El Pollo Loco Holdings Inc (LOCO) 2015 Q3 法說會逐字稿

Greetings, and welcome to the El Pollo Loco third-quarter 2015 earnings conference call.

(Operator Instructions)

As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Larry Roberts, Chief Financial Officer for El Pollo Loco. Thank you, you may begin.

Thank you operator, and good afternoon. By now, everyone should have access to our third-quarter 2015 earnings release. If not, it can be found at www.elpolloloco.com in the Investor Relations section.

Before we begin our formal remarks, I need to remind everyone that our discussion today will include forward-looking statements. These forward-looking statements are not guarantees of future performance, and therefore you should not put undue reliance on them. These statements are also subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect.

We refer all of you to our recent SEC filings for a more detailed discussion of the risks that could impact our future operating results and financial condition. We expect to file our 10-Q for the third quarter of 2015 tomorrow, and we would encourage you to review that document at your earliest convenience.

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

With that, I'd like to turn the call over to Steve Sather.

Thanks, Larry. Good afternoon, everyone, and thank you for joining us on the call today.

Our third-quarter results, which include pro forma net income growth of over 40%, and our 17th consecutive quarter of system-wide comparable store sales growth. For the quarter, we saw a 0.6% increase in system-wide comparable restaurant sales growth, that consisted of flat growth at our company operated restaurants and a 1.1% increase for franchise restaurants. The increase in the system-wide comparable sales came on top of strong 7.9% growth last year, for a two-year growth rate of 8.5%, and a three-year growth rate of 12.2%.

The four pillars of our brand remain great food, excellent service, and a warm inviting environment at a good value. Given our recent sales results, we conducted extensive research during the quarter. Our research confirmed that consumers still love our food, rating it significantly above QSR and on par with fast casual. The research also suggested that our sales results have been impacted by higher prices and a reduction in the value portion of our menu, resulting in reduced visits from some of our more price-conscious customers. We are taking action to re-engage these more value-conscious consumers.

During the third quarter, we launched a five-dollar Pollo Bowl combo LTO, with four new Pollo Bowls. Following this LTO, we reintroduced the five-dollars combo menu, which remains in our Company-owned restaurants full-time, and is a strong step towards reinforcing our value offering.

In addition to these, we plan to reinstate combo pricing throughout our menu to provide another element of everyday value. Finally, during the quarter we completed a comprehensive analysis of our menu offerings to better understand the price value equation of each of our products, which will provide additional input into our pricing decisions going forward.

As we look at pricing for 2016, we expected to take a lower than usual price increase late November. In addition to providing our guests with cravable food at great value, we continue to focus on enhancing the overall experience of our customers. We are working on a number of initiatives designed to improve the customer experience that should not only give our customers a real QSR-plus feel, but have the ability to increase throughput in peak hours.

Previously we discussed the roll-out of pagers that we completed in our Company restaurants in the second quarter. The pagers have given us the ability to more accurately measure speed of service inside our restaurants. Since the roll-out we've seen a marked improvement in that metric. The time from when a customer completes their order at the front counter to when they receive their food has been reduced by over 30 seconds. Pagers are currently being rolled out to franchise restaurants, and are now in over 40 locations.

Additionally, we're in the process of rolling out a more efficient center-line layout and simplified products builds, which are further improving speed in our restaurants. Also being rolled out is a streamlined point-of-sale entry, and the addition of customer-service-facing labor in Company stores to ensure that customers are truly getting the plus in their QSR-plus experience during each El Pollo Loco visit. Another initiative we are testing is a learning management system, which is expected to enhance our restaurant training in 2016.

Lastly, we continue to make progress on our remodel program to ensure that our restaurants reflect our elevated brand promise. Through the end of the third quarter, we have completed 46 remodels system-wide, and over 250 restaurants are either new or remodeled with the Hacienda design, representing about 70% of the system. We believe that these initiatives will further enable our employees to effectively and efficiently deliver our great food with great service in a pleasant environment, thereby further enhancing our value proposition, and ultimately driving continued sales growth.

Switching to development, during the third quarter we opened one new Company restaurant in Folsom, California, our 19th restaurant in the Sacramento area, and our third new Company-owned restaurant this year. Subsequent to the end of the quarter, we've opened four more Company restaurants, and we had eight under construction.

