FRGI - Earnings call transcript Q1 2019 | Fiesta Restaurant Group, Inc.

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Operator

Greetings, ladies and gentlemen, and welcome to Fiesta Restaurant Group First Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] It is now my pleasure to introduce your host, Mr. Raphael Gross. you. Thank begin. may you Sir,

Raphael Gross

you. Good XXXX closed Group's quarter Fiesta afternoon, release was everyone. earnings market Restaurant issued first Thank after today. the

be website have it, Relations you already found can on If section. the under www.frgi.com not company's the Investor it accessed

in results or in forward-looking materially could conference Any that such differ which from financial should or to earnings comparable to discussion call, budget, begin, on be available the you its during and Before limitation, factors forward-looking SEC future will include, projected be historical is information can company today, is forward-looking results in certain in information. company's isolation to evaluating for prove materially costs I'd the that company's management the can expressed and those that as such statements be statements believes plans, statements to business and make strategy, Please release. operations, company's statements the considered what non-GAAP filings. cause during Important the discussed of without operations. condition may give will be objectives GAAP will These correct. results note of of in today's results no company various the like substitute from and expressed for future in and reconciliation and regarding can by be not are or call actual assurance a inform forecasted we prepared Actual that useful the not financial that outcomes with the performance. statements accordance forward-looking measures GAAP implied based company measures statements found differ such

And today Executive Officer Rich. I Stockinger; President to now are Chief Kinder. will Financial Chief Officer, On Accounting Rich Officer, the turn over Chief Cheri call call the and Interim and and

Rich Stockinger

Raph. you, Thank

brief an brands' by with update overview recent the begin initiatives. me on our a Let of quarter followed

the adjusted a in initiatives year to Plan higher underlying as lease results. positive in both improved EBITDA compared impact at on period encouraged margins our generated see to of that We the accounting restaurant-level had Renewal EBITDA expense XXXX, our standard. the prior despite rent adjusted new result impact of are We the the brands Strategic quarter first

While fell first we through February, Time at is represents sales impact everyday to Tropical negatively in to come during Pollo believe comparable new X-month which restaurant South guests. we mix that experienced our total of have appreciate quarter, however, this the intrusion, primarily sales XX% our Florida was period. markets. sequential mix. core entrée our platform X.X% Time so increased and to the important XX% development to of our improvement the We improvement relaunch of continues a due from value Pollo our competitive and Pollo Cannibalization

approximately better our peer restaurant our understates improved potential were sales us brand X.X%, patio sales the outside comparable sales believe restaurant sales that sales were approximately factors. greatly fell core in choppy -- this are industry were XX X.X% fast-casual that as comparable Taco Black basis by comparable by April decreased restaurant approximately I impactful throughout restaurant of Box outside part XXXX. this XX repositioning We progress through points. sales results variety was comparable in Cabana growth consider in impacted approximately the we somewhat also strong comparable market believe expect and operate the Taco margins In impacted markets impacted in sale these of provides points modest Northern restaurant a XXX sales basis Beach this negatively Pollo Cabana, these discuss cannibalization timing we in than Cabana Cabana Easter media restaurants Taco XX, seeing increased sales Palm timing sales business. than points. through growth more had additional We optimism by April basis geographies unfavorable very Miami-Dade, quarter. year initiatives and shortly traditional comparable restaurant In deliver restaurant fast-casual which that from non-core in will new XXXX. during supported are impacted soft negatively At to to in on sales and and weather restaurant too sales points Tropical you peer certain Florida. counties Box and we pleased in and This of when of Tropical Taco April negatively restaurants XX digital the existing comparable in comparable despite through and The growth this markets very basis performance sales believe market our Seeing which timeframe and X.X%. by by of significant introducing Pollo our April, about we better April points efforts. start, industry restaurant April, Broward comparable Texas we of for sales XX operate that but restaurant sales basis comparable Black our XXX The marketing. Orlando Southwest due decreased

recently LSM we contracted example, Day to Field platform efforts. a marketing on local our messaging, expedite an As the effective of brand with communication store focus placed and for we

