LOCO - Earnings call transcript Q2 2019 | El Pollo Loco Holdings, Inc.

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Operator

Greetings. And welcome to El Pollo Loco Second 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] And as a reminder, this conference is being recorded.

to Officer. conference like Roberts, to now Financial Chief would turn over the Larry I you. Thank go Please ahead.

Larry Roberts

XXXX not, Thank now www.elpolloloco.com access quarter everyone operator, in should release; you, and section. have to good the Investor our found can be it afternoon. Relations By earnings at if second

put I you our of reliance forward-looking everyone statements undue not to guarantees that should forward-looking our Before we need include These begin discussion performance, statements. therefore, and future not formal remarks, them. remind today will on are

These could financial could also a We for our subject our impact what differ uncertainties statements to to are results filings that expect. numerous cause materially more future operating and detailed risks refer we condition. to you SEC that all discussion of actual and of results recent risks from the

for earliest to we and document encourage XXXX expect our We file convenience. second at quarter of review tomorrow, the you that your to would XX-Q

we discuss information believe today's GAAP should During additional prepared comparable or which considered our useful not this available GAAP, in are as our we be in be can with for reconciliation in and will The of in results release. substitute evaluating measures to isolation, call, performance. presentation a earnings non-GAAP accordance measures,

turn to Executive Officer, to the Bernard like now President I'd Acoca. over call and Chief

Bernard Acoca

afternoon, and Good joining thank everyone Larry. us Thanks, you all today. for

$X.XX adjusted of reported per of share EPS share year. we compared earnings of adjusted the XXXX, to quarter For second $X.XX per as last

the our was agenda. our our straight system-wide fourth same-store growth While positive our store of launch transformation it expectations quarter system-wide comparable of represent does increase since below sales of X.X% sales

quarter during contribution our XX.X%. restaurant margin evidenced job of In addition, our by did teams managing as store-level of expenses nice the a

I second points. attractive good our value-engineered have affordable, main half the Pollo Heading products quality at to value affordable is focus very that price without margins into Loco. to come expect By customers deliver sacrificing mean, El have the our from delivering year, the of

of new example promotion at this featuring our An Overstuffed current Quesadillas Quesadillas Overstuffed Nacho is our $X.

$X our along combos cost our your our to value most of We these choice will entrée Both items food famous five help chips which consumers maintain drink. includes to fire-grilled offer tremendous promotion at with promotions with designed attractive margins. this follow-up of and a of promotion popular

While we near-term are sales transactions, strategies. drive on taking remain our and actions focused to we longer-term

to executing future During the against the of a been during and continued growth. our sustain like agenda we've months on that the key I'd quarter, second and to update transformation we working on drive a initiatives brief provide three past few

culture rolled As focus our food shelters with donate and in build food part we the at which food with company those ongoing of to will choosing donation day to and restaurants testing connection, to banks. all a out participate Partnering franchisees of will over the program, food-donation be heart, centered end completed September. left on a leadership local

the mounting believe through We as homelessness the we to big we do assist reached a which business. crisis initiatives everything important are in California in to both and Southern with as can doing in we has and epidemic proportions this brand committed small is communities particularly

As donate a course the feed help people food to system the year of in we over XXX,XXX expect pounds to over need.

new included Flame brand regard and Feed tagline, to you'll continue the make logo point-of-purchase progress in boards our also campaign, March, we menu We recall rollout the with advertising system-wide to as relaunch that materials. which our initiated of

dramatically brand food engage our our brand. be or food the our takeout. we simplify and with delivery it On craft new website ability from and significantly app ordering Both our with quality whether to for interface July and heritage and and app, highlight customer’s X, mobile e-commerce our website launched the us improving associated

QX to customers plans to in increased have we next to in media to to XX% get our platform. and XX% Equally e-commerce year drive important, with as these digital mix order socially

media this on spent we X% to prior context, making than change. less For digital

greater While digital to key catering are experience, have new we towards media a unlocking loyalty, first the to delivery of still work steps digital creating to full and website, believe first-class that we commitment our potential which do, this is platforms. the and app

