TACO - Earnings call transcript Q3 2020 | Del Taco Restaurants, Inc.

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Operator

Thank you for standing by, and welcome to the Fiscal Third Quarter 2020 Conference Call and Webcast for Del Taco Restaurants Incorporated. I would like to turn the call over to Mr. Raphael Gross, Managing Director at ICR to begin.

Raphael Gross

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

On the call with me is John Cappasola, President and Chief Executive Officer; and Steve Brake, Chief Financial Officer. prepared will our for the deliver questions. your we remarks, open we lines After me that remind discussion let first, But everyone include forward-looking today part some statements. will our of therefore upon them. not future guarantees These should statements placed performance are and be not undue of reliance refer undertake our and future SEC of a detailed to do filings later not statements the a press financial condition. and discussion could results Taco’s update for operating to We today's impact risks forward-looking earnings these at date you and Del that release more Today's as earnings reconciliations the EBITDA contribution, press measures release to also includes measures. with adjusted and non-GAAP financial along of such measures GAAP adjusted these non-GAAP net income, nearest restaurant

or measures considered measure loss, not be or financial by GAAP net as cash non-GAAP flows measures, or activities liquidity should GAAP operating net other loss, or any provided income to However, performance. income financial operating of alternatives such as

call Chief John now to Cappasola, turn me and the President Let over Officer. Executive

John Cappasola

joining would unusual the our restaurants They and across support appreciation Del for shortly. their our in have partners change embed guided I longer and that at more we team it Thank expressing and our country begin and than work It occasion new ability up and perseverance of our Taco exceptional explain center for their rapid work execute risen through acceleration the today. best the to and serving really deep term like strengthening guests as is us their appreciate and these our set innovate, you, the Del my will brand by recovery by to practices. franchise to entire Raphael, brand Taco demonstrating everyone during course, I our times.

operations onset of reminder, through channels. and takeout since maintained a rapidly As expanding delivery our we COVID-XX, drive-thru, the

guest reopen system, guest channels is our for yet satisfaction rooms, themselves. which not improving dining efficiencies. validated our driving and any a This brand engagement sanitation, by safety helped efficiencies our also results and that trusted us increasing significant management in were out operational workforce course, by stand company-operated business aided as scores, of have labor while has We new digital

Let covering before for QX briefly our QX and XXXX. me review plans

X.X% rose system-wide X% company-operated QX, same-store including sales restaurants a a X.X% at restaurants. increase and franchise increase at During

Wage. labor franchise California reflecting positive despite increased a and significantly points increase our of diverse state margin absorbing and QX. sales, strength These COVID lower reduction offset exhibited Our margin, QX a leverage base expense contribution a by concentration to that California basis to XX plus and while Minimum Restaurant compared restrictions. slightly across year. normalized in level improvements trends X.X% benefited with expense footprint operating This related Vegas from as expense restaurants a a a occupancy advertising modest a advertising food restaurant and will were but last in return Las partially company helped XX% $X percentage despite turned to other and heightened higher contribution XXX in percentage

diluted per increased adjusted while income $X.XX year. In $X.XX last to terms $XX.X $XX.X from adjusted increased share profit, million, EBITDA million net to of from

brand are revolver our to ratio convenience. proud brand acceleration value we $XXX approximately am to including our drivers to we engagement, X.X leadership, debt-to-adjusted I by Finally, five focused our and drawn lower now EBITDA to on our reduced innovation, through which $XX of transformation net leverage million and business stabilize digital times. helped ultimate million actions longer-term

and let me start I’ll start value. by So with covering each

foundation things. and attracts It in perception. and strategy will restaurant do profit us our Dollar occasions. purchase strategy menu for to The the supports with category-leading consumer. quality its believe convenience key and today’s speed, also value growth of important with affordability deliver is role sales levers We facing provides powerful our interest It Del's Deals ingredients value few of against our our broadly the to is of a because ability QSR along and spectrum and play use establishes frequency ability and affordability dayparts is ability it’s not of incremental and a unique focus margin-friendly freshly its positioning, brand to on loss our drive given leader. menu appealing to compete across heavy Our users to decisions add-on prepared to wide a an economic due It as enduring uncertainty which purchase allows barbell an primary its multiple transactions. and a increasingly

