TACO - Earnings call transcript Q1 2018 | Del Taco Restaurants, Inc.

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Operator

Greetings and welcome to the Fiscal First Quarter 2018 conference call and Webcast for Del Taco Restaurants, Inc. [Operator Instructions]. It is now my pleasure to introduce your host, Raphael Gross with ICR. Thank you Mr. Gross, you may begin.

Raphael Gross

thank for and us operator, you, you joining all today. Thank

Chief John call Brake, and and will John open with questions. remarks, the for their Cappasola, Steve Executive Officer. deliver and me President the Steve On we and are President prepared After Officer Chief Vice your lines Financial Executive

and or over should press Before to of the we statements later today and as remind John also release alternatives includes Restaurants press not Cappasola, include flows reconciliations EBITDA that be financial future call forward-looking net financial refer some to measure considered Executive today's measures measures. be should to operating filings at filed We of activities these I earnings Non-GAAP income, discussion for measures earnings GAAP nearest liquidity GAAP GAAP will the refer not as them. statements condition. non-GAAP forward-looking SEC guarantees to part to like net operating release, the We are turn press reliance you that undertake could any the such includes to which begin, everyone performance. impact or non-GAAP such financial I'd provided Today's of income, cash not therefore, as future Taco Del measures would other upon measures adjusted detailed restaurant operating financial by a Officer. contribution. placed risks to performance, now Chief Incorporated you earnings to statements. not the like and today's by the discussion results of undue These a do our and and release update more date of

John Cappasola

were the remains everyday strategy and power in thank environment. our Good generally of the highly the Raphael. line value quarter call first a afternoon joining menu in in you Thank what our with demonstrating results Restaurant in expectations today. competitive for you everyone barbell

optimizing guidance annual franchise our on June System-wide as brand We same extending our our Del growth performance XX quarters sales comparable Tacos to reaffirm respectively. driving to sales pleased level and and position, launch gap strengthening Combined company and focused streak company believe we are transfer The average initiatives. transaction franchise experience of existing We by restaurant between and system remain price from driven margins. growth XX consecutive Elevated increases comparable restaurants of sales as service of late Solutions growth gains of growth store consisting operated the sales comparable to The growth and includes or comparable check growth franchise embedding elevated and of restaurant will sales basis restaurant X.X% these comparable of X.X% restaurant was achieve a X.X%, on more X.X% recent as restaurant company two-year transaction years of guest growth. restaurant difference help was and objectives. well franchisees engaged sales owners franchise speed in

markets. in the company know, you As of strategy years across great yielding last been practices our the is pleased couple supports the franchise way areas best these and with over results leading we're has

digit during weeks. franchise the due same caused weeks. ten and achieved trend the very of also cold a same-store plus weeks while weather store our impacted This two last sustained in two QX disproportionally addition, restaurants X% our same through erode In to wet company the the sales below footprint sales California XX% restaurants slightly system-wide mid-single California to

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lower of We chain restaurant management to achieve believe to supply to food our to margin XXXX XXXX. our near cost and contribution since of Fiscal and help contribution additional improved will us restaurant margin position are pricing, menu our net will inflation deliver for trends strategies us deliver optimized plan structural confident labor enhancements position compared record and continue QX. We XX% these guidance margins track on dollar

the over dollar Buck is Change continue beyond & complement Buck strong & Under clear, with Under rather, & price the To select system in of concept mid-tier Buck Under & not and Regarding a ongoing menu our of we nearly value Buck expected system our point restaurants QX performance. evolve and strategic within plan during We the menu. during & during our X% Buck part be menu fall the Under to after Buck part and incremental & proven that path X.X% to our menu with & has Change summer away; Buck to used a a X.X% price. to as to Change and menu approach & most nearly Buck represents Under this drive Buck products been during of QX, all section go restaurants migrate & menu are platform carrying is Change of QX. X% will menu nearly increases expand expand leverage the QX, price, price up innovation. time. will a to of will to

a For of drive dollar help all menu perceptions. new across instance, Combined Elevated late snacker upon believe will chicken the and We restaurants in the launch and quesadilla to value with strong expand & Change grilled we on menu the will Buck a launch Buck achieve and June Under transactions Solutions, approach on offered help adverse pricing elevated our transactions. this compelling barbell value maintain & limited impact

portion we experience. select continue make cost impact on on supply strategies optimization On that to chain do items including not the guest adversely management front, progress

the in enhanced hours enhance reduce labor techniques quality optimize restaurants to to and equipment labor. scheduling out prep new to Within also QX leverage we plan labor roll and

attributes to look the our out the start we're Solution the next of and our half brand deeper As freshness Solutions QX to excited quality ahead a second and Combined Combined Fiscal we through on of and understanding about the improvements is maintaining catalysts our set generation year, and designed Elevated includes further at launch operational roll Strategy. of of strengths. speed value position focus brand to our while elevate brand

