El Pollo Loco(US:LOCO)2019-05-03 00:32Financial Data and Key Metrics Changes - For Q1 2019, total revenue increased by 3% to $109 million from $105.8 million in Q1 2018, driven by a 2.7% increase in company-operated restaurant sales to $97.2 million [19] - Pro forma EPS for the quarter was $0.15, compared to $0.17 in the prior year period [24] - GAAP net income was $913,000 or $0.02 per diluted share, down from $2.5 million or $0.06 per diluted share in the prior year [23] Business Line Data and Key Metrics Changes - Company-operated comparable restaurant sales increased by 1.5%, with a 4.6% increase in average check and a 3.1% decrease in transactions [19] - Franchise revenue increased by 5.5% to $6.4 million, driven by a 3.2% increase in franchise comparable restaurant sales [20] Market Data and Key Metrics Changes - The company experienced adverse weather conditions in California, impacting sales, with an estimated weather impact of slightly over one percentage point on comparable sales [34] - The company closed two restaurants while franchisees opened two new restaurants in California during the quarter [18] Company Strategy and Development Direction - The company is focused on a transformation agenda consisting of four key strategies: developing a people-first culture, differentiating the brand, simplifying operations, and growing the business responsibly and profitably [6][7] - A brand relaunch was initiated in early March, including a new logo and advertising campaign, with plans for a new mobile app and e-commerce site in Q3 [12][13] - The company aims to enter one or two new markets by 2020 and has sold four company-operated restaurants to franchisees to enhance growth in those areas [15][16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in regaining traffic momentum with new promotions, despite challenges faced in Q1 [5][40] - The company expects systemwide comparable restaurant sales growth of approximately 2% to 4% for the full year [26] - Management noted that operational improvements from menu simplification are expected to enhance overall execution and customer experience [42][44] Other Important Information - The company had $6.7 million in cash and equivalents and $71.1 million in debt as of March 27, 2019 [25] - Capital expenditures for 2019 are expected to total between $14 million and $19 million [25] Q&A Session Summary Question: Can you discuss the traffic decline and its relation to menu simplification? - Management indicated that there was no degradation in transactions due to the menu simplification, which was tested extensively prior to rollout [30] Question: What was the impact of weather on sales? - Management estimated that weather had a slightly over one percentage point impact on comparable sales during the quarter [34] Question: How does refranchising affect margins? - Management confirmed that selling company-operated stores to franchisees would be accretive to margins [36] Question: What are the sales trends following weather issues? - Management noted that sales were flattish year-over-year entering April, with expectations for improved momentum as new promotions were launched [40][41] Question: What operational benefits have been seen from menu simplification? - Management reported improved food scores and better execution metrics as a result of reduced complexity in operations [44] Question: Is refranchising a broader strategy moving forward? - Management stated that while there are no immediate plans for further refranchising, they would consider opportunities if they arise [46]