and a menu with plan strategy. quality also reinforcement the fresh We stream continue products of maintaining product value while innovative, Del’s news marketing Deals upper-end barbell Dollar and at of middle new steady leveraging to our also keep and innovation to mid-tier

the Burrito lineup. pandemic, fresh menu new scratch Instead, we our efforts during our all. didn’t Epic with innovation at launched from along During pause QX, we a guacamole, handcrafted new

is our is highlight protein peers. QSR Del’s each QX guac improvements the Chicken Crispy mix. and and advertising menu a signature new to with and barbell menu the layer brand future. successful Chicken Dollar Taco, within to week, next high-single-digit $X new Chicken Chicken We and Crispy engagement our then available enhancing menu, and products in which separates new other as creative fresh new we add this partnership added life a first to side satisfaction menu more designed acceleration Mexican humorous new product strong Cholula available in products QSR plan for national offer to to menu to further our handcrafted a that drove flavors Dollar and flavor and ways with or the content brand was four to spanning our sales in branded to as and up fresh menu Epic messages features through is guest Our consumers. Burrito The followed overall bring a through the a Fries This to It reverent Last we highly guac. driver modification, Crispy products a new $X new Deals Box Crispy restaurant well simple barbell. and The daily approach our ingredient. contributed our just and first a of new launch our from in is flavors Crispy addition relevant as across with in us memorable unique Chicken same-store ingredients to as

that CMO, fun Taco to Our through reimagine to traditional new fans collaborating and talk buzz Del to Tim out Hackbardt digital about worthy with advertising and our ensure across want agency is our channels strategy content share. our and stands

seeing digital significant improvements already their a and result engagement social as across are channels We early of our in consumer work.

deliver has and buzz to to by creative social increased In fact, four our brand watch, new engagement up approach times. must

delivery digital one-to-one continue more than which Taco with users, fans from guest digital to through X.X the of engagement convenience. to million The Turning our we registered transformation, XXXX. up Del expanded XX% app increase and our grown mobile enable enhanced channels and Del our end App to engagement has

we increase due Importantly, in offers impart to Del which disruptive available seen have the an on App. users, regular active only app is

today aggressively the Uber promoting Del platforms delivery delivery and more delivery us or XX% home four a as leverage contactless trend provides clear Eats DSPs. and believe restaurants are of maximize toward Grubhub leading We one Postmates, convenience with franchise consumer through company at to all with partnering channels advantage. We a restaurants provide delivery and all with than ordering across more option DoorDash,

broadly, this our related will technology delivery to further times start consumer for focus delivery technology average including two approximately at adoption therefore sales trend and the During and our X% check system-wide has on plan represented delivery QX, likely More through pandemic average to a at strengthen. over company-operated areas. check began We accessing in to fiscal continues key QX. our company and with foundation leverage XX% of the of of position since us investment interacting the solid that future restaurant X.XX with curve and premium brands the accelerated at

develop along a we Erin to building a of in CRM First, brings in we digitize Technology and the a by Taco position To added team with Vice new President further guest. of of background our CRM Del Marketing the this appointment Erin successful sectors. further rewarding execute of and plan strong to Levzow. XXXX, restaurant expertise with hotel strategy, incentivizing platform and develop our holistic to platforms

to This technology The through drive-thru the increased second and adding lands our enabled outside expanding initiative. throughput by to of area off-premise consumer includes occasions ultimate in takers convenience volume order address demand is restaurants. improve of access high our focus and convenience in

to contact service larger to plan leverage expand in modes. our delivery we and share This and addition, smart developing ahead our grow will occasions In pickup. fiesta similar additional our limited order party testing include packs and occasions App the to of Del feature size bundles our curbside our to channels

expect we fiscal our two Ohio. to development. restaurants one to company-operated franchise opened now franchise into In restaurants Turning QX four and and we additional QX, including entry during open

national ahead, supports that brand growth. believe ubiquitous position appeal long-term unique broad and system we Looking our offerings menu drive