we with brand. leveraging year update quarter, we and consolidated that, the This investments. prior a includes you favorable and can With As costs Tropical. give the we year four walls. believe leveraging on the did by more within profitability higher me Starting Pollo expenditures margins the generate let by first commodity detailed for basis in full a

steam program April. has members in the build back digital in as to implemented that My end loyalty reached we and continues of XXX,XXX over December Our Pollo

same -- points program. the as we'll essentially are While over our want digital and has app our participation those encouraging to loyalty based we app encourage our download focusing our guests in on e-mail to on club do members that download not app, to continue with for XXX,XXX which functions redeemable Apple-based

of media, platform, and in the this store actively nonmembers than and slightly us in-restaurant Pollo to ads, also e-club program, mailings, encourages encouraged at habits. opportunity learn target on still higher marketing our and but local and My so efforts sign-ups better the our is that continue We accumulating check. allows by data both average we using more are loyalty innings the also want the Note check POP social early purchasing to-date to traffic enhances events. by the progress customer members what we'll guests digital and promote marketing and analyzing about are

opportunity. Pollo also We excited catering Tropical to continue our by be

by both a compelling mentioned we've positioned and have as food Pollo fresh As call, catering our occasion. BXC business rebranded flavorful it and last any under we or Tropical offering BXB for social delicious, on option effort catering and

to vehicles. equipment of for catering line dedicated We hub support are Miami-Dade this our business and units, the introduction new also in equipment kitchen an with ghost delivery of investing a

broaden messaging, intention. continue program certainly and perception, have some our we overcome To catering informal, we'll be refining that our alternative with of Pollo expensive such As by planners BXC of customers. testing or effort which for positioning, perceived an not catering customers is we BXC found this to promotional our in term as the party as program's family appeal our to party various gatherings social emphasizing sizes

quarter. gaining is the and partnership through we're the with positive trend with encouraged momentum continued also DoorDash platform delivery second Our into

become option, given core remain but stages so important in the many confident creating early of markets. food can alternative convenient for guests, it's our choice food well awareness this are an in it travels of and that that We for particularly the our

dinner as guest offerings our Time Pollo weekends. and campaign marketing was quarter, $X.XX an such on featured emphasis and weekdays family weekdays, lunch This on with real meal original be primary increased and and the on meal $X.XX our recipes. continues chicken the campaign with ingredients testimonials quality freshness to $XX.XX TV of chicken meal During quarter on on X/X

new Cuban Pollo April Cuban innovation and as sandwich, of also season fire our with Bites new on Bite empanadas promotion our Sliders. as celebrating XX, the during sandwich while platform way the began a of We a enjoy we Other skewers. the grilled chicken Bites with to guests our a promoted anniversary product Nutella. rollout Pollo new April $X -- successful Lenten for introducing filled includes chicken new with shrimp our well Pollo

of We further our operations the quality to encourage continue return visits. emphasize to

payment interaction in guest quarter, respect portable been out tablets the rolled restaurants and to will POS the has two drive-through. With very, feedback we months. Pollo all next to service secured Initial at we kiosk with begin During the in speed of improve positive. testing ordering, very further

food. XX our match resumed effort restaurant's also upgrades of planned have restaurant interior quality with to year to better in XX to order for remodeling the We our our facility

XXXX. invest to Although not itself million complete in our remodels quarter expect did program first during remodel in we the approximately $X any we

Taco to discussion our turn now us Let Cabana.

more the to MY program, data our check My what up Pollo, us our our sign more last end, on better TC! efforts higher become guests and program members to that was also system. continues to traction to purchasing the actively My to in opportunity promoting analyzing gain allows loyalty our and As accumulating our target are using encourage average habits. to by compared see which XXX,XXX To TC! loyalty TC! launched check guests marketing members My the to customer members. with consistently higher with Pollo, and With per e-mail Taco's guests. to case amongst about we My and app September date, addition Like over loyalty XXX,XXX want learn and TC! we

