Fiesta Restaurant Group Inc (FRGI) 2018 Q1 法說會逐字稿

Good afternoon, and welcome to the Fiesta Restaurant Group First Quarter 2018 Earnings Conference Call. Today's conference call is being recorded. (Operator Instructions)

I'd now like to turn the conference over to Raphael Gross, Managing Director at ICR.

Good afternoon, everyone. Fiesta Restaurant Group's first quarter 2018 earnings release was issued after the market closed today. If you've not already accessed it, it can be found on the company's website, www.frgi.com, under the Investor Relations section.

Before we begin, I'd like to inform you that during the call today, the company will make various statements that are not based on historical information. These forward-looking statements include without limitation, statements regarding the company's future financial position and results of operations, business strategy, budget, projected costs and plans and objectives of management for future operations. Actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements, and the company can give no assurance that such forward-looking statements will prove to be correct. Important factors that could cause actual results to differ materially from those expressed or implied by the forward-looking statements can be found in the company's SEC filings.

Please note that during today's conference call, certain non-GAAP financial measures will be discussed, which the company believes can be useful in evaluating its performance. Any discussion of such information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP, and reconciliation to comparable GAAP measures is available in the company's earnings release.

On the call today are President and Chief Executive Officer, Rich Stockinger; Senior Vice President, Chief Operating Officer and Pollo Tropical President, Danny Meisenheimer; and Senior Vice President and Chief Financial Officer, Lynn Schweinfurth.

And now I will turn the call over to Rich.

Thank you, Raph. We are very encouraged by the building sales trajectory across our 2 unique brands as we continue to execute our strategic renewal plan. At Pollo Tropical, the brand relaunch continues to gain momentum, resulting in 5 consecutive months of positive comparable restaurant sales performance from December through April.

Looking at the first quarter specifically, Pollo Tropical generated its first quarter of comparable restaurant sales growth since the fourth quarter of 2015 with a 1.1% increase and a 22.8% restaurant-level adjusted EBITDA margin, which is a non-GAAP measure defined in our SEC filings, an improvement of over prior year of 10 basis points.

Our core markets, Miami-Dade and Broward counties, continued to lead the sales recovery, both with comparable sales growth of approximately 3%, exceeding the Florida Black Box quarterly industry benchmark of 1.9%.

Our momentum continued into April with the company-owned comparable restaurant sales increase of 2.8%, including comparable sales increases of 5.1% and 3.9% in Miami-Dade and Broward counties, respectively. Importantly, we generated the highest comparable sales growth in the system on a percentage basis during April in our noncore Southwest Florida market, where we first began testing our citrus-marinated crispy chicken platform earlier in the year. Reinvigorating our business in South Florida has been and remains our primary focus. But we are encouraged by the improving sales trajectory across every Pollo Tropical region. The comprehensive improvements in food quality, hospitality and restaurants facilities as part of the brand relaunch are clearly resonating well in both our core and noncore market.

Our investment in the brand, including food, labor, marketing and R&M have clearly reinvigorated the brands where it is today. We are focused on driving sales and future improvements in the margin.

With that, Danny will now provide a more detailed update on Pollo Tropical initiatives. I will then touch on the progress we've made at Taco Cabana before Lynn goes through our financials in greater detail.

Thank you, Rich. I would like to echo Rich's enthusiasm about the progress we're making at Pollo Tropical. The heart of our revitalization includes comprehensive quality enhancements made across our menu, including NAE chicken and the incremental impact of our new citrus-marinated crispy chicken platform, introduced earlier in the year. Validated by extensive research and testing, our culinary team has developed this unique product, founded on our signature 24 hours citrus marination process and flavor, which is hand-battered in the restaurant and then fried. We consider this platform a real game-changer for our brand.

Let me briefly recap the time line in this new platform. At the beginning of 2018, we began testing crispy Pollo Bites with television and social media support with promising results. In February, we rolled out crispy Pollo Bites systemwide that could be ordered as a meal, as a side item or in our signature TropiChop bowl. We're still only in the early innings of this process, but our crispy Pollo Bites have already reached between 11% and 15% of transactions across every Pollo market since its launch.

As the next step in our product evolution, we launched our new crispy Pollo Bites wraps in April. Supported by broadcast and social media, we attribute our 2.8% comp sales growth, among other things, to the compelling appeal of our crispy chicken platform that, we believe, will bring guest back more frequently once they try the product.