Although the our pause us cases results revisit their growth resume pandemic plans, confidence and franchisees caused our franchisees in in plans. appropriately strong growth-minded and growth many instilled have recent to to

plans on infill franchise emerging including opportunities also We stimulate Orlando with in of XXXX. company a western strategic and longer-term attractive help in our markets to for have resumed markets development growth company focus core enter to the the seeding

capitalize will increased brand also future. and in the To smaller are as it franchise for final enhancements to include opportunistic and This stages result refresh return enhance and as growth real on that developing new We additional to and expected interest access. expand venues as in well efforts in anticipate position of a help footprint and concepts, modernized new behavior, to a accommodate smaller will includes shifting targeted we our new may operational regards conversion and real opportunities, improved as availability. -only are occur estate the model such sites. these of pandemic us to other real dynamics will drive-thru prototype prototype help the design, the favorable and a The unit profile drive-thru of restaurant new estate us These initiative. as consumer our allow menu our be opportunities functionality, a well estate

our alongside a apply already ROI program is we development franchise expanded that time. sales including functionality age we and fleet are new continuing both the comprehensive to believe program In and future future prototype through will estate encouraging positive We can returns. This image opportunities, a and combination promote and the franchisees. company the new refine compelling remodel generate opportunity is of addition, driving to attracting design a a benefit real lifts over across financial and remodel great brand test

can for to and value convenience. So is And relevant contact and course exactly days, these flavorful of limited conclude, these channels. positioning looking we consumer no fresh, our where what attributes is the provide food, brand great through

recovered has business is stable. and Our now

our and in in can bringing are and evaluating how franchisees future of We new and to look Our updates improve invest and healthy through side balance This to crisis forward new real memorable ways our brand investments to opportunities. in opportunities is to great us capabilities. sheet expanded progress. allows guest buzz, our COVID accelerating messages engagement create on our other that our the menu grow providing our our in This ability further on to the products the better prototype our and technology we convenience life these to shape. greater topics estate by strengthening to we realize emerging brand’s position intend capitalize to includes reach providing

to I'll third our Now, call turn to over quarter review financials. Steve the

Steve Brake

comparable year ago restaurants, to X.X% franchise restaurants. the John. million of million and sales third at increased increased increase a restaurant revenue $XXX.X X.X% at X.X% X.X% you, company-operated Total from Thank System-wide consisting increase in quarter. a $XXX.X

X.X% comparable Third driven the $X.X year, quarter, to company activity. by in from was with company-operated refranchising million year, ago $XXX.X sales. by to last restaurant was company-operated primarily The growth primarily million additional restaurants million $XXX.X driven to partially by to year. year XX.X% our franchise-operated revenue comparable sales, the compared increase comparable sales restaurant to our from the year-over-year in Franchise period. compared activity, restaurant increased franchise $X.X last refranchising coupled in decreased offset restaurants, last to The increase million fewer decrease from due

a cost now Turning points of increase as food menu exceeded X%, a of percentage inflation X%. price to food year-over-year and over sales expenses; from paper approximately which approximately by XXX XX.X%. just XX.X% restaurant decreased driven of This to basis company was

fiscal We high XXXX step-up our of from sequential a inflation elevated year, COVID-XX. by This QX cost by drive-thru menu deployment of primarily over advertising with is price of coupled restaurant particularly increase a labor, of representing a by quarter, offset in of in dining remain to XX.X% approximately company increased effective as expected less reduction compared an effective focus driven a compared variable low pricing was historically a to to year-over-year X.X% last points food X% an on the We a company very reduction restaurant expense expenses prior mostly in from well food result related fourth traditional XX grew trends. Minimum food menu market, to operations X% QX. by the a channel expect and basis approximately based by as that modest slightly delivery the as higher XXXX underlying delivery and cheese in area the percentage in reduced sales during to incremental decreased outcome, from sales a as narrowed as to Regarding $X reduction strong year. XX.X% to due point to on as XX.X%. of now a XX.X% XXX inflation direct our the eight of in closed robust last workers’ other times increase X% at was more basis X.X% to basis percentage media company related third-party of favorable year. rooms sales over expenses restaurant with Labor of approximately percentage offset a factor was annual points compensation fiscal X% sales fees management Occupancy XX This and $XX as this Wage X%. more approximately a view California hour increase than to and operating