Because The With Uber regards testing includes of Postmates test in we to with new Eats more of drive significantly promise are marketplaces. this curated a and in our through system-wide to process menu addition delivery as include a profitable relationship delivery heavy delivery, increasing September. limited our to plan more it options of to shown sales launch to on and which one meals the lot entire our expanding has mix, to DMA expansion are our it partners are test for DoorDash the third-party a of and customers. combos, emphasis family designed terms also in in we

A back-of-house a you of this and now key focus expect system in complexity approximately of our of continue better employees free franchisees. these we know, reduction a the been Along out our been management to lines, goal to As full by implementation rolled this customer to end up for capacity made we've to inventory has experience. of new the order has and back-of-house simplifying year. restaurants, XXX priority deliver operations

managers. less. production our simplifying help to per will of for one includes to two procedures. free-up work streamline to day many the simplifying menu made and and also for hours standard of each eliminating our general restaurant operating our expected huge This rewriting system an We've steps process items is operations our This additional or progress six

of members easier environment. our completing benefit to lowering deliver our today's of added Ultimately, chicken a the increasing provide how higher-quality test simplifying to We turnover in great much simplifying we are to also to will teach consistent restaurants and tight grill and This have customer market which proven product that to franchisees more cooked aspiring important labor is foundational exceptional is is close for particularly detail to be successful what enabler and team operations work has serve our it a very in food retention, for our and the service. believe is masters.

to new the back-of-house into is will one for a in expansion its foundation of design our target new the and Included of parallel entry going Included expression continue planned. strengthen to work future as markets. new in features new prototype, which will our market of development for visual be continue restaurant we the or our incorporate it to two XXXX is and simplify this Lastly, operating platform. brand

We By to we've and business progress, profitably continuing updating business, and our responsibly stronger calls transformation grow progress to-date agenda, our all should foundation brand. to us to convinced and our look lead for the that against a term. to Pollo long Loco I'm initiatives remain excited our progress we the continue current you make I our focus the about future El as elevate over on on made to forward allowing

call Before all would possible. franchisee Larry, always, as making to I I these our over the of results and employees turn like to thank partners for

dedication make Your this passion, and special. truly commitment brand and family this what are

now quarter to to the over detail. hand call second I'll Larry review results our in

Larry Roberts

Bernard. Thanks,

update get new into opened like the store restaurants to quickly Pollo base. you El we our quarter. results, on during quarter Loco I'd second No our Before second

We openings XXXX, along into with company-owned remodel The two three we additional nine is franchisees. year did from company-operated expect franchised XXXX. continue restaurants. three two with efforts two to slipping remodels to now restaurants guidance late For an completed primarily completing the to to XXXX restaurants lower our restaurant full open to due by coincide

the to XX to As XX to our XXXX. new to remodels use XXXX XX XX asset complete partners to from than to design, number complete vision reducing wait Rather design and we we remodels our rather design. a this We expect are invest continuing until year a remodels new expect work we'd using still continues of in company franchise early X. in

to Finally, growth the sale two closed company promote Bay put transactions we agreements pleased operated-restaurants and company-operated these strong-performing hands include continued have and the to in in of these four markets. of franchisees. restaurants restaurants to the We're area seven development both on into in franchisees East Phoenix

will and We expect both that to the sales earnings. accretive margins be

Now results. onto financial our

increased XX, same year. June to in second revenue $XX.X XXXX million $XXX.X million from last total to revenue in For increased of $XXX.X compared quarter quarter the restaurant to $XXX.X the second the Company-operated period XXXX. ended million million

company-operated a X.X% by sales XX the second to by locations company-operated was comparable in average a from franchisees of a restaurant by as XXXX, contribution was and check in driven sale pricing X.X% The of in transactions. during inclusive sales the as growth increase offset the X.X% offset well effective company-operated of subsequent period. of decrease X.X% the closures restaurant opened quarter same Company-operated by and increase six in restaurant comparable increase partially restaurant partially new comprised restaurants seven to sales during