Next up is our new crispy chicken sandwich, which we are particularly excited about. Not only did the research indicate that the process would drive incremental visits, the quality and size of this product stands out in the market. More importantly, adding crispy chicken to our legacy chicken on the grill lineup will allow us to appeal to a broader demographic. The feedback that we have garnered thus far points to one conclusion; our guests love this new platform in both core and noncore markets, and we're excited to see where it will take us going forward.

Our focus on quality hospitality has been instrumental in the success of our new product rollouts and people are taking notice. We've been receiving a lot of guest compliments around the enhancements we've made to the guest experience. We also recently held our General Managers' conference, where there was a shared sense of passion, pride and commitment to be the best-in-class in our segment.

Last, we continued to use social and digital media to build sales. As an example, we continued to promote Pollo Time, which is a specific promotion at a reasonable price that targets building sales during certain parts of the day and certain days of the week by market. The current offer includes our signature half chicken, rice and beans in core markets for $5.99. In noncore markets, the current offers includes 5 crispy Pollo Bites, 1 side and a drink for $5.99. In all markets, during weekends, Pollo Time includes 2 family meals for $12.99; a whole chicken, rice and beans or 20 crispy Pollo Bites and 1 side.

Advertising is now highlighting our signature citrus marination -- breast citrus marination to reinforce what differentiates Pollo Tropical from the competition.

Lastly, we're planning to roll out our new loyalty program online ordering and digital catering platform by early July, which, we believe, will be foundational as we focus on building our off-premise business, including delivery and catering.

To conclude, the path we've been on has been both ambitious and challenging. But the team has executed the plan to date, and we are delivering improving results. We are energized by our process as we begin to -- as our -- by our progress, as we continue to strategically implement, plan initiatives and build our business in months and years ahead.

With that, let me turn the call back over to Rich.

Thanks, Danny. Let me reiterate that the key focus at Pollo continues to be the fresh NAE chicken, where we control the breed and the feed, bone-in and boneless, grilled or crispy inspired by the tropics.

Next, let me provide an update on our progress at Taco Cabana. While comparable sales fell 1.7% during the quarter, it is quite notable that Taco Cabana trends have been improving since August 2017. This encouraging trend continued into April with our first month of positive comparable restaurant sales growth of 0.9%. These trends are even more notable given the reduction in operating hours since November 2017, which have negatively impacted comparable restaurant sales by 1.6%.

The breakdown of our quarterly comp between the transaction decline and the higher average check is indicative of our strategic direction that we are taking with this brand. As we have said previously, we are evolving our guest base through higher quality menu and promotional items at reasonable prices, while eliminating deep discounting and reducing overnight operating hours. This, of course, is benefiting our average check while negatively impacting our transaction as we transition through this interim period. We, therefore, believe that our trends will continue to improve as we build new guest loyalty and frequency.

Turning to profit innovations and other initiatives. We are reestablishing the quality and many recipes that originally made Taco Cabana special, with the help of our founding chef, Connie Gutierrez. We had home run with systemwide rollout of our new Applewood-Smoked Texas Brisket. A brisket -- as brisket-related product sales are exceeding 100 per restaurant per day, one of the most successful product introductions in years.

Our other product improvements include: improved steak, now USDA choice inside skirt steak; NAE chicken; higher quality shrimp; and lean-smoked bacon, to name a few. Next, we'll be rolling out our improved shredded chicken and ground taco meat in the coming weeks.

We are also nearing completion of our TC patio party development and will be rolling this out strategically at certain restaurants. The patio party consists of entertainment in our restaurant's patio area and features alcoholic beverages to complement shareable menu offering. Our draft beer and sangria test in select Taco Cabana locations continues to yield favorable results, and we're planning to gradually expand this offering prior to our relaunch.

All-day breakfast and TC Time! Dozen Taco Boxes continue to build. New creative TV media and aggressive social media are now in place as we continue to drive guest engagements and frequency through timely and relevant social posts, digital ads and e-blast. We've recently featured Brisket is Back, Margarita Mondays, Taco Tuesdays and other unique specials that change week-to-week.

Given the traction we are experienced with Pollo brand relaunch, our Taco team is eager to implement their own brand relaunch the summer. Similar to Pollo, guests are noticing the enhancements we have put in place at TC, and our guest metrics and social media scores are improving. As we continue to build our sales, our margins will also improve.