However, $XX.X we our during year-over-year advertising advertising was QX will in XXX by increase restaurant approximately expense reduction a X% sales year, sequentially in expect during the QX XXX from spend to a million approximately approximately of QX year. This QX. QX basis in compared $XX.X lap to during points increased compared normalized approximately to Restaurant to while of expected level of restaurant XX.X%. million, to result QX basis which reinstate X.X% last contribution points increase to and margin prior XX.X% a compared is contribution

XX.X% However, contribution sequential performance last we we quarter are in last compared G&A on and expenses restaurant XXXX due XXXX. $XX.X demonstrate dollars basis. of impact are to aided total contraction second and contribution the that primarily refranchising. X.X%. quarter year. points our to compensation, last increased last by business from new driven as offset year. last XX reductions. the Timing XXXX the total we based increased basis, to restaurant fourth up timing and lap runrate our and percent our dollar $XX.X last advertising this negative million, our was was and assets, food expense overall increase amortization on XX.X% as Note stock-based up compared reflects aforementioned increased to sales, G&A increased year quarter we level G&A a from performance. third by expecting margin of basis million, and dollar strategies other addition from the an Based million and by Depreciation offset to on of up a the the expect on in of EBITDA incentive increases margin expense dynamic, expansion will by a percent and from of that we stabilized revenues a quarter due year, a advertising currently aside, now insignificant $XX.X of $X.X and lowest lower increase to the which management of million, bonus partially half management was has $XX.X was focused amount fourth partially The million to in The XXXX expenses prior significant as a and was restaurant General for percentage compared primarily year, million performance-based in percentage expect recording were Adjusted administrative expenses compensation $X.X revenue from year during percent QX, year.

As outstanding Interest lower and compared to compared The points to $X.X depreciation increased X.X%. LIBOR due last total and balance a expense revenue, XXXX. average revolver million, to was to percentage one million month was a decrease lower basis rate $X.X amortization XX of year.

to we fiscal of the $XXX XXXX and to facility revolving compared During million our borrowing million availability remaining revolving fiscal year outstanding currently $XXX third credit quarter, end at is reduced credit under the facility our $XXX.X million. the

times approximately net $X.XX to million In addition, balance last year. share of at diluted X.XX adjusted $X.X X.X to of $X.XX of approximately our sheet end at leverage cash Net end million the per the income the was declined fiscal or compared $X.X third diluted to debt, share, of quarter, ratio compared loss per fiscal or XXXX. net to EBITDA times,

excludes held-for-sale We $X.X assets transition income was closure share, $X.XX income million to Adjusted approximately also year. and diluted of and which per to adjusted reported loss or lived adjustments of charges, restaurants, restaurant sublease income $X.X or executive adjusted assets, net of net diluted disposal impairment last on net for compared per long $X.XX share million closed assets cost. income

As a ending the for fiscal reminder, our we XX, year guidance XXXX. XX have week December withdrawn

concludes our our cost level restaurant step-up and an negative performance to sequential expense XXXX. due and quarter year-over-year of contribution bonus However, our here outperformance pricing. sales of That the quarter. significant are first as low during and thoughts lap impact low-single-digits. discussed week respect comparable the on advertising weeks formal sequential our QX, food the slightly a Also, step-down final artificially of operated franchise menu with an our will expenses restaurants G&A G&A fourth five consists basis, few This are to will up margin trending with previously recorded of restaurant company Through absolute system-wide cost XX in our fiscal noted negative fourth inclusive remarks. fourth in quarter

Taco in you are any happy we your for Del and questions. interest As always, to answer thank

Operator

Thank question. Instructions] Brooks & first you. King Todd, Todd your Associates. question Our go comes with C.L. [Operator from with ahead