fees was sale a compared restaurants million, $X.X period. Franchise XX.X% in associated to revenue of use new quarter prior increase our million sales, during eight the second to from system, XXXX. of increase in by quarter opened the restaurant with The of point and year franchise second the the comparable the contribution in $X.X increased subsequent to X.X% driven

period. former quarter, partially as restaurant This addition same to the the was closures XX noted of the the during And transferred restaurants, company-operated previously. during offset franchisees three by

expenses, predominantly of higher to year-over-year as The prices mix. a and company favorable sales XX.X%. costs menu decreased Food percentage sales was paper to points XXX to and basis Turning due improvement restaurant

basis percentage expenses XXXX. Looking to year-over-year points approximately ahead, a XX.X%. X%, we XXX in expect commodity of restaurant related inflation company increased, for Labor sales and as

The increased partially due to Los offset primarily workers increase and in compensation expenses especially Angeles higher higher hourly menu prices. expense California, in labor was wages by

inflation tight slightly market. XXXX, a labor of communicated, expect labor than about is which in previously We reflecting X.X% higher

operating costs operating occupancy lower XX%, other delivery company, expenses, of in as and sales other as advertising unchanged were Occupancy and by fees and offset increases was percentage a at cost expenses. restaurant

securities executive General cost in million. expenses G&A decreased expenses legal the Included of quarter approximately to $X.X and second million administrative $XXX,XXX in compared to year-over-year approximately expenses and associated $X.X $X.X litigation are related with XXXX. of million to by transition

with decreased the points associated G&A the year. versus the in total executive expenses approximately XXXX and of a to of XX quarter X.X% securities of second costs year-over-year approximately prior Excluding $XXX,XXX transition the decrease revenue, litigation cost, basis

amortization of year-over-year And expenses decrease in million travel site due by the from which was Depreciation $X.X $X.X quarter as expenses primarily to offset million and flat decreases dead dollar of and percentage bonus was in increased expense company second revenue. were higher and year. to last a The the G&A accrual. pre-opening partially

the of of $XX proceeds Additionally, compared million, as reimbursement securities in the securities costs legal associated, period action second insurance class of $X.X reimbursement insurance action related lawsuit, lawsuits. the to class in related we quarter, prior the received the million with of to to settlement a

effective an $X.X for This rate for tax rate a We XX.X% effective income a prior taxes an second for of XXXX, $XXX,XXX the million provision and provision year of of quarter. taxes of to quarter tax in recorded XX.X%. second compares of the in income

reported million of income We net in to or share million the in of diluted quarter, GAAP income $X.XX or year $XX.X net $X.X prior period. per share the second per compared diluted $X.XX

income second the prior quarter forma the Pro of quarter million, year period. the were $X.X XXXX, as forma share of earnings last for forma net quarter of was net compared diluted $X.X the to per compared income to Pro $X.XX in second in pro million for year. $X.XX

of a to forma pro our GAAP share, comparable earnings earnings reconciliation net per figures release. income refer to and For please the

had of XXXX million In balance we and of $XX million terms equivalents $XX.X as outstanding. and and cash in debt sheet, in XX June liquidity

operations maintenance to future, capital new our facility. and borrowings development foreseeable under and finance the our we from For operations expect through credit cash including restaurant

to For million. expenditures capital XXXX, we million total $XX to $XX expect our

expired. During $XX X,XXX,XXX XX our XXXX, or June program XXXX million $XX.X repurchased stock which run our will Effective million million $XX.XX. XXXX price an XX the approximately June Effective XXXX. quarter, XXXX stock for of until program March shares repurchase XX repurchase commenced, we $XX average

year Turning we're as for for XXXX, guidance to updating full our the outlook follows.

potential impact This in forma net per pro repurchases, of diluted share diluted $X.XX $X.XX forma share expect XXXX. to share Excluding compares $X.XX. net to we of per pro of the income income

approximately sales restaurant for XXXX We is in the income to assumptions: guidance following to be on forma annual X%. X% expect share system-wide Pro part, growth, net comparable based per

open company-owned As expect new two two three noted, to franchisees to And to to three our restaurants. expect open new we I restaurants.