We recently held our Annual Taco Cabana General Managers meeting in San Antonio. Under Chuck Locke's leadership, the team is energized, focused on delivering a guest -- great guest experience, motivated and optimistic about the future. Chuck is an integral part of the turnaround and is proving himself to be the leader that the Taco Cabana brand deserves. As with Pollo, loyalty, online ordering, delivery and catering will also be rolled out at TC this year.

In summary, I am pleased with our progress to date, given the sales improvements at both brands and the stabilized restaurant level margins at Pollo. We have more work to do at Taco to improve margins through sales leverage and supply chain, staffing and other initiatives that are underway.

I'm confident that we are on the right path to establishing a promising foundation for future expansion. I'd like to thank all of our team members for their passion and hard work and helping to deliver our recent accomplishments.

With that, let me turn the call over to Lynn.

Thank you, Rich. During the first quarter of 2018, comparable restaurant sales at Pollo increased 1.1% compared to a 6.7% decrease in the first quarter last year. This year's increase included a 2.3% decrease in comparable restaurant transactions, offset by a 3.4% increase in average check. The increase in average check was primarily driven by menu price increases that positively impacted restaurant sales.

Comparable restaurant sales at Taco Cabana in the first quarter of 2018 decreased 1.7% compared to a 4.5% decrease in the first quarter last year. This year's first quarter decline included an 11.3% decrease in comparable restaurant transactions, partially offset by a 9.6% increase in average check due to positive sales mix associated with higher priced promotions, product mix, lower discounts and pricing.

Reduced overnight operating hours negatively impacted quarterly comparable restaurant sales by 1.6%. Please note that comparable sales for both Pollo and Taco during the first quarter were negatively impacted by approximately 0.4%, each related to a fiscal calendar shift of New Year's Day and Easter.

At Pollo, restaurant-level adjusted EBITDA decreased by $1 million, but margins arose 0.1%. Restaurant-level adjusted EBITDA margins were positively impacted by a sales leverage, lower advertising costs and the closing of unprofitable restaurants during 2017, partially offset by the negative impact of higher cost of sales and repair and maintenance costs, primarily driven by the renewal plan.

At Taco, first quarter restaurant-level adjusted EBITDA decreased by $3.6 million and margins declined by 4.6%. Restaurant-level adjusted EBITDA margins were negatively impacted by the deleverage of sales, higher labor costs due to increased hours to improve hospitality, higher wages and higher medical enrollment and claims costs and higher cost of sales and repairs and maintenance costs, driven by renewal plan investments, partially offset by lower advertising costs.

During the quarter, consolidated adjusted EBITDA, a non-GAAP measure defined in our SEC filing, declined to $17 million, primarily driven by lower restaurant-level adjusted EBITDA at both brands, partially offset by lower G&A expenses.

Adjusted net income, also a non-GAAP measure, was $4.3 million or $0.16 per diluted share compared to the prior year period adjusted net income of $6.8 million or $0.25 per diluted share. Please refer to our earnings release and SEC filings for all related non-GAAP reconciliation table.

We continued to estimate our annual capital expenditures for 2018 to be $60 million to $70 million, including $22 million to $25 million for the development of new restaurants. As a reminder, other capital spending will primarily include deferred and other capital maintenance, IT and infrastructure investments and restaurant remodels.

Turning to our development plan. For 2018, we expect to open 7 to 8 company-owned Pollo Tropical restaurants in Florida and 7 to 8 new company-owned Taco Cabana restaurants in Texas. As a reminder, these Taco Cabana openings will include 5 closed Pollo Tropical restaurant conversions. For the year, we also anticipate 2 Taco Cabana restaurant closures, as we opened new sites in superior locations in the same trade areas. We did not open any new restaurants during the first quarter.

On the technology front, we continue to make meaningful investments that we believe will help us to be more effective in building sales and telling our story to both current and new guests. New loyalty programs will be implemented by early July in conjunction with our new digital, delivery catering and off-premise platforms, all of which present us with a significant business opportunity to drive off-premise sales, including delivery and catering mentioned earlier.

Lastly, during the year, we will be testing kiosks at each brand for potential rollout in 2018.

To conclude, the successful implementation of our strategic plans, includes refining our brands to have broadest appeal and developing platforms for future sustainable growth to deliver our business model that creates long-term value for our shareholders. We believe we are on course to meet this objective.

With that, Matt, will you please open the lines for questions? Thank you.

(Operator Instructions) Our first question is from Nicole Miller from Piper Jaffray.