Plato. the and brand all side we will year Buck launch new of throughout communications Taco the half new of mid-tier the & Prep, back our Under, products and On a marketing and including a premium Del refresh menus highlighting new advertising our introduce campaign Fresh

targeted with platform training be delivery will general leadership a elevating of drive expand the we Combined launch hospitality through also the The eLearning enhancements powerful manager half Solutions marketing enhanced our loyalty high use with Operations leaders, Elevated Additionally, our and capabilities tool academies preparing of Del has offers future spring launch Taco. best support the during from guest and promotional including party on been believe overall future. in our at practices mobile second marketing updated for Del platform frequency. a restaurant program third the an will the to we app which can offering Taco performing focusing

traffic Solutions this mix two continue believe Elevated facilitate the successful We optimization. a same-store will Carnitas a we weeks positioning Carnitas QX comparable franchise early X% up pricing for restaurant that Entering and contribution Fiscal of drive to and balance an and are stages of fan sales our launched with recently five improved QX. the favorite and brand, LTO. of $X.XX classic the are mix during further over we which burritos as promotion drive sales company respectively. and Through allowed we match we and expect popular first our QX, growth to in to guests journey and margin launched and restaurant is strengthen X% Combined premium that trends over

resulting year strong in far our each weeks While quarter. two-year during comparisons the same most thus trends during over lap, five the challenging X% prior

traction our in We AUV the growth states on are development we the with are continued an development country franchise development franchise base from increased the with announced This our we confidence bolsters both Atlanta, agreement seeing the that exactly why is growth. spans franchise our in pleased important across strength increased new role franchisees. continued a unit believe total along very new within and play and franchise will recently existing XX system-wide which franchisee future activity seven-unit with development

one first closed. three while company-operated During opened franchise restaurants restaurant the we quarter

to units system-wide we ahead, to in open XX track Looking remain on XX XXXX.

and the sequentially sales to momentum make food initiatives in margin favor As operational launch of half Steve on prior restaurant quarterly initiatives, these and menu turn the second and Combined our year sales With progress trends both to We with in enhanced detail. believe Elevated and marketing Solutions performance has expected and our improved beyond. positioned our innovation coupled are same-store that, review upcoming contribution over and call ease. in the advertising, we move I'll comparisons with of inflation to results well the drive year us management price menu

Steven Brake

contributions $XXX.X the quarter of Thanks was million, the and new revenue million advertising John. from related in franchise year-ago $XXX.X Total X.X% of increase recognition $X.X franchise $X.X rules. included revenue the to adoption first million and first of the quarter an other revenue of million

quarter Del trend. now revenue grew System-wide recognition a positive X.X%. and sales. approximately total during X.X% restaurant of restaurant of Taco by has of Excluding comparable sales system these X.X% first XX two-year generated lapped resulting in revenue increased impacts, strong the system-wide The consecutive same-store sales X.X% XXXX comparable quarters

year-over-year restaurant X.X% from from stores The in with increased X.X% operated $XXX.X company driven sales to period. of first growth along million as last operated company First to by contributions million of additional was sales comparable the the compared quarter, quarter year-ago increase year. $XXX.X company restaurant

strong the increased menu represents restaurant comparable Comparable transactions. company million to partially adoption the increase to flat XXrd comparable of year last $X.X growth sales fees. price restaurants was with growth X.X%, $X.X and a rules X.X% sales consecutive recognition quarter first driven compared resulting primarily revenue new The first operated additional increases a Franchise to restaurant year. from related by franchise last franchise gains. of revenue the in check by franchise The growth sales reduced other year-over-year quarter offset of was initial revenue increase X.X% quarter comprised and restaurant for million

approximately Moving at on were as expenses. sales year-over-year company food costs was the by increases. percentage Food XX.X% impact as menu paper a in inflation and offset price to of restaurant unchanged

points company of County we increased an last credit XX.X% of impacted by maintenance, higher increase XX.X% and claims XX.X%. approximately expenses as company to other Los compensation price to continue reductions the expect approximately operating and and quarters increased advertising mostly with the and expense expenses card by and was and percentage a in X% net sales percentage under based to restaurants. increase This increase expect January impact to XXXX ahead, Occupancy X, $XX.XX $XX.XX approximately Angeles by basis wage driven This a Labor timing the inflation menu year. food XX from restaurant on annual Looking to offset balance underlying inflation restaurant workers XX in the as to minimum the on expense activity. XX.X% California occupancy escalations fee an Half X, which sales. from of X%. basket was company from next hour of three was at as XX of a a points increase due July of based related net food of Pasadena basis sales and XXXX or wage on percentage advertising hour primarily the company expenses of repair, each inflation XXXX increases restaurant

costs may impact restaurant We as expect on of sales were basis flat points million $XX.X percent in margin growth. performance, a strength depending same-store Based about to the on from of this restaurant expense Restaurant XX.X% points inflation the XX a of legal which expense contribution dollars as percentage $XX.X of General increased advertising. decreased total a incremental year. prior continued expenses at partially million to of incentive pressure X.X%. the increased offering administrative our increase and revenue sales $XX.X XXX(b) points million expense, operating XX.X% driven approximately compliance This to franchise side by due reduced timing XX basis of approximately compared contribution that to including SOX the compensation and revenue gross based related on were by now management basis stock-based was basis and XX expenses, by expense performance reported compensation. and is other increased year-over-year offset

our looking we this front decreased are year, last from Adjusted G&A of million level million year we our full year. of loading timing the guidance. Although to believe in resulted $XX.X on $XX.X EBITDA ahead, track meet G&A X.X% for a