XX.X%. We expect restaurant and contribution between, margin XX.X% of

change expenses and X.X% G&A revenue total accounting fees between X.X% expect litigation in reflecting of excluding to action franchise related for our class advertising fees. We securities and of

of of between million; and our a $XX adjusted million EBITDA XX.X%. forma expect and using prepared tax We rate we're pro concludes $XX This income remarks.

again thank to today like that you joining now on answer are have. us for any to the you and may I'd call we questions happy

Operator

you. Thank

line the session. [Operator conducting We come Matthew of questions will first a Instructions] question-and-answer now Our DiFrisco be from Guggenheim. with

Matthew DiFrisco

to you. did just that shifted company in -- for revenues? XX here much the or side the the Larry to one that With revenue quarter question Thank from to contribute the how question. franchise bookkeeping franchise the respect

Larry Roberts

about franchise of net think expenses, I The $XXX,XXX. revenues, it was

Matthew DiFrisco

Okay. But just revenue the to line?

Larry Roberts

I'm about was line sorry, revenue $XX,XXX.

Matthew DiFrisco

only -- a modest was it okay So, was amount. it

Okay.

Larry Roberts

Yes.

Matthew DiFrisco

that of it. that is And the respect -- stores I Got over to guess to being number purely in should something you meaningful XXXX, that held are development then is I'm going is giving or respect XXXX up moving be this trying sort to into -- to or figure that XXXX without to incremental is for we out year a expect XXXX development? a with

Larry Roberts

the that guess little one make we XXXX. able actual Well, thing I numbers early higher to through think the XXXX on given which it's call can low XXXX. is early say expect achieve, give certainly to certainly than working we're It's way a but still bar, which would too right this be year Matt. now should I to to I we that we be

Matthew DiFrisco

on then that there, lower more in what to the disruptions you are And I far been what comp was guess did weather the in brand the are positioning from number the use California the -- a repositioning Is of somewhat your end you of mentioned some the region don't you respect Okay. pressures that and seen California to had into peers what heard out want regional A context of the of with of or the we've quarters doing? but expecting. on of I had and Bernard you've context still couple though you issues as or as industry strong is now. have

Bernard Acoca

with in I quarters a the way journey we If -- happy Yes we're third going bumps we've we the this Matt. be started four road journey XXXX. we certainly that our It results we of four really where to for made ago. minute we And back where our And again agenda. frankly what consecutive sales a I transformation quarter could same-store hold of that during in are is communicated take we're step quite quarters think the really attribute in They're journey. are to progress the that time terms while of in with growth. in experienced the some -- we've took

we well positive was comps to for introduction the count expectations. I to in do quarter this very And have to would to a so the us what product attribute on more delivering while past in which fully been able our very, not up to

with deliver know we do new that our more our and compelling underway that. So, work innovation to well pipeline and doing we're to to more we've customers got true to news

have July which accompanying impacted delay intended this the say realized of mix that -- of originally we And number or launch my with think I increased digital should overall the our we've I remarks opening now media say in which I'd our second thing QX to in digital plans to us intention the time. now quarter that was website the e-commerce XX% in that I our of QX in the and only as growing launch Xth which the quarter have launched over in said mix digital

I'm not where are. So, why the climate the at as rationale we macroeconomic looking are for we

of control journey has we're I like to where think pretty -- deliver on and we're we basis. can more what do are our go-forward in we in a feel it with we

Matthew DiFrisco

Okay.

but the benefits I already counting meaningful the helps outlined in third the of more you so it trend. implies or XQ are those. quarter given you guidance like that me that some So, you're headwinds guess sounds seeing on for the understand had just But the in two-year step-up a better delays,

Bernard Acoca

we in Well, we're slowdown. I July, of in a say a nice is we seeing in terms right But comp what that now can saw June. what uptick sales in experience did

And back expected the than to so balance bounce we're was it that month, looking softer quarter. a from but the of for

Matthew DiFrisco

you. Thank Okay.