Todd Brooks

when Thanks got on welcome you for in question. a for some couple the if can just I walk guys. labor channels, look being questions quarter of forward would Congratulations dining talked quarter on happen there dining And rooms? related running to like this you I’ve know through does, off. the step off-premise impact you just you and are has And – couple reopening what questions occur? taking to rooms? the when to One, my the efficiency the lead to to it – labor is or what path that the do on reopen about corporate

John Cappasola

Yes.

channels now Let me that been through given right with – bit just from – dining and rooms to obviously feel up delivery open the consumer there regard what the to we due the takeout of we Obviously, yet let the lost for of the and demand circumstances of and to drive-thru give most comfortable channels stated you I’ll go not and take in and background ahead a behavior here rooms. me make are these the dining off-premise and through kind as seeing sales dine-in company we part are the changes. channels we’ve able for just

So, the making of to consumer be is is demand to going reopening and gets second safe your guests secondly which employees sure profitable Todd. making rooms kind at are there, be and there question dining key to sure adequate

associated may that worth profitability, you in but with up may the reopening. if So, it down sales, it to not drags pick when be able be some risk you add

the markets we markets front, confident not of work and making which franchise safety we we had minority dining market the are limit with significantly company on therefore obviously Most restrictions and still can however that generally west of and and a dining that on small as rooms franchise appropriate risks. make under same we capacity, have risk So have level in that are exposure is to precautions. room to seen tied are work that open able

So we carefully. are watching that very

into cost and comply that, that are dining point safe and and second state really will piece to rooms be be The guidelines. with reopening going important is in order incremental the county there

general, in franchise and markets So demand there demand really this is are open. important and of dining rooms is them is seeing where minority that the we tepid part consumer for have

ongoing reopening is, next of some are restaurants do QX. So, to make our to our We’ll plan step handful that of room couple do here optimizing fully are cost in reopening. of sure testing in company we we going a of wedding dining further and the

we really want You going mentioned can Todd, that. and to we are streamline see that’s labor, one and understand to optimize

sales that makes the So sure clearly there down is road sense, make just that we a that because opportunity it’s it here profitable. be to want could

Todd Brooks

in. you've management from savings process just labor place, in Okay. is the the will a performance that quarter, can put that system maybe where savings it? quantify follow-up if using seen Great. workforce it an system? slide that of I - can we talked The you about one in that saw And new you the the Thank that iterative drive longer implementation tool And you're further you

Steve Brake

counter, it’s Yes. tool was - with given The just position in have provide coming and that focused been in and at this timing and are great put some it takeout to the to the in solely really unique right the good Naturally, behind the has that Good very floor putting operators hours finance is occasional year teaming make with we’ve conjunction a and an and with the drive-thru question. a driver powerful kitchen, delivery incredibly a our in they almost sure experience. environment what in. guest been managing on feet you appropriate window

this are year. day here really store, looking that we of two in by that everything see we or that at literally are fortunate unique mean, by very Longer-term, week, been steps. way. really I could it's place. it And is I think that a great system by It's you it's So benefit hour,

always up that in room that full on, powerful service robust and As fully to midst us figure eventually manner, mode a rooms very of a back quarter-after-quarter. to out and very dining to in step learn and And longer-term, labor safe will once starting we perfect normal and are test allow the dining guest-friendly better absolutely, touched will week-after-week, will John system how appropriate we system we in are that. get as it's then, be

So, be financially hard having you to it It's it. have place. in to quantify

think that year, I line and is comps you that this incremental $X in and California think in what has credit we new labor looked financially performance, that look of of both I knowing did we very lot that to wage and a the us if of light QX at QX labor have the installed. well a system hitting

Todd Brooks

great. Appreciate That's Steve. it. Thanks,

Steve Brake

You bet.

Operator

from next Sandler. Our comes please Nicole of Nicole, Miller Piper question proceed with your question.