XX.X% expense from year. the to XXX percentage in XX.X%, first a was total of million, increase million and $X.X of revenues, $X.X amortization last basis points down last was As Depreciation adjusted quarter EBITDA compared XX.X% year. an

compared depreciation last assets was environment. the restaurant revenue, an was addition of first the first one continue LIBOR by of write-off month the the in that increase rate in and amortization The total asset closed to and of indebtedness driven rate trend $X.X franchise The right XXXX expect year. $X.X related to Interest and to million prior of increase to percentage outstanding expense interest year. was to a average X.X% new the quarter franchise an million the total and to was X.X% the compared compared the due due As rising increased increased we increased year-over-year to quarter.

million our the margin revolving our X.XX%. As for of loans first the applicable under all LIBOR while $XXX outstanding facility at of credit remained quarter, end was

defect net restaurant. of the The one another related at temporary disposal recovery insurance two to addition, construction a on during at on restaurant offset disposal related fire mostly a loss a two quarter a In million we of were and closures $X.X recorded assets assets. gain closures temporary by and matter to

until insurance to in We the and to for tax Income first reopen quarter compared rate operating expect of to per fourth the tax first additional as Please recoveries. gains $X.X the note of was impact related XX.X% half week proceeds XXXX. fiscal during temporary effective results expense will an record the future legal million same the closures or $X.XX quarter or XXXX for share restaurants reform. $X.X $X.XX XX.X% period The a year. to tax tax effective $X.X quarter expense million impact during per recent diluted was $X.X tax a to Net is the share last income or the rate reduction effective due rate prior during compared for first the diluted year in million million of per the period. of

period the believe a Combined continue Please we same-store for release Finally, We indicated, our launch XX-week January today's we record off progresses; Thank details poised Del X, summary, with to to guidance any to track sales start are has is particularly as the answer reaffirming In tandem our menu us same-store your outlook. year interest strategies positive good trends you during our XXXX. the as prior refer year sales. elevated and management of and as margin XXXX the sales on pricing deliver ease contribution John half our restaurant our happy second of earnings upcoming questions. achieved. Elevated comparisons for is long in to Taco and ended same-stores for we're in Solutions our strong as

Operator

[Operator Instructions].

Long proceed from please of Our with your Joshua question. comes first the question with Piper Jaffray, line

Joshua Long

taking then it from terms normal as you you back -- of of sort could to those in trends if some how kind sounded my curious the cold that question traffic circle last Great, trends felt over trended and we there some for XQ XQ mentioned getting March was thank comp rainy of any falloff years strong trends. moved of to I with John, in you underlying away weather. back Wanted you if after the provide you to today. of lap and through commentary were like the XXXX? like

Steven Brake

weather. wet Steve. we it's Josh, and Hey end the cold tail dampered as by was QX Yeah, of noted,

the we to first that QX into aid there first the Moving against Lent quarter week that recall quarter. weeks but did the the somewhat of shift works second two QX, two is us started important

comfortably same-store terms X%, compares year of mark, to those basis a near prior there forward companies weeks, at balance franchise baked of two-year of good in that we five lapped Carnitas two-year we year mid-X% into through And both in So our week the now company fact up a weeks up, On over five favorably franchise we've expect in actually five-week first than that, summer basis. less on positive and than strength last weeks through up in, a strong two by of those of XX% naturally for as to, showing is the weeks week closer and our acceleration with most now it's great two-year sales know, company demand. stronger a first weeks comparisons you the toughest it of year and sign lot area look now about the is we by the X%, trend, really first having quarter, first have top as here the of on feel lapped difficult of so a X% we mixed very as the sit ago over sit two is that same five sales far consumer in lapped we franchise. which for here prior in stretch it did business far returned

have one-year to even So for launched we we in since a trends nice of great us our same-store bit sales Carnitas. seen we is off a think start and uptick Carnitas an

good So out then we round looking ahead about quarter. to that feel this

about over to for round last up about the next do company QX. X% X% the out ease, franchisees and weeks going know, You compares seven for we're year

naturally in to Carnitas but and role great difficult are QX. about it's the feel positioning in easier the those particular, good of compares compares, we play a So, yet still going balance

Joshua Long

to for kind on punch you Great, to of do terms of over Change context like menu had the there a That's the this provided with anybody introducing discussion one-two of rolling new sounds menu to kind you'd but the maintain go how with also that of and you're you they as sure them new of terms historical thank & color. around that experience of kind thought out had you helpful. to. not platform and I process rolling wanted added It experience these get shift Buck out going just to some of you've menu alienate platforms and in mix any & supplementing maybe Under in very curious kind the that platforms then new Buck these and historically. making as smoothly maybe but like kind