Bernard Acoca

to mention of to on we've I plans mention I than to Miguel to been is a historically. deliver arrival certainly vastly see thing he's the being that Officer enabling Operating a lot Lozano, upside Chief other the our of customer into basis only able superior is effect new also with us that a go-forward I Matt failed to we experience deliver -- want think one that starting that put the the

pipeline. mentioned mentioned I so, And the I and digital e-commerce.

basis can You delivery thing heard about go-forward benefit have on underplayed a The that as we was me talk well. in improved opening us my operations I remarks. think probably the that for

Matthew DiFrisco

Can I -- all the or of your ahead have much was Excellent. you throughout pretty July compare? three X.X% comp while the a from of Was it, can even the cadence ago? us give the year months, still you

Larry Roberts

You talking year? last about QX

Matthew DiFrisco

XXXX. Yes, QX

So to year September and figure comparisons? I'm trying out ago August July

Larry Roberts

Okay.

Give August that. me have maybe the in fairly during second. We a Matt, and little call consistent. quarter but relatively bit -- it consistent I'll higher a Yeah, versus September September

Matthew DiFrisco

Okay. Thank you.

Operator

next the Jake Our from of Bartlett questions of SunTrust. are line

Jake Bartlett

Great. taking it of just about focus the -- going to the one to on to value. traffic going the side perception kind the they've from sounds few strategies over like I'm and the we've to get Thanks going of -- away Bernard, had the more last going the you're and gone My for question. wondering is forward the of rest QSR kind deep been of on from that has years. orientation value on move industry sales where

but seem on you that products you premium be what I'm doing to focus more to value curious Why of need seeing here? there. is you're so think reignite traffic what better, kind hear to And out to

Bernard Acoca

I mean balance. I think it's for us, a always Well,

we a with to $XX counterbalance which business a see We a on price our high-end so point. family is high-end business, our business, which like business, then, with. air lower-end But have have us always we you

our we've barbell that biggest is one it's matter that of in As fact, will. got strength the business if you of a evergreen

aren't The menu, And at menu fire-grill to instance, on our price point regards to lot business. the quite combos discounts in that they that promotions the $X of those referenced, today. for a I've pertain additional honestly that our board exist already items as comprises

perhaps I not way it would and is what in throughout today It's the -- the what technically menu So, it's of don't incremental as describe year. promoting that on aggressively a our discounting. simply course highlighting we

look to like the we calendar. But at

of say, If during on be period, quarter, kind third we of the I should you year, first or with your the on certainly our really kind that front-footed of the year, resort back-to-school more you to media, bit discounting. see in didn't of This any with television time want usually aggressive a little discounting. time

So I incrementally doing think done. overall. balance it's historically qualify we've more just more wouldn't as I than a it what of

Jake Bartlett

have Okay. your some impressive And regards inflation, on you you in increase, then last inflation improvements seeing? to the or you're think of wage wage maintained turnover. and improvements in increased some you in those turnover mentioned in the can cost that quarter How do much the that think you tick-up that pretty the improvements? labor I seeing Are offset

Bernard Acoca

as think, I a average blessed been with turnover rates. historically lower industry brand, Well, than we've

quarter, And instance, crew saw see about industry-wide. lower the for you XXX%, so, turnover we than second XXX% is the XXX%, which substantially

employee on seeing. down that focus that we're on, it's itself in the I culture think, building retention this So, manifesting been numbers we've

because our -- believe little those platform do really on intend to trying that out That employees' coupled things maniacally that complicated two more with how have to fact operating a simplify to make the we we take has bit a the easier, figure house of back continued. the that an of job focused we're

industry numbers retention lower strong are than retention numbers. Our average

Jake Bartlett

have is XXXX. the lined any up already of as you new that or one lastly, process? entering still then three kind markets markets And for up on insight that or that mentioned franchise signed new in that, Okay. that Does mean and partners you new soon as --

Bernard Acoca

things all internally, of kind discussion we Those throes our of yet. are plans still haven't and in the here finalized

not that. them, -- more on we're So, position to to share in so but a come

Jake Bartlett

you very much. Thank Okay.

