increase they can take it up to three and a half per se, but as we sit here today and as I think as we look.
Speaker Change: You know really the economic climate has has shifted I think some of the thinking in regards to from a legislation standpoint, what's needed from a minimum wage increase while so while we haven't heard anything yet I think we're optimistic that we should see some pretty moderate labor inflation in the back part of the year.
Jeremy Hamblin: Well, so while we haven't heard anything yet, you know, I think we're optimistic that we should see some pretty moderate labor inflation in the back part of the year. Great, that's helpful caller. Thanks for taking the questions and best wishes. Thank you.
Speaker Change: Great that's helpful color.
Speaker Change: Thanks for taking the questions and best wishes.
Speaker Change: Thank you.
Jake Bartlett: The next question is from Jake Bartlett from Truist Securities. Please go ahead. Great. Thanks for taking the questions.
Speaker Change: The next question is from Jake Bartlett from tourists Securities. Please go ahead.
Jake Bartlett: My first one was on your consumer and what you're seeing, and I'm wondering whether you can comment on some regional differences that you're seeing across your stores, and maybe more specifically, other brands have talked about the Hispanic consumer being under particular pressure in the near term. I wanted just to see whether you're seeing the same thing and whether you're thinking this or whether you're seeing any trajectory of that impact, whether it's at all getting better or worse or what have you, and just trying to get an idea as how that might unfold for the rest of the year.
Jake Bartlett: Great. Thanks for taking the questions.
Jake Bartlett: My first one was on your consumer in and what you're seeing in it and I'm wondering whether you can comment on some regional differences that you're seeing across your your stores and maybe more specifically you know other brands have talked about their Hispanic consumer being under particular pressure in the near term and wanted to just to see whether you're seeing.
Jake Bartlett: Doing the same thing and whether what are your thinking or whether you're seeing any any trajectory of that of that impact whether its at all getting better or worse or or you know what what have you and just trying to get an idea as how that might unfold for the rest of the year.
Liz Williams: Yeah, thanks for that, Jake. You know, as far as across our markets in different states, it's pretty similar what we're seeing in terms of, you know, the consumer pulling back. And then when you look across also income bands, you know, you're seeing it throughout. In terms of the Hispanic consumer, they, you know, have there have been other, you know, put that consumer under even more pressure. And we do see some of that in the business as well. But just broadly speaking, I would say, you know, it, whereas it used to just be the low end consumer, it's, it's the consumer throughout, as we're looking at, at all the data.
Speaker Change: Yeah, Thanks for that Jay.
Speaker Change: As far as across our markets in different states, it's pretty similar to what we're seeing in terms of you know the consumer pulling back and then when you look across also income band.
Speaker Change: You're seeing it throughout.
Speaker Change: In terms of the Hispanic consumer they have.
Speaker Change: Has there have been other factors that have you know, but that consumer under even more pressure than we do see some of that.
Speaker Change: In the business as well, but just broadly speaking I would say you know it.
Speaker Change: Whereas it used to just be at the low end consumer if it's the consumer throughout.
Speaker Change: We're looking at at all of the data.
Ira Fils: Okay, great. That's helpful. And, you know, just a quick question, as well on menu price, it seems like you're letting that roll off pretty, pretty quickly. What do you expect for menu price for the for the for the year as a whole? So for the year as a whole, we should be, you know, right around 3%. And if you think how it's going to play out for the quarters, we should will be about 3% in Q2 and about 2% in Q3 and Q4.
Speaker Change: Okay, Great. That's helpful and just a quick question as well on menu pricing. It seems like you're letting that roll off pretty pretty quickly what do you expect for menu price for the for the for the year as a whole.
Speaker Change: So for the year as a whole we should be right around 3% and if you think how it's going to play out for the quarters, we should we'll be about 3% in Q2 and about 2% in Q3 and four.
Ira Fils: Got it. Okay.
Ira Fils: You know, and just as we look at the restaurant, thanks for giving, again, the guidance for restaurant level margins, but within that, I want to make sure that there's not some moving pieces that I'm misunderstanding. I want to make sure what you're expecting for COGS, for instance. Do you expect some pretty, is it just the simple math of your guided pricing in your commodity inflation? Are there any other moving pieces in there that we should think about?
Speaker Change: Got it okay.
Speaker Change: And just ask me if we look at the restaurant.