John Cappasola

Under same in you seen franchise Buck the course. years, on XXXX of Josh. you several Buck far price sales menu used store Well Sure, as some the as brand XXXX, our being the Buck with today, & here, rate & actually them and same-store our today implemented of and restaurants approximately yes the a in flexibility is several the call have component know, XXXX sales provide fairly franchise franchisees as to XXXX. as XXX order in within trends over & described know, again thus in QX increasing of past mid-single strong it support we've boosting Change at we've And what an Under have years, remained digit last

the & to sales don't certainly have and whose also have & date Buck menu Buck similar trends like Buck who very to validate same-store that these we Change restaurants XXX & & are Change. trends Under actually restaurants have the effectiveness today to note, Buck other So within and near Change help company of

pretty strategy our section platform good does experience there So what position the key relative on with platform, our traffic that and of mid-tier Under a for market order continuing approach, & that the obviously it we're be a increase percentage that and do about we'll & a that and minimal the our suggests punch if Quesadilla able to combined Buck Chicken Snacker value course of Change some our value increases onto to to fairly one, of part with menu but do will impact to & the rate risk expand feeling with we'll & flow price our dollar launch Buck strong us new is you traffic in through to to of two at manage high elevated as launch of mentioned, Buck we leverage part you the move. our when this be our and Under advertising and concurrently will, in and Buck Under limit the the perceptions best menu that to solutions data

some push just will about that the Buck Buck Under news, Under plus new question, and your feel pricing off news, a this historically So into to then the to approach either marketplace two very strategy use menu to so typically and value heavy perceptions with here pricing but one, similar has QX. the marketing we those news across we we've we been good think elevated occur punch new used that against new pricing enabling or manage the & oriented to get on we value kick &

Joshua Long

thank -- start sort of P&L, see franchise as was that in but housekeeping of and how that as And year year's or you that then over kind -- advertising kind tends of item be Great, a dial seasonality on breaking last as any any into to the the on of well. number, try able it nice for the pulls sort of to more of just might contributions that grow and the you out color we the to of maybe we over a provide then item curious, pushes just time? course that it, perspective happen line line kind to

Steven Brake

Sure, Josh.

substantiate is very contributions sales franchise now X% that's that of all revenue up that recognition revenues made contributes. part changes, million due of the the $X.X our restaurants So to that overtly of

quarter year seasonal revenue and if you cadence restaurant guide you versus a drive. it's then basis you're be year basically indexing or to quarter, year, ago, of total kick restaurants the sales with company probably franchise to the it expecting as perfectly so would trends know, correlated growth to we're a course look of on follow that that throughout probably So kind you they the commensurate a up know, to this to good, at

first this probably to plus some pursuant if kind about so to year XX-week it. last evolve thereon, you the growth data X.X So would right be way that that quarter to metrics want trends of by think

Joshua Long

Got it, thank you.

Operator

Our next comes from line Jeffries, proceed Slagle of question with question. please Alex the with your

Alexander Slagle

product Wanted process Thanks. Change expect try you products on of and from return? the Hey guys. limit and the and new menu and keep the simple, to introductions the & thoughts menu that follow-up new the as do out Buck to the to remove some items roll on complexity? part the you Is SKU's

John Cappasola

always Alex, menu you calling Well we're the dictates. as performance know

there the end those removed significantly add as and platform part a the Under & items part us individual of don't the as look on a & flexibility. others items thought be the are Buck items holistically our isn't it number component ongoing will of at really & very Change quite increasing strategy is & to that that, it some value mere still Change it as of perform So menu well core and/or on Buck as Overall Buck we our of pricing Under. of number We gives an Buck and reducing that as is now. items the process. right

could Buck Buck some in market and would we time and perception to to will performance upside bullish got & that and right we regards does Change of more we perception or we the over think and Buck some simplify value pricing time this out margin & think expect around perspective Change continue & front. Under dictates I on over Buck you us right XX in a the evolve. if Under up create now platform there from So brand mid-tier for if know, now the it moves to But what the items, around happy nuance value & we're with nice can is

Alexander Slagle

interesting are breakfast. daypart at and momentum seen first good you've dayparts. there mean, Has the same-store and I trends had recall continued? it dinner good pretty into or by you trends due Got at that some quarter, any the sales the second quarter had then

John Cappasola

Yes, and in We has a on daypart to sales as dinner, there's we side breakfast late same-store we're those another of opportunities been also that. of so night fairly continuing lot focused. and consistently focus them dayparts driver the innovate think really know sequence you and and we and that's one growth them can our from but use remain seasonality so the back toggle them why pace and forth

daypart. the was our think have and on focused top has with actually daypart So that in seen over bring to mentioned dinner even been has year to it to breakfast awareness I drive half XXXX very and the Breakfast usage. been and Del one of Platos another year that remind this that news on year great a more last us we was of first the performance new half; it's we continue been Taco to we've help we'll some and and some against appeal the you a Plato platform performing that that just mentioned for and do appeal which performing brought to going the has one daypart top

launched QX. and of Break in kind far a be performer starting the seen we offer in bundle promotion with Fiesta So, at QX was top daypart $X.XX margin the XXXX a thus the at which and very breakfast breakfast decent we've

we as an it So spot fall window to focus same-store be on focus then we be when year will use that great deserves night. in days. makes next to as It's that pivot that imagine, a late sense. continue that and you sales late breakfast probably take night seasonally the over daypart focus longer night on seasonality the late it to we're summer can and to for think seasonality next those the going will to to we turn does to We of what we're need like focus about about ongoing advantage as so that this as do and its we

like launch. launching [indiscernible] and the Churro that pretty Instagramable we're with to actually be we'll about highly a items night late cravable as would menu some So Shake new Dipper say,

from So we over comp night as upside some we've well. sales same-store got summer and the think upside months some late

So about some those how answers answer that hopefully thinking I of but know a we're about incremental all comprehensive your hopefully questions dayparts.