Operator

from Barish next Andy of line the questions are with Our Jefferies.

Andy Barish

with more quickly to you next referred seeing Hey, mean and that I sales a near-term the operational next are guys. are improvement guest your being pivoted are steps? areas to bit I what little of the on sort Wondering you of oriented teams. what guess steps, that did some need kind are satisfaction of the scores menu you the on or on either simplification, And good focus? improvements.

Bernard Acoca

Yeah.

not mentioned our is slow, So the It customer our several -- over to do of Operating but where think to of our agenda to in with certainly year the of but overall is metric. is and seen measure satisfaction. again, transformation I half satisfaction our the Chief customer the with improvement arrival we back the a trend there quarters, you focus a the wanted we index, expect still blended we we've last our as accelerate be, in on new Officer steady what uptick which

improvement. seen window we've seen ready we that to our drive-through. of but speed again We time greater aspirational steady down to I but want now in food hit improvement improvement at We've as the further. drive steady improvement, far So are say internal really to the even see right slow, would focused window target. in service

So several far we achieve -- can than better the quarters. believe that we managed we've we can what last to over do

So will system. year. It's simplicity. the talked that the restaurants now back-of-house management inventory of really XXX initiatives are addition end other about be One, in some that implemented by we in to driving the fully

-- the our standard recipes our or vast recipes a We overemphasize to six are less. simpler. able have enough them product is operating I all of to what we're make all our procedures in can't now rewriting make to it majority coo steps

with up And methodology our out which from the we product. the and roll of implementation employees, chicken, in restaurants is it our QX improving launching, shift to to chicken-cooking system in makes to much for our and that And quality be cook the managed so a in it in will there. to a that we we'll very easier company while rest then is full simultaneously have And of look which process paradigm major to something a are simplification. then our business and close testing come

are to free given So we're with capacity things think another one house. greater experience front in of of much taken all these back to we lead how up house conjunction going starting to

Larry Roberts

are the only doing the is blocking that Andy thing routine area the to And team. ones level. really I'd when talking work long restaurants, is you're Yeah. the realigned to with who term. and the restaurant And getting they're level dividends in of the first also is work focused other really, all add really where And but going really thing go a leader getting Miguel near about impact plan come have into everyday operations is, you after. to of day. he's has around that's after the starting because we're A they tackling over lot thing his and also other Miguel the HR pay the have get

Andrew Barish

Larry of part menu then with by back somewhat far menu the negative in X.X% offset product as $X but And Thanks. look about terms and becoming similar does mix half you on seemingly of more mix, as the pricing price, tell your of items can strategy?

Larry Roberts

Yes.

So the pricing. of is been. the will X.X% at of we a back actually half back to north where of it's year It little or year about pricing probably probably so expect run going on half

in total, you're mix then And right.

will roughly think mix I be flat.

holidays come really and centered promotion, back be quarter family QX, fourth the little meals it tamale. emphasize driving to then negative as slightly a the positive I think will stores in but the $X hoping as around be turn we we're in in

So, yeah.

Andrew Barish

you. Thank

Operator

William from of are Zackfia with questions the Sharon line Blair. next Our

Sharon Zackfia

afternoon. Good Hi.

Larry Roberts

Hi, Sharon.

Sharon Zackfia

I sure that prepared delivery understood make to from wanted just I text. conversation your

correctly menu testing kind of not and understand that in there. bit both I that's in And lost to sides? it got addition did or the little I Uber So Postmates a was really September, what's the you're or curated DoorDash?