Speaker Change: Thanks for giving anything again, the the guidance for restaurant level margins, but even within that I didn't want to make sure that there's not some moving pieces here I'm misunderstanding I wanted to make sure what you're expecting for for Cogs. For instance, do you expect some pretty is it just the simple math of your if your guided.
Speaker Change: Pricing in your commodity inflation are there any other moving pieces in there that we should we should think about.
Ira Fils: And then I have one more follow-up. Yeah, there is, you know, we we do have a, you know, a project underway internally, we call it project fire. But it's really all around, you know, optimizing, you know, what we're purchasing in our supply chain and what we're using in the restaurants. And there is some efficiency savings in the supply chain that we do have built. And I would just add to that, in addition to the supply chain and cost of goods, I talked about the distribution in terms of, you know, making that transition. And then where we started the questions with some of the labor productivity, whether it's the equipment, even though it was put in last year, beginning of this year, really now changing success routines in the restaurant so that our labor can be even more efficient.
Speaker Change: And then I have one more follow up.
Speaker Change: Yeah. There is you know we do have.
Speaker Change: A project underway internally, we call it project fire, but its really all around optimizing what were purchasing in our supply chain and what we're using in the restaurants and there is some efficiency savings in the supply chain that we do have built into that.
Speaker Change: And I would just add to that in addition to the.
Speaker Change: By chain in cost of goods I talked about the distribution in terms of making that transition and then where we started the questions with some of the labor productivity, whether it's the equipment, even though it's put in last year beginning of this year really now changing six dos routines in our restaurant so that.
Ira Fils: And we're looking at everything in addition to equipment. We're also looking at how do we open a restaurant? How do we close a restaurant? And how do we make sure we have the service at the peak times where it matters most for consumers and really take out any excess that is there? So, fresh thinking and just new approach, new sets of eyes on this to get productivity overall.
Speaker Change: Our labor can be even more efficient and we're looking at everything. In addition department. We're also looking at how do we open a restaurant how do we close our restaurants and how do we make sure we have the service.
Speaker Change: At peak times, where it matters most for consumers and really take out any access.
Speaker Change: That that is there so fresh thinking and just new approach.
Speaker Change: On this.
Ira Fils: Great.
Speaker Change: Net productivity overall.
Liz Williams: And then the last question, you had mentioned in the prepared remarks around momentum in developing the pipeline or the development pipeline. Can you comment further? Is there anything you can share in terms of how much momentum, maybe, you know, how much the development pipeline might be building at this point? It sounds like you're, you know, speaking fairly optimistically about it. You raised your guidance a little bit. All seem like positive signs.
Speaker Change: Great and then the last question you had mentioned in the prepared remarks around momentum in developing the pipeline or the development pipeline can you comment further or is there anything you can share in terms of how much momentum maybe how much the development pipeline might be building at this point it sounds like you are.
Speaker Change: Speaking fairly optimistically about it you raised your guidance a little bit all seem like like positive signs I'm wondering if there's any kind of numbers. We can we can talk about.
Liz Williams: I'm wondering if there's any kind of numbers that we can talk about. Yes, I am really encouraged with this part of the business. And when we say green shoots, this is a great example. In addition to the 10 units that we feel confident will open this year, the pipeline is coming together really nicely for next year. And as we all know, now getting things built takes usually 18 months plus. And so seeing those registrations and those LOIs, and then leases being signed for projects for next year gives us even more confidence in being able to accelerate far beyond the 10 that we have this year.
Speaker Change: Yeah, I I am really encouraged with this part of the business and when we say Green shoots. This is a great example, in addition to the 10 units that we felt confident well will open next year. The pipeline is coming together really nicely for next year and as you know, we all know now getting things they'll take.
Speaker Change: Usually 18 months, you know flat since I'm seeing those registrations than those LOI is and then you know leases being signed for projects for next year. It gives us even more confidence in and being able to accelerate them far beyond the time that we have this year, we're not giving a firm number yet for next year.
Liz Williams: We're not giving a firm number yet for next year. Hope to do that in the upcoming months, but can safely say you'll see some nice growth off of the 10.
Speaker Change: Up to do that in the upcoming months, but can safely say it'll you'll see some nice growth off of the time.
Liz Williams: Great. I appreciate it. Yeah, thank you.
Speaker Change: Great I appreciate it.
Speaker Change: Yeah. Thank you.