I wanted to understand a little bit more about marketing side. I know the menu has a modest level, but there's opportunity to be somewhat regionalized. Is there an opportunity to do that in terms of marketing as well? Are you doing that? And why or why not?

Yes, this is Danny. And we certainly are doing that on the Pollo side. In terms of the marketing plans, they do vary by market and by region, and it could be a different blend of traditional and nontraditional media. Social and digital is playing a much better part and gives us flexibility to tailor menu, offerings, Pollo Time!, as we mentioned earlier, to really fit a market need and the customer type. So it is matching.

It is much that the marketing will follow the flexibility of Pollo, where the Pollo brand will be driven primarily by what it's used in South Florida, meaning Miami-Dade and Broward by the bone-in chicken. But as you move to other markets, you have to be flexible to what the particular market needs are. It may not be so much bone-in, may be boneless or may be more handheld and less platters. So our research has told us that and we're seeing it right now. So not only will -- the marketing has to be focused more towards the individual needs and the flexibility of the brand.

And just a second last question for me. How are guest satisfaction scores? And also because the GM conferences have been recent, what are the challenges but also the opportunities that the store-level teams see?

Well, I think, the -- going for the last one first. The opportunities that the store-level people, the excitement and passion is incredible. Because the guest complaints have gone down, the compliments are going up, and of course, sales are going up, their results are getting better, and of course, their incentive plans -- each one is incentivized on their individual stores. As well as the better we do and continue to improve, we'll work back to the growth model that we haven't forgotten. It's just been put on hold for a period of time during this renewal process. So from them, the excitement is incredible.

On the first one, in terms -- no, just to reiterate, the satisfaction and net promoter scores have also been improving to coincide with what Rich said.

Our next question is from Nick Setyan from Wedbush Securities.

When you guys talk about the Taco relaunch, it seems like a lot of changes and improvements have already been made. I guess, what's the incremental step? What's the difference between kind of what's been going on until the summer and then the summer relaunch?

Sure. It's Rich. We are still and, as I mentioned before, just 2 of the items. We're not done with the proteins. When we get finished with rolling out all the improved proteins as well as the patio program, it's not yet, it's been the process of being sent out there. And again, more shareable type items, bigger and better nachos, et cetera. Once we're completely done and rolled out, then we'll do a complete relaunch. Right now, it's been a little out of time, the all-day breakfast we just put a table out that, had that out for a bit. The TC Time! by the -- which is basically Tacos by the boxes or dozen Tacos, where before we only had them at breakfast, we now have them all day. And it's not just breakfast items, it's non-breakfast items and that continues to improve weekly. We'll have hopefully the loyalty program and some of the other programs ready to go. And that's when we'll do the relaunch. Right now, it's just been okay, we'll send out a little part of the renewal program and then pull it back. We're about ready to do the steak, which is the marinated steak platform that will be coming out in a few weeks and will be in commercial. And so that's another added improvement from what we had before. So again, it's really the culmination of these little things that we've been rolling out. And we'll hopefully have that all in the summer.

Got it. And then, Lynn, I'm not sure if you said the price versus mix, what it was for each brand? Would you mind telling us that?

Yes. The price for Pollo was 3.1% for the quarter and for Taco, it was 6.8%.

And in terms of the go-forward pricing, how are you thinking about each?

Well, we'll be carrying some price certainty at both brands throughout the year. We are planning potentially to take more price in the fall. So it will fall between the mid-single-digit percent for the full year.

This is for each brand?

Well, it's going to be a little over 5% for Taco. Depending on what we do in the fall, we still have to finalize that decision. And then, for Pollo, we're probably trending closer to 4% for the year.

Got it. Okay. And I guess, the next price increase will be in fall?

That's right.

And then in terms of a commodity inflation that we saw for each brand in the quarter, and I guess, what you are seeing for the rest of the year?

Yes. For the menu enhancements, we've certainly seen some cost increases. And those are laid out in our 10-Q document. I think the bigger impact to the 2 brands is really the higher-quality ingredient we're were purchasing. So that's really the primary driver at the increased costs year-over-year. And then, on the labor front, we're seeing anywhere between, let's say, 1.5% to 2% at Pollo and about 3% at Taco.

And then just lastly, when you guys talked about the noncore markets and Pollo seeing the improvement in April. Is the comp becoming more equal? I guess, gradually more equal? How are you kind of thinking about that as the year progresses in terms of the Miami market versus the rest of the markets?