Bernard Acoca

Yes. It's Sharon. both

with launched our bifurcated right we DoorDash now menu. So

So our us menu order and from menu if we order our order full generate or online price. you regular get you our program loyalty at the from from delivery

curated you that's combos pricing DoorDash on family preserve to September eventually elevated elevated menu and primarily order combos of and third-party into pricing, or at from -- it with a on elsewhere actually margins us get kind will slightly need our the launch you family and will also Postmates our marketplace and focused system-wide, If and whether Uber which Eats, more get ability. unique a some you -- the be take meals that of can't account best the to in meals

that system-wide what is is So launching September. cum-early

Sharon Zackfia

is I previously guess, this having a sales I percent point. you much mix don't as And recall at of delivery your said how

be update us that. So why you're September is delivery you Is Because that the launch that will it on And might September I helpful paradigm? in to the quarter? delivery then, comps like feel in the revamped improve optimistic in bit July, a math X.X have the half comps took is if your the that you there sitting need you're comp And the like it back weakened little right guidance. now. end to of hit low doesn't a in

Bernard Acoca

fire-grill think for lot right. are you we quite few around us. a Two, there's think we which will have well So I of $X promotion, things confidence that combos gives One, our confidence: us a do

delivery us. expanded do Our for platform to more expecting we're

business. enough, can't And because We for primary huge one our I haven't is delivery how are a part of aggressively promoted state point reason. date transforming to this we it

has to we not a in been model grow number player. mean, to that print doing now we media. digital media clear, quarter we're heavily going have be only a on XX% forward. television in in and single I than X% is from right that as believe, our know been this I northward move and quarter, very jumped To historically but dependent that's go-to-market we hard digital less to

quite in July. website of been our XXXX. touched the since hadn't website We That beginning launched which redesigned frankly

reskinned the new I a to on growth the which It's improved. us want platforms to in UX that have user we beautiful It's up e-commerce And drive that Now aesthetic. of dynamic that been website, brand bring app. a dynamic why required new delivery. mobile was experience for then has been reflect first beautiful was our our to us really reason only that then what get is to people to been the

to new national promoting behind the spigot on that we're partners. to we've to by going do two We're free put and that. us, we delivery and do early the now are far turn your that than dial which and going our our X% to delivery delivery turn take up with marketing represents really on aggressively question and more So business ready that that now less communications answer of

all believe combined, throughout and we a yes, quarter go-forward us on help basis. So things will those the

Sharon Zackfia

you. Thank helpful. very That’s

Operator

Our are with the Baird. next of David line questions Tarantino from

David Tarantino

Hi. Good afternoon.

you so running could on is the level you're so just First, meant far in July quarter? everyone softness on that clarify this what set the you please by call what

Bernard Acoca

what I'm that, number, by seemed we mean, to in not in I we that terms sales QX. we way July quarter the a And of get is I experienced. will bit say Well that the have the slowed going were momentum to but the comp into encouraged little in exited specific last

Laurance Roberts

we're slightly in negative July. basically Dave,

David Tarantino

Got it.

year. and Okay. then or I fairly back at nice as acceleration now quarters I the end the look Thank we're the of guess and step a you July. five guess And last little in couple been back last of six a you the since of saw half for company sequentially at you. and Bernard, And quarters, slowdown last seeing a bit of you've

in year just the year? strength the year last level, of have did you the some first what high I underneath is then you going half you first as this mentioned that there in guess -- year half well know do the the this So and And you issue continued or diagnose in mind promotions I not half this QX. a well back that guess is last of new on may your in the business? But year as slowdown not why think of surface? I the

Bernard Acoca

aware innovation to I is development and just marketplace on as fronts. the Well is I place it looking better is I a need this pipeline But that certainly get demanding marketplace we're has our getting fact the and you're and tougher think to about accelerate better it everyone the the another. attribute delivery industry mean with would getting brand well honestly better just simply talked as do we being get to that and a digital that to -- fact faster. to -- I I certain faster every

be one-year be to could progress I We're making characterize successfully we're and along there's past of get lie proud way as the to making. we're think promised going mentioned, days never speed best we going ahead. progress. We're the some transformation it. But going so best that our We way. very those agenda. And and the this bumps confident that I But to was that's