Steven Brake

And that first positive I six would quarter. just say the in were dayparts all

Alexander Slagle

Thank That's you. Helpful. great.

Operator

proceed the question Securities, question. Wedbush of next Nick your line from with Setyan, please from Our comes

James Feldman

Thank you mainly other The of the price was on it, between as company the well? comp, comp think franchise there or owned you. it about are going and I some touched things difference kind

John Cappasola

on me a Steve taking and performance of some back between as Nick, the franchise combination just tight add color company that and seen two here. I'll the let But Yes, observed give little know, it's historically talk a dynamic fairly bit let actually some step things. approach sales you've we've we've same-store you and me on let context But, franchise. -- about a been financial and this

However, franchise back has held eight going on company to the store QX past nine over sales same for of a quarters growth the slight edge XXXX.

is component, so migration attributable added to finished some over have their the office reduce with performance. among seen they're One, few this year, our key as we control and much our to business often mainly QX really Better a franchisees definitely strategy and our momentum elements years. them data we've So their last a making improve company. support this our much business more them think accessible provided the of another saw pronounced back better is POS to quite edge momentum, most to plans. and drive visible consultants franchise to more in We've albeit we not common several franchisees we span with help of franchise as

as another the hedge advertising have with training and lastly well. the mature we smart has platform talked we've to that the marketing. of franchise we've way detail been seen their then have they're our made markets training with as yet. ability lot training and through these we've marketing businesses. store reporting quite have better Better some also eLearning don't reporting not mean, better franchising And and to help effort more piece strategies a them in much our I full is we've on gaining enhancements better complement support we training, led compliance an traction about enhanced local improved frequent the operations on aided say really more I'd So, provide to that's because that of and added so digital really marketing

just examples of these we're and strong of putting our a -- against are a type So, that few building you the culture. detail know, focus franchise

Steve me let Let speak here. the numbers little bit to a

Steven Brake

of Yes, on little quantify That's be changes we you all very can't one initiatives. dynamics there; relevant important we outperformed we new ownership would of so over or touched listed itemize a the than of units that about can't if who some franchise franchise owner more ownership, by lot those several balance prior focused amongst and basically a and come -- operator the more in last XX spread those the itemize the folks have restaurants bit. QX much under John restaurants will naturally years are than the

other played things So role know, a -- but quarter. fairly among you spread during the first on the that that which John noted has impact small quantifiable certainly definitely

James Feldman

Got less thought a than would it. there actually lot On be. deleveraged labor, I

the comp we On of we something of year-over-year for about watch actually little the or this think the is opposed increases, going comparisons quarter-to-quarter maybe might I as how should the going bigger sounds think to kind or a being Yeah, out maybe reverse that forward, the anything comparisons of we it deleverage workers like quarter-to-quarter deleverage? as given mean price terms about that maintain we in even can piece, less forward? level

Steven Brake

a it know, workers you to fourth that comp, out it relates we So called good as favorable, was quarter. guy

had there. The first some quarter favorability

much some having our claim. underlying we're trends know, improved open in You

So about happy that. we're

by to them wrong look I us have you touched good plan the progresses. controlling role can those threat. but Naturally that a know, health direction other first that obviously in labor, felt for good to play bulk to level will as biting extent continue don't of quarter we'll the first elevate menu bit the forward, a and trends. lines to pretty only year certainly will line marching of BIP's I and overall year-over-year, carry seem less I time the feel other menu what drive of but XX way, I the way, about claim expense becoming very on price the we a the don't workers ultimate that amount and price deleverage in insurance hours that comp among about item see least tell the quarter deleverage of we As our definitely

of it of some the mix So, plays and ultimate about feel that in and the traffic comp the leverage or strength lastly, we year. for check line but of role balance in management what absolutely and shake deleverage will keeping out good

James Feldman

And the more get marketing do in shift, is in or that that out? QX spread we back of terms

Steven Brake

It'll spread out.

of will less You as call quarter spend will it even but out year in tiny that exception of every difference you percent know, full be a be or we may basis. good naturally X.X% a a guys try or given a sales fiscal so more know, for to we there pressure always without year sales, on

James Feldman

shares. buybacks, about how are guys and know, you and warrants, -- on back bought buyback it question your some how going last thinking guess thinking Got we that I just you any there the forward? didn't was what

Steven Brake

it go-forward Overall open it's We nothing lever program. flow, a again, cash of the to important free said our always set that done continue here. an of a create very remains the be we with strategy, helps period recent points opportunistic at we during in the will very how long-term in or part of various XXbX-X's combination absolutely deploy right as value it important think transacted. manner windows an we've important -- on year-to-date we the use time That and think long-term bit bias would,

as forward we see move expect to know, from activity you we'd here. So, more certainly

James Feldman

you. Thank

Operator

Instructions]. [Operator

of with the Steven Our please next with question. proceed line from Anderson Maxim comes your question Group,

Stephen Anderson

look to lines. and reason seemed afternoon -- the at occupancy wanted closely that your and clarify good that. like to larger wanted I other more in It Yes, for increase the

timing ahead Elevated I part So that you but Solutions? advertising increased there that of also some know do may and was enhanced of Combined mentioned investments think you be some