Cabana compelling like BXC occasion. excited Dallas completed our our and as far DoorDash look our Taco and also build by delicious and is Houston any in to We're the Feedback which positive traction. all look or on social March, the fresh and -- Cabana both offering flavorful catering business been we'll rollout thus program, the we food month Pollo positioned has for restaurants El Paso. of to a of of program Taco service During option delivery our BXB early we

markets, necessary We're investing Taco this system Taco available systems new to are expand we vehicles Cabana our catering the entire only later the the be has in expect Cabana. throughout been efforts to for in in groundwork laying major and catering our While delivery year. also place

terms brisket digital innovation, of TV and LTO tacos promotions. In new supported during out by menu and our rolled tacos we the quarter fish

one beer. drivers our of the our is products our Unlike We end, all Taco that reduced with alcohol for and and To menu value we're sales Tropical locations TC Cabana. Time! restaurant-level of beverage selected testing and wine dual taco at rum, the alcohol also at offerings. margin as including selection prices Taco tequila, main Pollo at rollout expanding promoted such

which brand. refine hours, operating Operationally, the weather this be a labor. patio negatively been food for to program opportunity we test we way has significant by and revised continues to year Our impacted the the continue manage

high-quality and consistent reducing ensure also are the optimizing efficiency, are to the plan products We this our cooking recipe staffing. same books and to to at waste menu make order. time improve later a reduce while prepared complexity, to updating test easier and year our it for guests we throughout guides day, simplified And

Lastly, we development costs. reducing are increasing of benefit to added promote the leaders with of leadership shift use the

our Pollo, sales at As Taco further we Cabana these XX of But, today everyday tablets in greatest menu functionality to invest none service, Cabana Taco in have opportunities platforms, better two our improving their catering ongoing Cabana's detail. brands Together In we an With let Pollo capitalizing to our two e-club thank and new all Cabana patios. foundational greater loyalty support that than for Taco to remodel value speed future. to through services. through done with growing innovation the Taco fresh me TC sales of our members our by to operations partnership were that, and to believe for assets for although $X brand's remain create and completed have our are call for and to their quarter. to support programs the DoorDash remodel locations both take for exist vendors our passion the strengthening Cheri long-term we in in continued in I at will and keeping one first amplifying budgeted added go that million Pollo summary, MY bringing will shareholders. turn opened we our and sales Tropical over through committed restaurants and year delivery back and platforms to restaurants on and expanding expect building levels. want This at My upgraded and these we we Cabana, our restaurants, with team value advantage have of increase Taco financials POS effort working growth we're

Cheri Kinder

well to versus ago the Pollo revenues decreased of last of quarter period. prior operated at million a comparable afternoon, lower to the We $XXX.X improved by operations, we deferred a by prior quarter first million, points lower XXX restaurant year Tropical's expenses decreased non-GAAP Sales earlier. to other These $XX.X a leaseback impact EBITDA restaurant of percentage adopting to Thank by basis of percentage longer Despite restaurant restaurant EBITDA results will we higher restaurant weaker new a rent This XX sale in had from at the sales. point Black line basis to decrease sale $X.X our sales to the as basis portfolio you, At cannibalization X.X% approximately gain at restaurant standard, restaurant increase and Pollo results in leaseback consisted standard Rich, by comparable points. to lease lease closure Box both period which a impacted and XXX from pricing. to of Total and sales increase X.X% decreased comp existing in Pollo comparable and the X.X% decline restaurants everyone. X.X% worst increase restaurants in the rent as offset labor of expense. accounting level and from a measure in sales X.X% good we end as as we year reflecting for average Taco restaurants new million cost sales Comparable sales benefit the partially approximately sales due healthier new deferred Rich SEC inclusive and XXXX. fewer approximately negatively a restaurant as a primarily receive on standard, Tropical Prior transactions year negative were new restaurant to year's in a quarter XXX gains, a $X.X rent adjusted X.X% compared lease year. significant standard accounting The restaurant compared the top than as first points accounting from clients operate, basis the primarily of in no adjusted sales. restaurants check, as amortized margin market basis due fast of sales in of on the million the reduction operating in defined to adoption period, the comparable points our transactions because are expense. mentioned worse. were expense due filings, casual Pollo, Pollo our level XX restaurant new lease accounting and which had in restaurant impact