David Tarantino

Got it. the sounds the with referenced to you you side And Does then make where you is you operations heavy it to year, you that I books lifting on of think growing, right on on a want. the plans that not next think year growth. to maybe need start new you enter new I'm you like wondering markets And that? a it so in sense get to unit past your got still to that to or lot push do sense out before the operations get do start

Bernard Acoca

I Yes. you've wrong. No I me don't are. want our to operations where misrepresent got mean,

it of forward. We going have a a opportunity solid operating We see platform. just for upside lot

progress to historically. year. and We real relative as and what see headway past we're a business for just making we been differentiator being bigger a tremendous -- the have it it's bigger certainly our So over

And tracking of that some prototype the our the them want thinking have of building store things that great store is we're as And might we incorporate as of into matter underway incorporating with we and the new so, that future. into restaurants. timeline everything to future and fact to our a on existing all driving initiatives

work right and we're along with timeline. So its parallel other tracking

David Tarantino

you've question the And then, for an what like takeout Got is or replacing relative of sales, sense. on transaction terms can incremental what structure it. that are those looks had then, on the insight to of Thanks whether margin you you explain in-restaurant makes -- you Larry if so takeout that seen think That in transaction? normal I in-restaurant or be the far any that'd delivery, clarification. have And transactions last helpful.

Larry Roberts

price might avenues. economics or transaction. marketplace paying provider. be directly restaurant for the to the to you're drive-through. somebody at as and basically There the the the paying are fee It's small buying you're the are a restaurant. -- dispatch a marketplace margins from the the similar process going obviously where you But fee Well in that to know through two is which a One is similar the economic there's something

where the if and are bifurcated full paying with highlighted the margins not continue consumer significantly, better evolve the lot margin been delivery will Bernard reduced bright is all it price. the better. the incrementality task As the meaning menu, is has to to way But on They're a the that delivery. work we on

what we're So trying being by covering I'm feeble menu. to fee, we -- Marketplace, at is think of marketplace -- but higher paying time a a fee probably again on dispatches a prices pretty lead same margins. the the percentage covered to the that is are same

this -- we the of Bernard way it's incrementality, think hard to We incrementality. In stage measure ready going terms we're really delivery to haven't David, aggressively get pushed to. I at as highlighted,

going it’s believe on less structure a we It's is more be around incremental. incrementality way transactions. those incrementality you lift delivery to to or that so probably that breakeven We in need XX% the So, needed.

incrementality in So, to we hard the doing it. certainly to so today, terms it's we're we really very determine aggressively whether push I work enough pushed incremental think or but do -- it forward But right of and haven't incrementality today, there. it these and going expect are just

David Tarantino

Larry. Thanks, Great.

Operator

Thank you.

questions from SunTrust. with Bartlett next Jake are Our of line

Jake Bartlett

of pushback bookkeeping question. some increase pricing? Thanks. I quarter? kind sort what then that a drove the was And the promotion that, just Was this it in of kind clarification just was and there of drove negative had just from the in or a mix maybe the clarification

Larry Roberts

No.

I bit higher. discount little our we year-over-year overall a it's line, the review little look in if on go we -- I significant, a that discounting but second did that It bit -- quarter. when think wasn't up

that year-over-year. believe some of mix So I shortfall the drove

Jake Bartlett

the us Larry, that'd Okay. And could with then be provide system-wide you helpful? number sales if

Larry Roberts

million. $XXX.X Yes,

Jake Bartlett

much. Okay. Thank you very it. Appreciate

Operator

our like comments. We've to end Acoca session. now you. question-and-answer the closing would Thank I Bernard floor reached of to back the for turn

Bernard Acoca

just sharing talking thank future joining results call you soon. Be very for and you much the we with our well. to look to look to today. everyone to forward We want forward I Yes.

Operator

teleconference. today's concludes This

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

El Pollo Loco (LOCO) 1 Aug 192019 Q2 Earnings call transcript