John Cappasola

to there's Combined or relative No, otherwise. Solutions investments increased no

XX advertising reverse half that will course the pressure, of know, just we of out year-over-year over touched on BIP's You year. the and of the that of fiscal was neutralize which the timing

comping the stores have underlying and are comping inflate elements than the when opex X, X,X half know, majority more deleverage. grow stores you're other frankly of slight our the X, You you it's was

components So of run same-store that that's them sales inflated our kind a and and and know, opex bit a to than of what through from the repairs maintenance lot there's utilities supplies those more growth. underlying happened, and you rents,

you that's So QX. we the what deleverage modest that felt takes to

in strong comps, flat XXXX in XXXX XXXX, last end MSP each ran line comp strength manage For day context leverage we've against so of years the back what of play and the we on it best the seen opex. strength contemplation so on of and year out those BIP's to some recent day that in we're doing XX to item got it's of rule the our kind of the of years comp that's tends and up

Stephen Anderson

Got it, thank you.

Operator

question next of line Bibb Securities, please Craig comes Our with question. your with CJS from proceed the

Craig Bibb

shift Hey guys. for How a comps much next hurdle of how much QX did the and help Easter in then quarter?

Steven Brake

the it's for trend quarter. moving two modest dramatic always a hurt the a quantify was it precisely a weeks became quarter or there's headwind. parts It's -- to first because a but a modest was it not many help a a that's not it's mean, for I of -- amount -- second in dynamic hard and tailwind is it

inside it call definitely we is that calendar always is to real You feel dynamic. something it's BIP's not XX a out huge know, so is likely but because a swing it factor appropriate

Craig Bibb

two kind mean the end quarter? of at be the I also of weather -- the just weeks would

Steven Brake

Yes, X.X% you obviously at up are the system we ten-week know, mark.

there weather less because last are is know, sales XX% You did more franchise on have those more same-store was company our and footprint California. XX% downward it California, than plus couple wet than of a pronounced you weeks very which, impact the know, cold companies

of you know, franchise down those quarter. company two a that weeks than it franchise that, actually sustained more. more much mentioned slowed digit the We geographic to with mid-single the more really hit you so a end same varied So, kind company they've know, the the footprint, trend

Craig Bibb

also I did add, with labor in well the you do Yes, would guys quarter.

the workers explained You've comp.

you in plan offset? up or price for how step in do What's bigger hourly scheduling or labor a game is facing that, XXXX. You're the it

Steven Brake

going margin management of be items. It's variety plan. a what It's we refer broadly to as our to

So, management encompasses that strategies. and brand cost

On appropriate the incremental promotion making sure for that brand item you pricing, every margin level about menu drives appropriate are over side, thinking levels the business. every product it that new and of yet know, time profiles

our know, You bring menu through barbell of know, of strategy. as all you unique course we that to life

So brand that's kind of the side.

on have focus. continue of be going things a On to the lot a and side been cost will huge

on to floor packaging of coverage somehow within happened optimization at. no save have a what looking things strategies. appropriate the portion to side, ongoing we on freight So that lot then the chain trying I'll reduce has on supply work impact of effect use somewhat, ongoing where is sizes, continue call itself, the with A our of and chain and also experience. Also, look the to good make case trend of lot will the buys we when food money items packaging, guest portions, supply can on the and select protect at

scheduling on customers the with when we're floor. make generally day from to know certainly front I optimizing call journey down. what -- ongoing start labor the to techniques that sure labor the we feet That they On when varies and each slow enhanced arrive the

the to got we've let So accordingly. go adjust staff, when to don't Staff need staff labor need you staff. when we the

food equipment labor later have -- take You there rapid some some example performance, those help try labor know, of capital the training here We that coming to pace we labor as this out off another practices with see equation. also in pressure and incredible new QX. to investing at focus best embed we do stores prep and a and others opportunities Then that on touched have. more

some us the should [indiscernible]. optimize That and degree. Our can to saving, is of goal to achieve capital there ongoing to smart mean which allow uses absolutely process prep that to labor hours reduce speed labor

at at Next reducing Chicago the NRA the kinds teams interesting at up solutions hours. of all week looking in labor aimed

cost labor. So that's about journey price, and some we're so ongoing across of combination will the thinking be this and of things hard that savings food an a

and strong long, margin and ultimate we got you or brand performance as no goes, wage doing threats much history other matter driving think a to trends We the dollar mixed very obviously composition know, of very this comp know, have benefits move healthy favorable price achieve. we've as as minimum well to as mix. cost margin positioned we and and among far you and percentage traffic traffic As strength that cost going of a is forward inform what remains is

John Cappasola

Craig, this John. is

think side thinking as and our when levers unit growth good about, you piece our I management AUV just how the think several focus then in think our we're weeds three franchise positioning, of growth and that that on do the our margin driving out positive position on about yield about we we're on can our still major feel about got and way growth which, sustained right that we're what's the with that. outlined AUV the management strategy, what of occasion the and all now. the next plan enduring well are with balance to that we to here, and seeing in over the what some And elevated then pipelines Steve and marketplace margin you've some pricing even the years need growth about based we thinking we're the on we're side, which momentum very that especially building franchise on again, happening

ever we're to probably maniacal going margins as been to four-wall that make growth that in area and to on strategies. continue we're be strong about focused as we're sure AUV we've to complimenting going deliver thinking how we're So, the

in position, we're the that to a but on to levers focused be leadership meaningful heading pull going won't we accretive So, easy most to brand. lot feel know we're over be the that, where those long-run, are of certainly I is and and the good a good we team XXXX. have we think for It about

Craig Bibb

explain there Taco you John. Platos, Taco interested, Plato? could Del Okay, I'm Del

John Cappasola

Del The Taco Platos?