Nicole Miller

Thank so good much you. you, Thank and afternoon.

comp on was the talk you the one ask due the you other is versus you demand. Could it Just So, said about performance? but room to sounds performance, follow-up. and tepid had like then one company franchise going to dining I question it

that's not it. So probably

geography, degree. mobilization be I But if guess, be some it missing to something. think still So it's could I might I

So a of for that give in reasons could you us couple disconnect comp – performance? that the

John Cappasola

Nicole. Yes, Sure.

it's over footprint. So a reminder to as sales positive broader continues a same-store geographic franchise, and have obviously

market in just concentrated market, generally experiencing up Las Vegas area of disruption Southern as level footprint. we've and two those the company that in exposure really of not markets and Las California it's about our the of So California aren't is franchise and Vegas one markets, XX% which make and many those the seen COVID

nationally over the the relevance that. past their unexpected. to a obviously it's speak into years So, effort I and to overall, several the and see infrastructure obviously, brand we of not and are and of our tremendous mean, outperform amount put entirely to continue establishing we strong franchise ability support to franchise results happy support

So really that's piece. important a

post company the of So drivers let address for really the recent kind of comp me trends a look just two company just if moment trend. – you kind and the Day. There at the comp Labor is

are comp the year-on-year fall in related order the price to just September with the into and sure flowthrough read to as is, to and the increase there further factors for maximizing the key as pricing November at we want we beginning all to to a first considering consumer We flowthrough. we determine issue XXXX that check as off our the appropriate maximize move delayed of to strategy XXXX. burning X.X we're The of make

our going transactions. which designed In addition, to program over cycled the September in and Carnitas launch LTO we $X Chicken a was program, of XXXX, the $X Crispy high-check drive value premium which is

the experiencing in that second disruption are in disruption The that's recent having an QX, breakfast Southern company is due occurred and trend talked breakfast California the at the the and during comps, impact in Southern X% about restaurants and that's occurred as negative daypart. were in Vegas during outsized company we breakfast in positive – We to comp. adverse COVID, performed Las company example mid-single-digits an a

seasonality high that launched further in and during breakfast, post As QX while we the breakfast Breakfast behavior moved are virtual, into year normal in seasonality our markets. lap typically we was Day highly as key Labor high these quarter-to-date, breakfast consumer trend still XXXX declined last and launch these offices markets schools particularly has at the of Wrap Toasted

all the far for in to lunch caused including daypart so dinner for highest on because each QX decline slight to further company the daypart an and it compared overall dayparts of our So that the remain to flattish are QX whereas QX drag dayparts in remaining of comp other positive comps, that mixing causing up the it's question, of and company since and restaurants. majority X% approximately the transaction in improved I we launch And holding want those Chicken Crispy and details then, the I lot there my volumes of the last know, comps of sure be long-winded, make have the on kind to are transaction increases. comp got to is the the I your QX, just sorry is to comment a –

of doing complementary the seasonal price fall as more a normalized we combination trajectory really to our a think in is followed returning LTO, in QX quarter. we should be a November more a obviously, help the program a premium LTO Crispy Tamale check transaction transaction-driving Chicken news deeper truly – for us of early So with continue that of well, into increase, it's spend to we percent and sales are new move should advertising as by help which and as

but lot I to your there, lot for wanted there So, to the you. in details question, get was a

Nicole Miller

as very, it. I that's California important ask in the to the they geographies drive-thru that, makes it a but limit think mandates Is curiosity, dining and but an question. especially used potentially understand don't relearned of your I use that I core and appreciate imagine really drive-thru. is the in have can with where can you. diverse customer, More leaned issue then on franchise very that and me well? also

John Cappasola

sales from up think of year-on-year. we're delivery much that the higher that mean, We're higher if the of sales some some built Clearly, look at from you obviously up mix drive-thru making making I No, I mix. being back.

we're getting that a lot back. So, of

Your point don't to breakfast have of – I compared pressure. what have in material to piece, it's is you're you seeing daypart, could that California. dining regard compared some that maybe to overall, that think room valid, we of But, outside to going are

it's I neutral fairly a think concept. probably

Nicole Miller

Well, it. A Thank like appreciate Best thanks, of you. going again. I said, on and lot, you luck.

John Cappasola

Thanks, Nicole.

