El Pollo Loco(US:LOCO)2020-10-30 02:59Financial Data and Key Metrics Changes - For Q3 2020, total revenue was approximately $111 million, a slight decrease from $112.1 million in Q3 2019 [21] - Pro forma diluted earnings per share increased by 40% to $0.28 compared to $0.20 in the prior year [7][25] - The company reported a net income of $9.9 million, up from $6.4 million in the same period last year [25] Business Line Data and Key Metrics Changes - Company-operated restaurant revenue was $97.3 million, down from $99.1 million in the same period last year, primarily due to the sale of five restaurants to franchisees and temporary closures related to COVID-19 [21] - Franchise revenue increased to $7.8 million from $7.3 million, driven by a 3% increase in franchise comparable restaurant sales [22] Market Data and Key Metrics Changes - System-wide sales increased by 1.8% during Q3, with comparable sales outside of Los Angeles increasing by 6% [8][9] - The unemployment rate in Los Angeles was reported at 15.1% in September, nearly double the national rate, impacting sales trends [8] Company Strategy and Development Direction - The company is focusing on operational efficiencies and has achieved the highest restaurant contribution margin in over two years at 22.4% [10] - New product launches include L.A. Mex Burritos and a focus on family meals, which accounted for over 30% of sales mix [11][12] - The company plans to enhance drive-thru operations and curbside pickup capabilities, reflecting a shift in consumer behavior due to COVID-19 [14][16] Management Comments on Operating Environment and Future Outlook - Management expressed optimism about returning to positive comparable restaurant sales and the potential for sales growth as economic conditions improve [7][9] - The company anticipates challenges due to the ongoing COVID-19 pandemic but remains committed to its transformation agenda and operational improvements [18] Other Important Information - The company has temporarily halted new company-operated unit development and does not expect new openings in 2020 [20] - The Loco Rewards Loyalty program has reached 2 million members, with app downloads increasing by approximately 45% since September [12][13] Q&A Session Summary Question: What is driving the expected margin decrease in Q4? - Management indicated that Q4 is typically the softest margin quarter due to holiday-related increases in volume and lower margins [29] Question: How should margins be viewed long-term as dining rooms reopen? - Long-term margin challenges will depend on pricing strategies and the relationship between transactions and labor costs as dining rooms reopen [31][32] Question: What caused the shift in same-store sales performance between company and franchise locations? - The difference is attributed to the concentration of company restaurants in California, which faced greater economic headwinds compared to outer markets [35][37] Question: What is the real estate pipeline for next year? - The company expects to open 3 to 5 new company-owned restaurants next year, with franchise development anticipated to be higher than this year [39][40] Question: What enhancements are being made in the remodels? - Future remodels will focus on technology and drive-thru efficiency, including double drive-thrus and smaller dining room footprints [42][44] Question: What efforts are being made to attract new franchisees? - The company is preparing to aggressively recruit new franchisees and has identified target markets for expansion [50]