We expect to open 13 to 15 new Company-owned restaurants in 2015. This slight revision in expected Company-owned stores is because several restaurants which are under construction may slip into 2016 as a result of permitting delays and the recent heavy rains in Houston.

Our franchisees also opened one restaurant during the quarter in Pharr Texas, continuing our expansion into south Texas. Subsequent to the end of the quarter, our largest franchise partner opened its newest location in Bakersfield, California. Our franchisees currently plan to open five restaurants in 2015, which is down from our previous expected franchises store openings of eight, as several franchise units expected to open in late 2015 will now slip into the first quarter of 2016.

Looking ahead, our restaurant pipeline is strong and growing stronger, and our real estate team has been focused on our 2016 and 2017 development. Excluding restaurants that might slip from 2015 to 2016, we are currently targeting 18 to 20 new Company-owned restaurants next year, and expect a more balanced opening schedule as compared to this year. We continue to focus on accelerating franchise development, and have a number of highly qualified new franchise candidates looking to develop with us.

Additionally, we have further augmented our development team, having recently hired a Dallas-based developer director and a franchise sales director. We remain confident in our ability to deliver 8% to 10% unit growth over the long term.

With that, I'd like to turn the call over to Larry for a detailed discussion of our third-quarter results and our 2015 guidance.

Thanks, Steve. For the third quarter ended September 30, 2015, total revenue increased to $88.9 million from $86.6 million in the third quarter of 2014. The increase was largely driven by growth in Company-operated restaurant sales, which rose 2.6% in the third quarter to $83 million.

The increase in Company-operated restaurant sales was due to the contribution of 13 new restaurants opened during and subsequent to third quarter of 2014, partially offset by lost sales from six units sold to a franchisee. Comparable restaurant sales were flat in the quarter, with a 1.9% increase in average check, offset by a 1.9% decrease in transactions. Franchise revenue increased 3.3% year over year to $5.9 million, driven by comparable restaurant sales growth of 1.1%, as well as contribution from new restaurants and higher point-of-sale fees.

Turning to expenses, food and paper costs as a percentage of Company restaurant sales decreased by 20 basis points year over year to 31.8%. The improvement was predominantly due to higher average check, partially offset by increased commodity costs. Looking ahead to 2016, we have completed our chicken negotiations, and now expect overall commodity deflation of 3% to 4% for next year.

Labor and related expenses as a percentage of Company restaurant sales increased 20 basis points year over year to 25.1%. The increase in labor expenses was driven primarily by higher workers' compensation and medical insurance claims activity.

Occupancy and other operating expenses as a percentage of Company restaurant sales decreased 50 basis points compared to the prior-year third quarter to 21.9%. The decrease resulted from lower utility and repair and maintenance costs.

General and administrative expenses decreased by $1.2 million year over year in the third quarter to $6.3 million. As a percentage of total revenue, G&A expenses decreased 160 basis points to 7.1%. The decrease was primarily due to the capitalization of $300,000 in internal development costs related to site selection and construction activities, a decrease in the bonus accrual, and leverage of higher total revenue.

Depreciation and amortization expense increased to $3.3 million from $2.9 million in the third quarter last year. As a percentage of total revenue, depreciation amortization increased 30 basis points year over year. The increase was primarily driven by our new-store development, as well as our remodeling program. For the full year, we continue to expect depreciation and amortization expense to be between 3.7% and 3.9% of Company revenue.

Interest expense decreased by $3.2 million year over year to $810,000, from $4 million in the third quarter of 2015. The decrease is largely due to the pay-off of our second lien credit facility with the proceeds of our IPO in July 2014, lower interest rates associated with our December 2014 refinancing of our credit facility, and $40 million of pre-payments on a revolver in the first nine months of 2015.

During the third quarter we incurred a charge of $546,000 relating to the present value of expected payments under our income tax receivable agreement, which calls for us to pay our pre-IPO shareholders 85% of the tax savings realized as a result of utilizing our pre-IPO net operating losses and other tax attributes. We recorded a provision for income taxes of $6.5 million in the third quarter of 2015, reflecting an estimated effective tax rate of 41% and a $1.9 million valuation allowance against our deferred tax assets resulting from certain tax credits that may not be realizable before they expire. This compares to a tax benefit of $61.4 million in the prior-year third quarter.