Craig Bibb

Yes.

John Cappasola

has as entre. the plato Del that really I do two It's can Tacos for I quickly you. a

Craig Bibb

it? That's

John Cappasola

street it's doing the think our that that and entry the do is, get are using as the reason offerings evolution two within well can Plato's on don't and is tacos can premium want the before from as we appeal and well get as you and salsa me, we also in with of burritos, and we to doing that package. those the we of want Taco's really literally expand we're beyond just make of lower top you why that dinner daypart the It price the -- see the folks items, brand. premium we beans it's Steve it Del Plato's, part sure forget free the right, to of menu as our rice wet one because products that And aid let could the were reminded chips

for offering to move and So, time. through to we're us great going we continue as expand it

Craig Bibb

on also? that get can I And Queso

John Cappasola

You could. like could Yeah, you if you'd to.

Craig Bibb

would. I

guys. thank you Okay,

Operator

Our Hamblin Jeremy Company, next of question from comes with the line Dougherty question. proceed & your please with

Jeremy Hamblin

remainder I controls questions. the commentary of make there. sure your year, costs Hey on wanted to guys, kind impressive I for that taking thanks food the captured of

better and with expecting you item favorable expecting you're you're that particularly as little prep that expect or the to might you're well, on bit food a and the we remaining new a lower labor? bit rest able I of said little pricing year about the year, the Given flat. hold that the that quarters inflation pricing think positive the three higher kind comments equipment of line be of help Should menu able menu leverage costs more to food throughout

Steven Brake

question. good Hey Jeremy, Steve. Yeah, it's

right. you're definitely So

over mid-X% about of basically X% in perfectly quarter area. First the menu offset pricing by that food inflation was

we of XX points on lowest good held level menu of highest pretty over food quarter and like X%, inflation, our food X.X% feel that in area. far that contracted but timing. and margin excluding basis by We we had price costs that advertising percentage about expected remember, the level a actually far our flat So

or net X% So that of approach to X.X% beginning X% sequentially same see area, about we forward three the next we QX, then QX below in price on X% in beginning talked time touched to to as and food, approach we I the that menu up efforts on inflation at look in in quarters food mitigation the that QX.

year, on down some year-over-year ongoing definitely line focus mentioned a So where that certainly as like don't sequentially And sets the hours to as of both labor of We delivery. the structure boards, move in of play now have only in forward over we X% significantly. our a price. with mean, year saving but and very of impact percentage good up Elevated for here lot the over same cost you and can the the going I new time step innovation hit out quarter of weeks comparisons soon prior then refreshed we're half we At us Combined the the X.X% feel that's all here ease then item the going basis sequential it food us launch as also puts right campaign, X.X% position going the with menu company. that's expanded well third quarter the fourth Solutions and we're to as the on is forget app, on to in away ad improvement. back benefits a the

price, about how about sales same-store you good cost compares, of and second dollar rate lap be we the out performance that's and performance. think to contribution combination as benefits play we in should in half that year the really dynamics feel against So, Solutions what of margin think restaurant ease particularly performance, EBITDA going Elevated a sequential strong and on of run Combine cross-referenced benefits when particularly very

play sitting year but asked out. that's how thinking what that's today is going love So, you bit for really about than more probably a here we about the to

Jeremy Hamblin

definitely quick more lapping helpful wanted add the very you that's start just impressive had then. one one compares. and to in to quarter I X% have Yeah, an there

know, assumption several in even planning potential this to ago, the mix the QX had in that really you QX I in my been getting I lapping you couple year Are factor last planning, have some contribution negative and be well assumptions quarters? and X% should my be mix years. mix QX, should of a correct tough great for that guys negative for quarter of be think be kind we a next really positive is that are particular, You QX in would you though mixed as

Steven Brake

for mix. QX very is know, you tough correct, QX, easier You're compare on

we with in that probably mentioned, menu we the mix. able so actually come as back sit far, strong to but posted about improve very mixed As tenth in were up QX into Carnitas we business only a about a today, that performance our good In QX. week has feel being mix I upon here in, we

So level we expect do we what on of in actually do quarter. at have based second mix point, the we this to some know,

on rate about lever there. a strength both the the dollar The to forward. of harder with think and call, lot third of there's Snacker There's Elevated dollar price QX we good there's up can about the of mix, think but take feel of aggregation a we Quesadilla but sure comps and the that of has going quarter going have bit good a sometimes but be big go way think Solutions. a we QX we obviously Chicken depend I a along is bit things good like bit of little going those mix price traffics a component it's We our there. with to Snacker, helping performed traffic a on the capability us lot menu our obviously making We of there about be actually But, of traffics to to to drive as in aggregation always kind we but definitely it's tests, it there. move feel trend mean, potential a put two point toggle. Combined and always