closed other despite last markets sales decrease due to fast-casual a sales accounting from partially Black We measure the XX higher a the Taco to also the quarter new no in advertising which Taco standard. increase approximately X.X%, year's better and average to Cabana can X.X% restaurant sales restaurant-level of longer in to use basis restaurant X.X% decreased significant comparable by in by of and EBITDA, decline higher This restaurant our sales previous and promotions cost filing points comparable have to Box sales Taco adoption the rent a Comparable number consisted of increased at expense in and sales menu positive in in were closed check our which pricing primarily associated operating transactions. The to $X.X had comp first a a accounting $X.X we in and Cabana approximately million lease we X% restaurant adjusted XX transactions defined of expenses. offset new a points that of payment. restaurant with decrease year. offset were This X.X% we compared increase non-GAAP worse. restaurants due the in labor rent SEC At with and than items million operate as in increase prices rent of basis mix lease percentage adoption inclusive as the was restaurant was lower due standard. of lower Cabana, reserves

XXX negative XX of the a a despite again restaurant Cabana's restaurant compared sales, the margin restaurant the which lease year point adjusted period accounting healthier basis reflects EBITDA to percentage new prior As basis improved standard, level to Taco impact points portfolio. by

and measure the consolidated the million quarter or to non-GAAP impacted accounting income $X.XX negatively accounting million, XXXX. would diluted $X.X of the EBITDA, million. diluted share Net $X.X During income in table in per the compared standard million, or a see our adjusted consolidated resulting diluted for accounting the have the of or million of earnings $XX.X diluted quarter despite share of diluted of share absent which in in Adjusted of per first by more changes increased million SEC $X.X net per new of defined was higher on $X.X quarter standard, adjusted million our $X.XX EBITDA of quarter, $X.XX impact from or per new $X.X $X.XX $X.X the the was filings first lease reconciliation XXXX. in Please quarter per income net adjusted compares first XXXX to the This share details. adoption net first share income to been release non-GAAP XXXX. the lease $X.XX

$XX We restaurants and expenditure for Turning to expectations Taco open restaurants million. capital capital $XX at three at of Pollo and development Cabana three XXXX. with to four to expenditures Tropical million plan to

So far restaurants. two quarter end through the first we've of Cabana opened Taco

million range in project develop to includes $XX restaurant $XX implement new CapEx million $X and million IT and million other million $XX $X systems Our company-owned to to equipment. to catering

enhancements, you. as capital are for to to platforms for $XX maintenance. million to new well to at $XX Thank million support million equipment and as brands and $X facility million $XX we addition, invest planning restaurant both remodeling In menu other also

line open the now question. will for We

Operator

the with proceed line Please Slabaugh comes Operator with question. Will Inc. Instructions] Stephens, you. your from Our of Thank first question

Will Slabaugh

Thank Pollo broadly the Around today? really announcement Can question And to you. where see amount start. good the well. I you more menu had Pollo here menu on done obviously Crispy menu? Bites given innovation, past your slider a the year to the you you've performing on the approach about in with innovation a from opportunities Pollo talk

Rich Stockinger

We thank and will, Will, -- you.

is be doubt. chicken. will There on concentrating We no

out deserts. very the there. Nutella, we fillers as definite the desserts, other about room empanada with filled some excited our some as well at changing have And feel and looking with We in of

Pollo even the gone see, with have Time down. our averages success of can you not As the check platform,

gone Our DMP has significantly. up not

corn between in have be well extremely we'll for out out fritters done us again is tostones which next So the rolling coming -- window. the

product around the But our We've So that's chicken. at we're take chicken. add-on with And key it's always such Yes. looked steak innovation going citrus-marinated we plus be opportunities, It's chicken. et items focus, corn to our as the we're did sales going certain cetera. to adding -- fritters.

be with will We tostones. the

Will Slabaugh

update And be I we that you update also, were us may know a give there's a we it progress bit Taco, there? lines from don't I little made Can the if Got to there. if opportunity. willing shifting supply around points you referenced the get. over the and you you're could time? there quarters, and what where I some talk were chain sort a some where margin number over three to opportunity about or could know we had standpoint wondered of you over say if other margin know where versus any past had that of