We reported net income of $4.7 million, or $0.12 per diluted share in the third quarter, compared to net income of $25.8 million, or $0.70 per diluted share in the year-ago period. Weighted average diluted shares outstanding were approximately 39.1 million for the third quarter of 2015, and 36.8 million for the year-ago period.

To account for an IPO in 2014 and changes to our capital structure, we have calculated pro forma results including net income and basic and diluted share count as if the IPO had occurred at the beginning of FY13. In addition, we have made pro forma adjustments for other one-time or unusual expenses.

To arrive at pro forma net income, we have made adjustments for IPO and secondary offering expenses, credit facility interest expense, expenses associated with a tax receivable agreement, losses on disposal of assets, asset impairments, and closed store costs. We have added back provision for income taxes, and have applied a 41% income tax rate.

Included in our earnings release is a reconciliation of our GAAP results to our pro forma results. We believe that pro forma results provide a useful view of our business in our post-IPO capital and cost structures. Accordingly, pro forma net income for the quarter increased over 43% to $7.2 million, as compared to $5 million in the third quarter of last year.

Pro forma diluted earnings per share were $0.18 for the third quarter this year, compared to $0.13 in the prior-year period. We have used a diluted weighted average share count of 39.1 million shares for the third quarter of 2015, and 39.5 million shares for the year-ago period, which reflects our shares post-IPO.

In terms of our liquidity and balance sheet, we have $8.2 million in cash and equivalents as of September 30, 2015, and $125.7 million in debt outstanding. For the foreseeable future, we expect to finance our operations, including new restaurant development and maintenance capital, with cash from operations and borrowings under our credit facility. We now expect our cash capital expenditures to total $28 million to $31 million for the full year 2015.

Turning to our 2015 guidance. Based on our year-to-date results, we are updating our 2015 pro forma diluted net income per share expectation to $0.67 to $0.69. This compares to pro forma diluted net income per share of $0.55 in 2014, which included an estimated $0.01-per-share positive impact due to a 53rd week.

Our pro forma net income guidance for 2015 is based in part on the following updated annual assumptions: System-wide comparable restaurant sales growth of approximately 1.7%. We expect to open 13 to 15 new Company-owned restaurants, and expect our franchisees to open 5 new restaurants.

We expect restaurant contribution margin of between 21.2% and 21.5%. We expect G&A expenses of between 7.8% and 8% of total revenue. We expect adjusted EBIDTA of between $64 million and $66 million, and we are using a pro forma income tax rate of 41%.

With that, I'll turn the call back over to Steve for closing remarks.

Thank you, Larry. In closing, I'd like to reiterate that we believe we have a unique brand that operates from a position of strength in terms of food taste and quality. We believe we are taking the necessary steps through our menu actions and our service and operating initiatives that will not only re-engage our more value-conscious customers, but also continue to enhance the broader customer experience in ways that will strengthen our differentiated QSR-plus positioning. We continue to have a long runway of growth ahead of us, and we're excited about the opportunity that lies ahead of us.

Thank you for joining us today. We appreciate your continued interest in El Pollo Loco. Now we'd be happy to answer any questions you might have. Operator?

Thank you.

(Operator Instructions)

Andy Barish, Jefferies

Hi, guys. I was wondering if you can give us any color on the sales trends through the 3Q? We've definitely seen some weakness here across much of the industry to start the 4Q. Can you give us a little update in terms of your thinking and what's going on promotionally here in the first half of the 4Q, please?

(no audio - technical difficulty) and really, it's reduced the visits from some of our more price-conscious consumers. To address this, we are focused on the four pillars of our brand, which are great food, excellent service, warm and inviting environment, which all equal good value. Our research confirmed what we thought in the spring, that consumers still love our food, but we can improve on our service and our value, which are now taking actioned steps to address those issues.

On the value side, as you know, we've implemented our $5 combo panel, and we're reinstating our combo pricing, and are taking a much more scientific approach to pricing decisions. On service, we've implemented or are in the process of implementing a number of operational initiatives that will improve service, and most of all, our throughput ability.

We think together we're confident that over time, that these actions will take -- it will enhance that value proposition and ultimately drive sales, Andy. I think it's going to take into this next quarter, but we're very confident on the moves that we've made. Thank you.