Well, the core markets where we primarily focused initially. So we have seen the benefits of that initial focus first in those markets. But as we mentioned today, our Southwest Florida market was the best performing market in the month of April. And that's the market we had done a lot of our pretesting in prior to system rollout. Our North Florida and Atlanta markets continued to be challenged. However, they are improving in trajectory. So we really have a range currently that we do expect to narrow further, as we get through the balance of the year.

Our next question is from Jeff Farmer from Wells Fargo.

You guys did touch on it, but across new product introductions, reestablishing that food quality, I think you mentioned Pollo Time! as well the value offers. What's the most impactful in driving the same-store sales recovery at Pollo in your opinion? And in terms of looking forward, how sustainable are some of these drivers? Are most of them going to be working for you for the balance of the year?

No, it's not just -- Jeff, it's Rich. It's not just one item because we've improved 90% of the specs. So everything has improved. In the beginning, what was starting to drive was the Pollo Time! It was the $5.99 half chicken special bone-in as well during the week, Monday through Friday, at lunch time. And then the weekends the $12.99 family meals. That was in the beginning starting to drive it. And now it's been -- recently, it's been there addition of the bites and the crispy program. And we've seen not only is in helping in sales and add-on sales, but it's also bringing in a different guest profile than we had before, including Miami-Dade and Broward counties. It's a younger guest and people are coming more often because of the success of the bite program or the crispy program. So it hasn't just been one item to say, well, that's where we're going to hang our head on, that's been rolling forward, it's been an improvement in every item. We are focusing right now a little bit more on the handhelds because it's an opportunity for us and our research told us it was an opportunity. So you'll be seeing things like the sandwich coming out, we're playing with the potential slider program, we've got the -- we took the wraps and made them bigger wraps, they're better. So we continued to look at improving the handhelds and the platters. So again, it's not being one thing, but it all goes back to the chicken. When we improve the chicken, we improve the specs, continue the 24-hour marination, the NAE, it all starts with the chicken, if you don't care if it's bone-in or boneless.

And then from a marketing perspective, communicating with the customer everything you just outlined there. Are you early innings? Do you think you've already done a good job of letting your existing customers, potential new customers know what has changed at Pollo? Or is it still ramping up on the marketing communication side?

Yes, this is Danny. We're still in the early innings as you just said. And we're learning a lot about this customer. We've been talking to them in focus groups and various research studies. We're in the stores, we're doing intercepts, we're visiting with them. And they're different. So we're learning a lot about what their thoughts are about the brand and how they're behaving in the category. And really who they are, and how we better target them and message to them. So we're learning a lot about them as we go.

And just one final question on CapEx for 2018 does include -- we can sort of back into it a healthy amount of deferred maintenance CapEx and remodel CapEx. As you get into '19, how much of that carries over into '19? Or do you get a big chunk of it taken care of in '18 and then it falls off in '19?

Yes. We are expecting it to fall off in '19. We actually started our efforts in terms of deferred maintenance that need to be addressed last year, in 2017, with the balance being addressed this year.

Our next question is from Will Slabaugh from Stephens.

I had a question on Taco, and I wanted to make sure I understood how to frame the traffic declines that we saw this quarter. So you mentioned there continue to be a lack of aggressive discounting. But could you give us an example of what that was that your no longer doing, whether it's couponing or something else? And is there a concern at your end that the removal of some of this value whatever it may have been could impact the frequency in future periods at all?

Sure. I will tell you that the guest declines and transactions continues to improve as we speak. So people are starting to see the improved quality, which we still think and so do our guests feel it is reasonable. And fair price. But we're no longer doing the coupons, we're no longer doing 4.5% in advertising and then 9% to 10% in discount and promotion. Our discount and promotion is hovering around 3%, which is primarily for military, first responders and senior citizens and that's pretty much where it's going to stay at. So are we concerned? We're addressing it. We're doing selective type more strategic discounting or couponing. What I mean by that, if we have some areas where we do very big at breakfast and not so much at dinner, what we're doing is a bounce back. So if you buy two dozen or a dozen breakfast Tacos, we'll give you a coupon good for the next X period of time for the hours of, say, 3 and 10. So we are doing that. We are concerned. But we all believe based on our research number one item was quality. And the reason why people didn't come back -- the only reason that they were coming back before was because to fill their bellies at not a lot of price, price point was about $4.99, which was just to fill your belly and then the margins kept going down. But right now we're not only at a breakeven in comp store sales, we've got positive comp store sales being down, I think, about 9% in transactions. We get those transactions down to just 5%. Just 5% we'll be positive, 5% in our comp store sales. So we're not concerned, but we're keeping a close watch.