Operator

question. Our from Securities. proceed next from your with Nick, Setyan question comes Wedbush Nick

Nick Setyan

Thank you. clarification. I [Indiscernible] appreciate the

Steve Brake

you, a are having hard time we Nick. hearing Nick,

John Cappasola

And up. Nick, are breaking you

Nick Setyan

Okay. you guys hear Can me now?

Steve Brake

Not very well.

John Cappasola

can operator up clear and Maybe try that to the help. Operator?

Operator

moment. One Yes.

Nick Setyan

now? about How

John Cappasola

But give it can to shot. it's a understand. tough You

Nick Setyan

Okay.

the five the about few next build systematic or on shot. picture, And a unit actually we And think growth actually to years XXXX, those maybe the remodel, next unit prototype, a picture not particularly timing? over can the the years the near-term in a give be even maybe but thanks necessarily should the in see in over clarification. how when bigger to potential? three Quarter-to-date the that about growth about the across me you just anticipate talk question, we it new implemented for Let remodel bigger system, way the the think

John Cappasola

got the I Nick. gist of think I Yes, it,

First at finish that is off, on the line prototype new that. we design the are

we and makes some along into and strategies multiple that about the We level, pandemic at like of some things ideas given additional the around have of excited pick kitchen as and more lean the throughput, ability added pickup. and see as like, drive-thru that smart forward menu we've the the those integrated restaurant that venues been to we that the with venues to have it type improve drive-thru-only are mobile well scalable moving that functionality kitchen, COVID up now, things of

now the at back casting that. then into and venues. lot a finish we So, of one, we're our two, on menu program, remodel are into back line right And that of

to company that XXXX, going restaurants the a we well be there are in hunting So, new three real will next concept enter as real estate, into as both are five years. about thinking opening as to we considered as we franchise, have and

into prototype of estate it be be, like I land drive-thru for it that built. initiatives, it's We penetrate maybe So, we venues a be because get designed infill that able conversions said other the of opportunities, beneficial? necessarily and we've typically and will with parcels to will standard us smaller to real menu as couldn't scenarios believe

– to So we to on additional should access to estate for lead that continue there that opportunities lead franchisees believe believe we more are for going obviously. front and The us will improving use experience have with it be the of growth remodel, more very the to just and to real that the our we revenue it is and not mention returns the capital drive fleet, strategy promising should guest that brand. good a really growth among could to be sustainable remodel

four We XXXX we continuing strong test at a trying are saw of to And impact various we end XXXX results beginning with understand top-line focus completed elements. on remodels and as remodel those of to the consumer-facing restaurants. the speak. in we So, really of refine

the pandemic we obviously and here then learnings downtime paused additional streamlining the as AUV success double-digit with growth for area. of a that now But so, going back we view four in cost, And to really track here minimizing optimizing And remodels general, first we few consumer-facing be phase, a and are QX are months. in from on we elements. because on the in doing focus

about system-level we what remodels that's be more So XXXX And the some from goal a of goes XXXX, could have would then of, program success we we – that you're and in at in tests think targeting. remodel certainly having We'll do probably XXXX. as looking we'll these a are additional XXXX. our assuming these take well, of learnings. everything these more entering And remodels goal in

Nick Setyan

a wage state in minimum mandates are of your California Thanks. municipalities fact of And particularly inning ahead of or are the California the headwind already the given that, the in labor, the eighth we lot with ninth on footprint?

Steve Brake

Yes.

That XX. a minority minority footprint. a municipalities getting is are that past already of to of still innings. hit said, have It's it We California middle definitely our

the years to $X two restaurants. is our there next go So California in most of

that's current our So, reality.

Nick Setyan

Thank you.

Operator

There turn to over for management are floor no back comments. would like to further questions at this time. closing I the

John Cappasola

your operator. progress Have about future we Thank best. you brand us with wish a great interest and Del look you Well, for taking today to on the forward the you, day. our calls. all sharing in Taco and we time Thank Okay.

Operator

concludes today's program. That

lines. and your may You for great a disconnect your have Thank day. you participation

Del Taco Restaurants (TACO) 15 Oct 202020 Q3 Earnings call transcript