Thank you. Sam Beres, Robert W. Baird

Hi, good afternoon. My first question is related to the comps, as well. Obviously outlined the range of initiatives to instill a bit better momentum here and upcoming quarters into the business. Just wondering if you could provide any perspective on maybe why you haven't seen some of those initiatives gain traction as of yet, and what the consumer reaction has been to some of those initiatives you put in place?

This is Steve. I think it's going to take some time to, as consumers come in and see these value initiatives that are on the menu now, as well as the service improvements that we're making. I think that's just going to take more time to bring those consumers back, let them experience that both on the price side and the service side, and re-gain those customers.

I think the great point of our research that we saw was consumers still love our food, and also the Hispanic community is still very strong for us. I think it's just going to take a little bit longer.

Thanks, and maybe a follow-up on the pricing outlook. Could you provide any specific insight into what level of pricing you're expecting in Q4? I know you talked about a below-average increase being implemented late here in November. I believe you rolled off 1.5% from October of last year?

Then maybe looking into 2016, what are your thoughts overall on the pricing power for the brand at this stage? Obviously you have chicken deflation next year but also some minimum wage pressures, as well. Would we expect any additional pricing actions into next year beyond the increased plan for late November?

Yes, this is Larry. Just talking about 2014 -- I mean 2015, you highlighted the 1.5% that has come off. We've got a lot of research, and determined that we think it's best for us to take a moderate price increase end of this November. We will take something around 0.8% in price.

Then what we're going to do is we're going to basically wait and see as next year develops around pricing, see what people react to the minimum wage, continue to do our own analysis. We will wait to see and look at taking other potential pricing next year, which is largely to be determined.

In terms of then managing the pricing versus margins, I'm not ready to get into a full discussion about 2016 margins. One thing I will highlight is obviously we do have a minimum-wage impact. The fortunate thing is on the commodity side, as we highlighted, we'll have 3% to 4% deflation, which will actually offset the minimum-wage impact on our business.

Then we're really assessing a balance of the P&L and some of the other initiatives we want to take. We'll get deeper into margins during our full-year 2015 call, which we'll have -- probably scheduled to March.

Great, thank you.

Thank you. John Glass, Morgan Stanley.

Thanks very much. First going back to the comp again. In the fourth quarter, your guidance is assuming a further deceleration versus the third quarter. Can you confirm if that's what you're trying to point to? Is that both Company and the franchise side, or is it more one versus the other, please?

John, the fourth quarter comp would basically -- if you back into it, would be flat. Yes, it would be a little bit of deceleration from Q3. It'll be probably a little higher comp on the franchise side versus the Company side in Q4.

Okay. When did you put the five-dollar panels back up? Was that intra-quarter? Maybe color around what happened when you did that? You made it sounds like it's going to take some longer time, but was a reaction in? You talked about reinstating combo pricing. When was that removed, and when do you think you'll put that back in?

John, this is Steve. We put the -- well, we did the five-dollar Pollo Bowl in module 6, and then module 7, which was in August, we brought the five-dollar combos back on the menu. I think your next question was the combo pricing?

When did we take the combo pricing off?

Yes, you said -- when did you remove it?

Yes, we did that in period 2 we took our price increase in February. We took that extra 1% to cover the high chicken costs for last year.

Yes, so part of that increase was to take -- the combos came off when we took that price increase.

Okay. What was the thought process behind that? I thought that value was always an important part of the brand. Did you feel just like the brand didn't need that anymore? Was it more just motivated by pricing and keeping margins?

I think what drove that was really just looking at price points and feeling that the a la carte price points might drive sales more than the combo pricing. Then also, the idea is potential you get more revenue as people bought drinks at the full price versus the half price.

Okay, and just one more. On development, on the Company side it really sounds like it's slippage, and you're still -- you feel very good about the 18 to 20. That would be what -- plus one to three that you missed this year? Is that the way to think about it -- 18 to 20, plus one to three that slipped?

The one to three or 18 to 20 would be additional to the one to three that are slipping.

That's what I'm trying to understand, though, what the full number of unit openings you're going to have next year are? That is the right way to look at it?

Correct.

Okay. In the franchise side, how much of this is slippage versus how much of it is maybe their willingness right now, given there's maybe a little bit more uncertainty around sales? Maybe just can you talk about their commitment to opening the stores at the same rate maybe you thought six months ago?