Rich Stockinger

a it that favorable. -- That not because did a can increasing at steak we Taco. thought but on the who daily the going. a than really where we're costs. his driven gone impact as cost up operating job not as manage well we're and rather Ulyses, But was labor, implemented me thing the I at we Taco the basis done Pollo, at we we're where And where cost been our controls it to I'm of as mean now than an cost ate and other by happy we're has has gone Chuck have expenditures. the with you as chicken. -- are, cut We strategically price. choice, We costs, in primarily happy team – Well amazing negative don't as not was Operations, VP now lowering quality. right The keep of Taco. is it much Will, rather goods know, with I It's we they've managing as

not and enhancement are negatively items, So that there's there's significant adding the item, lot guests' surprises, margin up little no satisfaction one impacting a to the it's without guests' experience. of

Will Slabaugh

Got you. it, thank

Operator

Thank you.

Jaffray next comes of Our your with Please from line question question. the Joshua Piper with Long proceed

Joshua Long

Great. want on your into questions. taking Thank at we to my you you're digital as about you they what the guests? might delivery, able even going loyalty talk use how channel evolve And Wanted at see program the learning how to Pollo forward? if be My And you push for able about that just be and brands? to may insights Taco, to

Rich Stockinger

been millennials to a for interesting we've is the both Well, note, rated restaurant able non-millennials at as higher have to brands. learn, That significant what is opportunity the leader. any scores NPS to that than the

and get have us. try we out, go Now to those millennials just to

that the going we're into media brands. after. again, more that the within with specifically we partners much both where doing We're programs we're with then markets, much on Media, market and digital And be are should putting digital. Southwest guests like more together So identifying our doing social

are I as But right us, even at it's we've now of bringing driven not both doing. got use the opportunity say, it's platform and to much So, basically -- in what millennials. would TV. not off we our TV, a and to social huge feel competitors that it's It's digital though one, brands

Joshua Long

helpful that's context. Great,

value of things Looking a of protecting balance of that then forward we recipe or initiative-wise. and the cost about cost comes are think to of When margins how about to the you what the the just price sales, menu thinking your least bit. about the that take with environment for appetite kind maybe little kind seeing competitive also on environment proposition side feeling but out at

Rich Stockinger

in operate very difficult We Yes. areas.

country. our key higher fact core significantly lot is in the of the the significant poverty Value us. at you national highest in If than markets, in to of levels the some it's average, a look

section Pollo now the to the right for couple the first it Time be sales a Pollo. stay is. where months plans permanent of we've been of of concentrate and add-on will Our on these with is again. successful menu rollout It's going as

don't Taco, to We're Your menu with the thing. simplify the because again we trying same At traction. cumbersome, check Taco the average just the trying it's has of It's lot too of it's food not started. rolled doing gone there's comprehensive also gotten in platform. and had value a It's building And down. but things that the of we're side to will up remaining that end the looking of not -- items remaining really subject any with to to pricing summer, again be this price and add-on but the We'll come external of any factors changing. year look significant maybe or we're We at with part sales. at the taking the want push year. it

Joshua Long

Thanks one then Understood. for for me. that. last And

or we could Cabana Taco non-alcoholic like work going team. forward? that maybe an food well. newer opportunity You done complement in opening the by on at the insights volumes. think some was you execution it Thank there I time spending I the about plans brand Curious side expected that's selection it opening there's that's store-level good in as you. side than that into the on some higher was the if -- Curious work restaurant, for think of just to site really good as the driving with -- the on mentioned think longer all you've it seems the units beverage term have something what's then the some And if if

Rich Stockinger

Okay.