Andrew Barish: The next question is from Andy Barish from Jeffries. Please go ahead. Good afternoon, guys. Um, anything other than just the, you know, the backdrop that you described?
Speaker Change: The next question is from Andy Barish from Jefferies. Please go ahead.
Andy Barish: Hey, good afternoon guys.
Speaker Change: If anything other than just the you know the backdrop that you described I mean March seemed to fall off was.
Andrew Barish: I mean, March seemed to fall off was You know, was it just my mango habanero kind of ran its course or anything you can point to on the, you know, on the month of March that you didn't address in your in your prepared remarks? Yes, the one additional would be the weather. And I always hate to bring up Mother Nature, but given the prominence of Southern California, usually I know weather isn't a big thing in California. But in March, we had actually about three weeks of rain. And you always see an impact, particularly on our lunch business when it's raining, a little bit on our dinner business, but it's pronounced.
Speaker Change: Was it just my mango habanero kind of ran its course or anything you can point to on that.
Speaker Change: Month of March that you didn't address in Europe in your prepared remarks.
Speaker Change: Yeah. The one additional would be the weather and I always hate to bring up mother nature, but given the prominence of southern California, usually I know weather isn't a big thing in California, but in March we had actually about three weeks of rain.
Speaker Change: And you always see an impact, particularly on our lunch business when it's raining.
Liz Williams: And so that would be the other piece that was a true headwind in March, in addition to just all of the macro, just the uncertainty, you could just see the consumer reacting to that.
Speaker Change: Well, then on our dinner business, but it's pronounced and so that would be the other piece that was a true headwind in March. In addition to just all of the macro just the uncertainty I'm eager to see the consumer reacting to that.
Liz Williams: And also, you know, I guess the other point would be, you know, we launched Mango Habanero in January, you know, so we got that, that nice pop and trial in January, February, and, you know, although it, we got great customer reactions, some of the repeat could have been stronger as we, you know, as we were running it out into the third month of a product, and just some of our operational execution, if I'm being really honest, I think could have been better in terms of just having that repeat, be even stronger. So coupled with the weather and the consumer malaise, it just meant for a softer March than we had seen in January and February.
Speaker Change: And also I you know I guess.
Speaker Change: The other point would be you know, we launched mango habanero in January so we got that that nice pop in trial in January February and.
Speaker Change: Although we got great customer reactions some of the repeat could have been stronger as we as we were running it out into the third month.
Speaker Change: And just some of our operational execution, if I'm being really honest I think could've been better.
Speaker Change: In terms of just having that repeat beef and stronger so coupled with the weather and that consumer malaise.
Speaker Change: It just met for a softer March than we had seen in January and February.
Andrew Barish: Got it.
Liz Williams: And then, yeah, can we drill down a little bit operationally? I mean, it seems to be something you're picking up with, with the consumer feedback with SMG, that there's some gaps. Is that, is that something where it's labor hours or an investment that's needed at this point? Or is it kind of like, you know, we can look at kiosk and that reallocation can kind of occur. And as obviously inflation sort of moderate. You know, maybe maybe that frees up some some opportunity to address some of that.
Speaker Change: Okay.
Speaker Change: Got it and then yeah can we drill down a little bit operationally I mean, it seems to be something youre picking up with with.
Speaker Change: With the consumer feedback with SMG that there are some gaps.
Speaker Change: Is that is that something where it's labor hours or an investment that's needed at this point or is it kind of like.
Speaker Change: We can look at kiosk and that that reallocation can kind of occur and as obviously inflation sort of moderates.
Speaker Change: You know, maybe maybe that frees up some some opportunity to address some of the apps.
Liz Williams: Yes, I see this as, you know, I think SMG was a nice awareness for us that some of the gaps in our operation are really things that we can fix and are in our control. So things like accuracy, as an example, making sure our team members are doing a triple check, you know, when, you know, consumers are in a drive through, just, you know, simple things like hospitality, making sure our service is even more friendly and hospitable, and when there is a problem, addressing it with customer recovery. So we're putting, it's kind of a back to basics program where we're putting those back to basics in place.
Speaker Change: Yes, I see this as you.
Speaker Change: You know I think SMG was a nice AD awareness for us that some of the gaps in our operation are really things that we can fix and are in our control. So things like accuracy. As an example, making sure our team members are doing a triple check and when.