Yes, John, this is Steve. We're seeing the franchise side we had some slippage; but we're seeing strong interest from our existing franchisees and new franchisees, and we'll have significant increases next year in 2016 development. Houston, Dallas, San Antonio, and Salt Lake are all going well. As you know, we've got franchise partners in both Houston and to help co-develop Dallas with us.

A number of existing franchisees are also developing, specifically Salt Lake. We have two existing franchisees that will open up units next year. About 1/3 of our new units will be in Texas; 2/3 will be in the remainder -- California, Arizona, and Las Vegas.

Thank you very much.

Thank you, John.

Thank you.

(Operator Instructions)

Jake Bartlett, SunTrust

Great, thanks for taking the question. Just to clarify the unit growth. We should expect 13 to 15 this year and then 19 to 23 next year? Is that the right way to think about it, or 13 to 15 include the slippage. If you could just clarify exactly what you expect in both years.

Jake, anything that slips from this year from the original 16 target will be in addition to the 18 to 20 next year. If two units slip, the target would then be 20 to 22.

Got it, but your guidance includes the slippage, so we should think about your actual, what you really expect in 2016 to be the larger number, correct?

Right. I think we made that --

Your 13 to 15 assumes a slippage, so we should assume it for 2016, as well, correct?

Okay -- I want to try to get really clear on this. Right now we said 18 to 20 next year, right? Anything that slips from this year to next year -- so, originally the target was 16. Anything that slips -- so say if we do 14 this year and two slip into next year, that means next year's range would be 20 to 22.

Okay, got it.

(inaudible - multiple speakers) understand it.

Yes, that makes a lot of sense. Then to think about what you've done, it looks like guidance is for potentially negative Company same-store sales in the fourth quarter. On a traffic basis that could be maybe equal to what we saw in the third quarter or worse.

I'm trying to understand. In July you came out with -- you did the chicken bowls again, you changed your promotions, you had this promotional snafu in the first half of the year. You made some changes, but it doesn't seem like we've seen literally any improvement. I'm trying to understand that?

I'm also -- if you could quantify -- there's the value-sensitive consumer that you've lost. Can you quantify whether you've actually seen -- what percentage of your base you think (inaudible - background) whether you've seen actually improvements from the rest of the group? Anything you've measured to see how those two groups of consumers are behaving?

Jake, can you repeat the second part of that question? I'm not sure I quite --

Yes, the second part was you've put this on the value-conscious consumer. Have you done any work -- what percentage of your sales are going towards this kind of more value-conscious consumer? Could you point to -- is it possible that the rest of your consumer base has actually been increasing their sales or their dollars spent?

Yes, this is Larry. We're not releasing that. When we did the research, what we found is that we saw that frequency had declined in our business, especially among what we call our more value-conscious consumers. We asked them, where do you go instead of El Pollo Loco, it was pretty clear where they were going, which was down to the lower end -- call it the Taco Bells, the In and Out Burgers, McDonald's.

It highlights that at least a good portion of our customer base, who is that value-conscious consumer, has a drop-down and are using them more often than they're using us. We did see some also movement away from our higher-end user also to the more fast casual. But I think a larger piece of the loss is really at that -- I'll call price-value-conscious consumer moving down to more QSR.

Okay. The last question, you mentioned that you're bringing back the combo menu boards to the Company-owned stores. It sounds like the franchisees aren't on board with that, or if you can maybe clarify why they're not doing it too? Are they a little more sensitive to the pricing aspect? Are they going -- do you feel it's possible they will take more pricing, or be less oriented towards winning back that value consumer?

Jake, just so you know, the menu board, the combos are actually a system initiative. It is Company and franchise.

Oh, okay.

Everybody will have that. Thanks, that's actually a good question. It helps clarify that.

Okay.

In terms of the other franchisee pricing, it's always hard to predict how franchisees will price. I think the good thing is initially when people are looking at the minimum wage, I know some are highlighting the fact that they thought they were going to have to take a good chunk of pricing. But now that we are communicating that we have the offset on commodities, we're hopeful that they won't take nearly the price increases they originally contemplated. But like I said, they're always hard to protect in terms of what kind of pricing they will take.