we'll it regular we're be We've about rolling lemonade that done two out we'll Texas; kitchen I Josh It's First about for also little lemonade. but it almost beverage site difficulty] basically started non-alcoholic on doing the like was Taco. here Taco. you're then able in Houston. like is the Pollo; former at brand. Pollo, The We've patio. -- so fresh And to walls closed a done that with it looking can't in garage right. Murphy, a closed to They're making anything one selection. is the Pollo, the we've it -- talking at work at as when able XXX% be huge with say and door extremely well [technical a up then Didn't restaurants Westheimer things as well. we looking we've at Taco one a kitchen, different. it the where some We've is open

than And a an of we're about little about area least chicken early one doing and there. that's unit families results we're So, the would competitors what excited well. income, conversions. that conversion but We typically -- that. at higher the less early extremely really a at we It's of little excited spent all of past in is we which regular in on a in little our $X done other different profile it's the converted on More the different. about spent geographic we've higher is one million end, than a have the game, it's competitor. the a Taco. It's But

Joshua Long

It much. I'm looking that forward one lot familiar for Great. progresses. seeing Thank that story. clarity. a you so I've how Thanks so and that one is Westheimer with going an interesting been to the

Rich Stockinger

Hope there see you to soon.

Operator

Thank you.

Vaccaro your Our next Brian from the Please of with Raymond question. comes question James. proceed line with

Brian Vaccaro

Thanks, and good afternoon.

a on markets. you give quick Just update where context, the terms on strength you or in relaunch Could out ones in in you for just couple me. just the the with I think for update you're And headed on that? there drove an broadening you non-core of markets. Pollo a a working brand the you're appeal called of quick performance, non-core some Could give and what some on concept and regional believe Orlando that? Starting the more

Rich Stockinger

Sure.

in have up products improved where it's will new excited areas with there it's come and improving of we throughout. improves very the just We're work. a which in of We And the positive the Puerto Puerto bring that new We've but job people back to who's Orlando, an line Orlando, the guests influx Orlando, not happened of the done some a coming lot amazing that tell and more organizational had of Rico guests, Orlando. in is often been hard I double-digit by very leader you in it's course top now from excited having benefited Firstly, guests, a them is see Rico. to but about what renewal to level. plan drive impact margin that

of working So markets it. lot there hard of Orlando work. non-core We a the to and us about renewal had it's is very And to gets excited that put lot effort a again us on not there. We program. up the did Orlando, in just changes

Brian Vaccaro

And any if call you're headed to mini-brand you that? Okay. on comments the of sort on where it want relaunch,

Rich Stockinger

Yes. looking early that. of It's things. at a too on lot We're

looking a are at and when where it's on market, just from exactly and happen it's But collecting colleges Learning we're something us. too know the tell universities And meaning to crowd to millennials. early going it's help there. to small a We Right happen. now, younger data. it's I to going

Brian Vaccaro

us sales that's comment dine traditional view each those or of That's just sales on sales give brand, how and check contribution at of right. All the incremental quick sense average Could maybe on helpful. you a Quick and maybe channels speak a versus to those how third-party in delivery. drive-through? profitability one or you performing

Rich Stockinger

But Like of at X.X% is drive-through. every it's our and too coming from it's X%, right total now early, expensive. restaurant where other CEO it's it's Sure. Pollo, sales only our

margins impact the margin to But way should It's the just by So believe than lower so competitors. XX% game. it's I despite It's due expect got negative, then from enhancement, despite had And today. margin incremental cost despite had there's small we increase. really do XX% too We Taco. have. that sales at see definitely some lower it's wanted you'll to in it's delivery. to less fact We've on early right like our the be But X%, X.X%. our enhancements the that incremental I had no than we increased an anywhere again, And sales. we now. even

This believe especially do. it's what too this part in early So with lifestyle. still I the have is you millennials to game. is of their that the

arena play this if to you game. you want have to So operate in the

Brian Vaccaro

Understand.

you. Thank Okay.

Operator

no further closing are this there questions appears it time. comments? Gentlemen, you at Instructions] [Operator Do you. have Thank any

Raphael Gross

and the everyone's have company everyone a disconnect appreciate good interest We and in No. night. please

Rich Stockinger

you. Thank

Operator

and Ladies this you. today's Thank concludes teleconference. gentlemen,

at for participation. You you Thank lines your may disconnect this time.

Fiesta Restaurant (FRGI) 6 May 192019 Q1 Earnings call transcript