El Pollo Loco(LOCO) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For Q4 2024, total revenue was $114.3 million, up from$ 112.2 million in Q4 2023, representing a year-over-year increase [36] - Company-operated restaurant revenue increased by 1.8% to $95.6 million from$ 94 million in the same period last year, driven by a 1.6% increase in comparable restaurant sales [36] - Restaurant contribution margin for Q4 was 16.7%, compared to 15.8% in the prior year, indicating a 90 basis point improvement [40] - GAAP net income for Q4 was $6 million, or$ 0.20 per diluted share, compared to $4.4 million, or$ 0.14 per diluted share in the prior year [41] Business Line Data and Key Metrics Changes - Franchise revenue increased by 2.5% to $11.2 million during Q4, driven by new franchise openings, despite a 0.1% decrease in comparable restaurant sales [37] - Average check size increased by 9%, while transactions decreased by approximately 6.8% during Q4 [37] - Food and paper costs as a percentage of company restaurant sales decreased by 180 basis points year-over-year to 25.1% [38] Market Data and Key Metrics Changes - System-wide comparable same-store sales increased by 0.6% year-to-date through February 26, 2025, with a 2.3% increase in company-operated restaurants and a 0.4% decrease in franchise restaurants [37] Company Strategy and Development Direction - The company is focused on a brand transformation to modernize its image and enhance customer experience, aiming to become the national fire-grilled chicken brand [7][19] - A new advertising campaign is set to launch, emphasizing the quality and value of its food offerings [13] - The company plans to open 10 new restaurants in 2025, primarily outside California, and is leveraging restaurant closures in the industry to convert locations into El Pollo Loco restaurants [27][29] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the brand's growth potential, citing improvements in unit economics and operational efficiencies [24][34] - The company anticipates commodity inflation to be in the 1.5% to 2.5% range for 2025, with wage inflation expected to be between 5% and 6% [38][39] - Management highlighted the importance of customer satisfaction and operational consistency as key focuses for 2025 [22] Other Important Information - The company completed 8 company-operated remodels and 44 franchise remodels in 2024, with plans to remodel 60 to 80 restaurants in 2025 [43][30] - The company has a robust product calendar for 2025, focusing on culinary innovation and value [32][34] Q&A Session Summary Question: Can you provide insights on the impact of remodels on same-store sales? - Management noted that while they do not have enough data yet, initial consumer reactions to remodels have been positive, and they expect good returns from the remodel program [50][52] Question: What is the status of the franchisee pipeline? - Management indicated that interest from franchise partners is growing, with more meetings and discussions taking place, reflecting the brand's improved performance [53][56] Question: What factors contribute to confidence in margin expansion for 2025? - Management highlighted improvements in supply chain efficiency and labor productivity as key areas driving confidence in further margin expansion [60][62] Question: Can you clarify the build costs for the new restaurant prototype? - Management stated that while the goal is to keep costs around$ 1.8 million, actual costs may vary based on location and market conditions, with opportunities for lower costs through conversions of closed restaurants [68][72] Question: What is the impact of the L.A. wildfires on operations? - Management reported minimal impact from the wildfires, with no physical losses and only temporary closures due to power outages [75] Question: How is the Mango Habanero product performing? - Management confirmed that the Mango Habanero has driven trial among both existing and new customers, positively impacting sales [78][82]