This is really the last question. I look at labor per operating week, because it's how I try to measure it. It was under 1% this quarter, even though we do have already some minimum-wage pressure, as well as other pressure we've heard across the industry. How are you managing labor now? The last two quarters -- and maybe it's just the traffic is negative and you're rationalizing your labor a little bit to accommodate that, but if you can explain some of the reasoning for that?

In terms of the drop-down in labor utilization? I think you almost answered the question yourself.

It's just because of the traffic?

Yes, it's the traffic. I would just say the operators are doing a very good job of managing labor.

Okay, great. Thank you very much.

Thank you. Paul Westra, Stifel

Great, thanks. Just a few more follow-ups. Most were already asked. I was trying to, as well, tease out seeing a little deceleration here on the franchisee business. Obviously it seemed like in the second quarter the Company slow-down was a little bit more self-inflicted -- it seemed like, anyway. We are seeing a deceleration on the franchise even more so sequentially to the third, maybe even into the fourth here.

I'm trying to tease out what might be happening in their markets? Is there anything going on -- I know you mentioned the combo menu boards was actually my question. They also -- it was system-wide it was removed and system-wide it's putting back, and maybe that's explaining some of the franchise fall-off? System-wide, yes it was removed, and system-wide it's coming back. The one that is a slight difference is we have the Pollo Bowls, which we call them where we have the five-dollars combos. Some of the franchisees call those now classic combos. About 20% to 25% of the franchisees remain on the five-dollars combos. Others have on their menu boards it's called classic combos, and they're slightly higher.

Yes. I would also add that the one thing in Q4 is that the franchisees are lapping a lot of pricing. When we did our forecast, we built that into our forecast.

Okay, that's helpful. As far as pricing on the Company side, you'll have -- you're out about 1.8% on a year-over-year basis now, and 1% more will fall off in February. You alluded to maybe taking more pricing in 2016, would that February window normally be the time you decide to go or no go?

Yes. We're 1.8% as of the end of this month, because we'll take 0.8% at the end of the month. Then in Q1, basically, we'll have that 0.8%. The point falls off in February, so basically you're at 1.1% in the first quarter.

Okay.

Then we'll evaluate additional pricing during the year.

Paul, this is Steve. We think that's a very prudent move by us, so we can see what the reaction and what our competitors are going to do with the minimum wage increase. This will give us time first quarter to really review that, and then make our decisions.

It makes sense, certainly with your comparative deflation on the food side. Just to follow-up on that, you mentioned the deflation in food of 3% to 4%. You mentioned offsets, minimum wage and I know didn't want to get into specifics, but is it safe to say therefore that the minimum wage impact for next year is around that 3% to 4% level?

Yes, probably closer to the 3% level.

Excellent. Lastly, did you give a franchise development actual target number for next year? Did I --?

No, we haven't given that yet.

Okay.

But we are seeing (inaudible - multiple speakers)

Great. Lastly, maybe a modeling question. Seasonality -- looking back, fourth quarter was a very good high-margin quarter in the fourth quarter last year, certainly compared to 2012 or 2013. In short, the fourth-quarter margin at the Company store was less in the 2012 and 2013 year versus the third quarter, and last year it was the reverse.

Seasonality, how -- I know you had the extra week last year, that probably explains it. But seasonally, should we be expecting normal seasonality be down 4Q versus 3Q? That would maybe explain why the store margin number -- to hit your store-level guidance, it looks like a pretty decent fall in the year-over-year store-level margin for 4Q 2015?

Yes Paul, you're right. Basically, last year was a bit of an anomaly. You had a 53rd week. You also had some one-off adjustments that took place in Q4. But the norm is that you will see margins decline in Q4 relative to Q3.

That's what we expected in this year. The big driver of that is just the lower AUVs you generally run during the fourth quarter as a result of your Thanksgiving and Christmas holiday periods. Again, we'd expect to see a fall-off in margins in the fourth quarter, which is reflected in the full-year guidance.

Great, thank you. That's all I had.

Thanks, Paul.

Jake Bartlett, SunTrust

Just a quick clarification. On the check, could you give us the mix in the menu price in the quarter? I think you had 2.5% price, but if you could clarify that would be great?

Q3 was 2.5% price.

Okay. Thank you.

Thank you. That's all the time we have for questions today. I'd like to turn the floor back to Stephen Sather for closing comments.

Thank you, operator, and thank you everybody for your time today. We look forward to our next call.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.