Speaker Change: Consumers are in a drive through just simple things like hospitality and making sure our services, even more friendly and hospitable and when there is a problem of dropping it with our customer recovery. So we're putting its kind of a back to basics program, where we're putting those back to basics in place and then the other pieces are.
Liz Williams: And then the other piece is, you know, this brand has been such a great brand with high quality food. Having that consistency in the quality of service is something that I've been out in restaurants, I've seen as a huge opportunity. We have some restaurants that operate really, really well. Maybe there's a general manager that's been there for years and they just, they run a great restaurant. And then there's some on the other end and raising those on the other end. We've never had a, or I shouldn't say never in the last couple of years. We haven't had as clear of a standards program and a standard third party audit.
Speaker Change: This brand has been such a great brand with high quality food, having that consistency and the quality of service has is something that I've as I've been out in restaurants, I've seen as a huge opportunity if some restaurants to operate really really well maybe there was a general manager that's been there for years and they just they run a great restaurant.
Speaker Change: And then there's some on the other end and raising those on the other end, we've never had a or I shouldn't say never in the last couple of years, we haven't had as clear of a standards a program and a standard third party audit. So just putting back in place some of those fundamentals that.
Liz Williams: So, just putting back in place some of those fundamentals that every restaurant company I've been with has in place in terms of driving operations. I think those, there's some real low hanging fruit that can get us back some transactions fairly quickly. So it's a, like I said, a back to basics and our operators have taken this on with bigger, our franchise partners are leading some of the efforts as well. It's a true team effort.
Speaker Change: Every restaurant company I've been with has in place in terms of driving operations.
Speaker Change: I think though there's some real low hanging fruit that can get us back some transactions are fairly quickly. So it's a like I said a back to basics.
Speaker Change: Our operators has taken this on with bigger our franchise partners are leading some of the efforts as well it is a true team effort.
Liz Williams: Got it. And then finally, just on the kiosk update, kind of where is that in terms of the rollout through the system more broadly? You know, what are you seeing from that? Is it, you know, is it giving you some benefit? Is it, you know, kind of more still in need of more uptake from the consumer? How are you kind of looking at kiosks these days? Yeah, it's in most of our company restaurants. We still have a handful, 20 or so, that we need to get it in as we're kind of remodeling for the balance of the year, some of the more, you know, difficult configurations that require a little more work.
Speaker Change: Got it and then.
Speaker Change: Finally, just on the kiosk update kind of where where is that in terms of the rollout through the system more broadly.
Speaker Change: And then you know what.
Speaker Change: What are you seeing from that is it.
Speaker Change: Is it giving you some benefit there.
Speaker Change: Kind of more.
Speaker Change: So indeed more uptake from the consumer how are you kind of looking at kiosks. These days.
Speaker Change: Yeah. It's in most of our company restaurants, we still have a handful of 20 or so that we need to get it in as were kind of remodeling for the balance of the year some of the more difficult configurations that require a little more work and we.
Liz Williams: And we'll be trying to do those through the balance of the year. There's a fair amount of franchise uptake as well.
Speaker Change: We'll be trying to do those through the balance of the year.
Speaker Change: There's a there's a fair amount of franchise uptake as well, but I think where the opportunities lie is really how we how we take the next step with the kiosk and use it as a merchandising tool to really help us drive check and a little more guest engagement than just really kind of order taking.
Liz Williams: But I think where the opportunities lie is really how we take the next step with the kiosk and use it as a merchandising tool to really help us drive check and a little more guest engagement than just really kind of order taking right now.
Speaker Change: Right now.
Liz Williams: Okay, thanks for the time guys. Thank you.
Speaker Change: Okay. Thanks for the time guys.
Operator: Ladies and gentlemen, we have reached the end of today's question and answer session.
Speaker Change: Thank you.
Speaker Change: Okay.
Speaker Change: Ladies and gentlemen, we have reached the end of today's question answer session I would like to turn the call back over to Liz Williams for closing remarks.
Liz Williams: I would like to turn the call back over to Liz Williams for closing remarks. Thanks again, everyone, for your interest today in El Pollo Loco. We look forward to talking with you again next quarter.
Speaker Change: Thanks again, everyone for your interest today and they'll play a logo we look forward to talking with you again next quarter have a wonderful evening.
Liz Williams: Have a wonderful evening.
Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Speaker Change: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: [music].