Got it. That's helpful. And also you mentioned the kiosk test later this year. I think you said in Pollo, so I was curious on any updated thoughts around any other technology that you may be looking at to improve the processes there? Any test with delivery or any update on catering there as well?

It's a big category. So I think yes is the general answer to your options. So we are testing kiosk, actually at both brands, not just Pollo this year. We're looking at new handheld POS equipment to help in our throughput at the restaurants. We're certainly, looking at other digital capabilities that we talked about in our preopening comments around a new loyalty program. New online ordering, guest experience and everything that kind of goes with it. So technology is and will continue to be a big area of focus for the company as we move forward.

We've contacted the best in the business, either it be Olo or it be Punchh or MonkeyMedia for the catering. So anything we're ready to roll out, we have been working on extensively under the renewal program. The line buster program, we will have new iPads-like items out there that we'll be able to take the credit cards right there just to get people through the drive-throughs faster. So we, again, are pretty excited about what the rollout. Again, it will be some time in the summer, late summer. But we've been working on this now as a part of the renewal program for some time.

(Operator Instructions) Our next question is from Brian Vaccaro from Raymond James.

Just a question on the comps, if I could. I think you said the calendar shift was a 40 basis point headwind to first quarter. Lynn, can you maybe quantify that the Easter shift benefit to the April comps that you reported?

Yes. It would be within 40 to 60 basis points for the month.

Okay. All right. And wanted to circle back also on the guest sat scores at Pollo Tropical. And can you speak to which metrics you are seeing the greatest improvement in? And then specifically on value, are you seeing any times of resistance to the price increases that you referenced earlier?

This is Danny. The number one feedback that we get and the highest ratings are on quality of food and the trends have been taken in that direction since the beginning. And we see them get better and better and better. So quality of food is the leading metric that we see from our guest today.

And the value scores that not gone down because of the quality of food. And what we've been very careful on price increases, again, what area. If we're in Miami-Dade, been real careful about the bone-in, the grilled and will raise prices in certain areas like the handhelds. So we've been real careful, we have introduced tier pricing, which we announced several periods ago. But the value scores have continued and again, I put that more towards the value and quality of the food.

All right. That's helpful. And then could you remind us what's the average check at these days at Taco Cabana?

It's [$10.50] (corrected by company after the call), currently.

Okay. And then, last one for me, just a quick one on the margins. Pollo Tropical margins, specifically. That other OpEx line, Lynn, I know has been pressured by higher R&M for the last several quarters. Can you give us a sense of where you are sort of in the process of improving the physical state of the assets? And when you expect that pressure point to dissipate?

Well, we do expect ongoing cost throughout this year. But we do expect those cost to dissipate as we go into 2019 on the expense line item similar to the capital category that we talked about earlier.

Okay. And similar one on the advertising. I think advertising came in lower than we had expected this quarter. I know that's our expectations and not yours. But can you remind us what you expect for Pollo Tropical ad spend this year, maybe, as a percentage of sales? Just some guardrails there. And any cadence we should be mindful of as you move through the quarters?

Yes, we've actually moved down our advertising expense expectations for the year a little bit for both brands down to 3.5% as we are continuing to weight a little bit more heavily social media to help drive our results. And then on the Pollo side, from a cadence standpoint, we will be spending more in advertising in the second quarter as compared to the first.

Our next question is from Nick Setyan from Wedbush Securities.

In terms of the July 1 launch of online ordering and you kind of mentioned, delivery. Is delivery going to be ordered through your site? Is it going to be third-party? Is there going to get test-first? How is that -- what's your thinking around that?

Well, we'll definitely do a test-first, and we are going to try as best as we can to direct guests to go to our website, because we won't have to necessarily pay commissions associated with third-party delivery services. But by purchasing third-party delivery services, we have to offer our menus on their websites. So through our loyalty program, we're hoping to steer those orders to the website of the 2 brands.

And the Taco launch, is that going to be a little bit later than Pollo? I know you guys said this year. You guys didn't mention any specific time frame.

Yes. Taco will be after Pollo. And Pollo, we're hoping to rollout in the coming weeks, by early July.

Thank you. This concludes the question-and-answer session as well as today's teleconference. Thank you for your participation. You may disconnect your lines at this time.