Jeremy Hamblin

awesome. Okay,

about in the that high in think looking you or on of to to likely X% expected. two before I was G&A, go three little or FYXXXX reasonably for it year kind multiyear number sense that target probably to of line on G&A, see a is noted on would looking and Do two at to where of on and a you sales difference to? it A considering better at What came if kind three there some be years you what kind wanted Moving go down of should -- percent kind leverage your ago if a where mid-X's. of that? you're came for than longer-term thinking we're now I opportunities models to. get few expenses restaurant of item year can margins we you target think point closer had get your G&A of more a a target, be that that can the

John Cappasola

we and Yeah, in we year full be Sure, SOX had of that you auditing is the including three year so that it largely this you're that's public XXX(b) have and if compliance this called we because percentage irrelevant two three public G&A ago expect XXXX should little will, because peak we've highly this public company correct. out journey year that internal our barely those finish, ago. company the and company years the become costs is terms controls system a entered incremental years with --

basically and G&A expect a appropriately. growth believe sure not get do up of that revenue of on long-term be we will the dollar drive to your level, make call, to or some you at inflation be percentage move mature short-change brand like unit sales the brand of on leverage of this supporting potential We terms we against in same-store want said looking likely we're really to growth. strength what this today Once driving year So, we will -- upside the in growth growth level the do modest a we forward and peak G&A last to as basis. the it's plateau

eventually business managing going robust to the growth plateau think That's through So, story eventually have you against AUV be we of well to that well what an deem looks leverage comp and know, that we growth modest compares positioned capability our to driving effectively. growth inflation that top-line how we're strength to as going we're inform to appropriate sure really it's year-to-year revenue like. make as emerging trends,

year-to-year know naturally So, how very to of basis. and that's guide on if we I that's it about will it don't want but specifically think helpful kind a

Jeremy Hamblin

Okay, on then. moving

franchisees for is noted $X.X I'm You look attractive. when I you is think it magic approaching X.X margin which your some pipeline AUV's sure AUV's, franchisee pretty XX% attractive, your more restaurant are with number that getting a that's million at

of are XXX you're talking brands? In get call franchisees plus terms starting large I'd today, franchisees, of to what to the say you let's QSR operators those size with units and of are that that scale the of conversations scope

John Cappasola

conversations and as we time ourselves our of but some believe we're out news we happen also that that Well, those sales yet just certainly not over and plus the signings Jeremy to more about do we're franchise and marketing -- there marketplace. franchise unit may the can perform guys putting to as efforts in out be we we through talking hundred put

per what have strong mostly in development think there, obviously down done I those southeast, representing development agreements ten pretty been in which multiunit potential So trickle has five the agreements are we've eight agreement. to signed southeast being down I today we unit a in and the range of think

them an fulfill that areas, into and execution the getting the all thing from best best franchisees that make of have the continue the the right do highlight supporting of right estate, we we a So agreements and these wins we're their so giving will better real chance those can is them, we're of we new to when they're brand sure and to operations that in bigger those the things. them standpoint, small lead wins believe as success potential to those way the that nuancing marketing

there groups execution. conversations going but efforts of having, out We're to absolutely get and wouldn't looking signings just those some us we're keep you the lot on But to-date. major count So, ways after I bigger to a at know, working no of internal yet. the

Jeremy Hamblin

to that. a related Okay, question

operated forward locations running here you obviously to company California. exposure as can't overnight having on side, so look operated of change you're the much you're That company the costs but opening. labor that On into

the like there You gets a some cost those California that maybe away skew a higher states Colorado gets openings some operator or of of know, and thought states? cost the from is lower into

John Cappasola

construction as given trade So know so area, could or of environment, things we're real can Not area costs very estate and pragmatic it at geography just play out trade vary, it being are we're by the deals those these now by one-by-one. that believe but heightened not. sorts looking and right, we right

that will So, really like to we're going approach be deals returns taking pay portfolio that make a the we side optimizing our some company up that that on there's sure plan to bit get we're and and little a them to for be try slow we too expensive deals will and them and walk to are or the to we'll deals some better from next think thing. and away move on

environments So, what that that's it inevitably and that happen suggesting push naturally continue do normal in which is the could and cost through us our of today to could course. just direction happening environment maybe happen given the will what's you're better

and deals a doing new kind because the actually that we've the still we're line signing coming right unit still and economics. are Colorado are places and a firm set So, now sand that we right? solid we're deals haven't in got we don't in California of unit these to underlying in So, about inflationary, deals feel good in these we some that great build finding of we're on markets want

which got ultimately we're think to -- we really So can if to the keep options I geographic our annualized we get build strong all to believe over to growth, want growth time, be able we and the those open expect we've in, want going over that more geographic to to time. more we territory likely the hit have and hunt we to that rates and

Jeremy Hamblin

Good thanks taking question luck. my guys. Great, for

Operator

queue. for further call management I'd questions the no closing to are There to in hand over back like comments. the

John Cappasola

and in your day. for Taco. our interest look today on you a on forward to Del thank have brand great future calls hope Yes, We all we progress sharing you the

Operator

gentlemen today's you have teleconference. your Thank Ladies lines and disconnect conclude may time wonderful a participation, this and this at does day. your you for

Del Taco Restaurants (TACO) 3 May 182018 Q1 Earnings call transcript