El Pollo Loco Holdings Inc (LOCO) 2020 Q1 法說會逐字稿

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the El Pollo Loco First Quarter 2020 Earnings Conference Call. (Operator Instructions) Please note this conference is being recorded, today 30, April 2020.

On the call today we have Bernard Acoca, President and Chief Executive Officer and Larry Roberts, Chief Financial Officer. And now, I would like to turn the conference over to Larry Roberts.

Thank you, operator, and good afternoon. By now, everyone should have access to our first quarter 2020 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, including statements related to our impact of the COVID-19 pandemic on our business and strategic actions we are taking in response as well as marketing initiatives, cash flow expectations, capital expenditure plans and plans for new store opening. 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 first quarter of 2020 tomorrow and we encourage you to review the 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.

Before I turn the call over to President and Chief Executive Officer, Bernard Acoca, I'd like to note that Bernard and I are, of course, in different locations today. Please bear with us if you experience any slight delays or minor audio quality issues. Bernard, please go ahead.

Thanks, Larry. Good afternoon, everyone, and thank you for joining us. I'd like to start by saying that while we'll briefly touch on our first quarter results, our primary focus on today's call will be the impact that the COVID-19 pandemic has had on our business and the strategic actions we have taken and continue to take in response.

2020 was off to a strong start with our marketing focus driving comparable restaurant sales and transaction growth building upon last year's momentum. System-wide and company-operated comparable restaurant sales were up 3.7% and 4.2% respectively through February. This early sales performance enabled us to deliver pro forma adjusted earnings per share of $0.16 for the quarter.

Prior to the impact of COVID-19, we felt very optimistic about our business and the ability to sustain momentum over the balance of the year. Obviously COVID-19 changed things. Following the slowdown in March, system-wide comparable restaurant sales for the quarter ended down 1.5%. From March 1 through March 25, system comparable restaurant sales were negative 15.5% with the last 2 weeks slightly better than negative, 30%.

As the reality of the COVID-19 pandemic set in, we responded rapidly and in unprecedented ways. In keeping with state and local regulations, we began operating on a drive-through where available, takeout, mobile pickup and delivery basis only.

Historically we've had a sizable off-premise mix of approximately 78% including roughly 45% through our drive-through windows, 30% takeout and 3% delivery and thus we were relatively well positioned to operate in this new environment.

We're pleased with the trajectory of our recent sales trend. While second quarter-to-date system comparable restaurant sales are down 23%, we have seen sequential improvement in each of the last 6 weeks with system same-store sales over the last week expected to come in at around negative 10%.

I've always felt that it is during difficult times that you truly understand the capability and soul of an organization. I've worked in some great companies with exceptional people but I can honestly say that I've never been more proud of a team than I am of my El Pollo Loco family during these last 2 months. I'm blessed to be in the trenches with this phenomenal group of people who are working tirelessly to protect their fellow employees, franchisees and customers while providing a much needed and valued service to our communities.

I'm especially grateful to our restaurant teams who are on the frontlines everyday working to provide an essential service to our customers. Food is a necessity, of course, but made from scratch healthier food like the delicious meals we offer can be a source of comfort and reassurance during these stressful times and provide a small bit of normalcy for people whose lives have changed so dramatically in such a short period of time. We take this responsibility seriously.

I can't thank our restaurant teams enough for their dedication and commitment to one another as well as their customers. Our top priority will always be the wellbeing of our team members, franchisees and customers and we've taken critical steps to ensure their health and safety.

At the restaurant level, we have provided and mandated the use of gloves and masks to all company and franchisee employees and have instituted enhanced cleaning procedures at all restaurants which are now occurring with greater frequency. In addition, we have installed plexiglas shields at cashier stations in all company restaurants and have made them available to franchisees as well.

In our drive-thrus we implemented contactless payment procedures to keep our transactions as hands free as possible. Finally, we're purchasing infrared thermometers for the system and will begin requiring that all employees undergo a temperature check before being allowed to work a shift. These and other measures are designed to ensure a safe work environment for our employees and protect our customers.

I've spoken frequently of our people first culture and our heart-centered leadership approach; both of which have become even more crucial in the current climate. We remain committed to helping our people take care of themselves and their loved ones. To this end, we've provided 2 weeks of paid time off to our restaurant employees over the age of 65; extended sick leave benefits to employees impacted by COVID-19 and we'll be offering low-cost tele-doctor services to our restaurant team members who might otherwise have difficulty accessing affordable health care.

For our franchisee partners, we've deferred 50% of April royalties as well as their 2020 remodel and new build requirements. In addition, we've established a support team to help franchisees access benefits provided by the CARES Act legislation with free legal consultation for our smaller franchisees who don't readily have access to these services. Our employees and franchisee partners are family and the best way we can ensure that we all get through this is by taking care of each other.

In response to the COVID-19 crisis, we quickly altered our approach to the business to ensure that we not only weather the storm but are well positioned to take advantage of the future recovery. On the marketing side, we've shifted away from our standard 8-week LTO calendar to a program that focuses on 4 key themes: delivery, family meals, value and digital ecommerce.

In early April we launched a one-of-a-kind free delivery, however long is necessary campaign with Postmate in order to make it as easy as possible for our customers to access our food as they shelter in place. While other concepts offer free delivery for limited windows, we are the first to commit to offering it over an extended period of time in order to assist our customers as much as possible while they're confined to their homes.

At least partially as a result of this promotion and our partnerships with Grubhub, DoorDash and Uber Eats, we've achieved record delivery sales with delivery as a mix of our total sales tripling.

The second theme we're highlighting is our complete family meals. Families are spending more time than ever at home and what they're looking for is healthier and affordable meals that the entire family will love. In addition to our long-standing $20.00 ten piece Familia Dinner promotion, we recently introduced a special weekend offer exclusively for our loyalty members; 12 pieces of legs and thighs along with 3 large sides, tortillas or chips and salsa at the same $20.00 price point.

Not only does this meal provide incredible value, but this offering to our local rewards members marks a significant step in the evolution of our loyalty program and our targeted marketing capability. What is especially exciting is that the sales from this loyalty offer look to be highly incremental. Overall, these family meal offerings have resonated very well with our customers resulting in record-high family chicken sales mix during the last several weeks.

The third marketing theme we're highlighting is one of value. The importance of a strong value offering goes without saying in this environment, especially given the growing economic pressure our customers are facing. To [best the system], we will soon be promoting our extremely popular $5.00 fire-grilled combos which have been a successful part of our sales mix since they were launched last September. We believe that customers shouldn't have to trade quality for price and expect our $5.00 fire-grilled combos to resonate strongly with value-seeking customers looking to maximize their budget.

The final marketing theme is the growing importance of ecommerce and the digitization of our business. If you can recall last July we re-launched our ecommerce Website and mobile app and have continued to experience significant growth which has only been accelerated by the crisis. In the course of 5 weeks, we've managed to nearly triple our ecommerce business and are setting new record levels of participation in our loyalty program.

Lastly, with over 20% of our media budget now focused on social media and digital, we believe we're well positioned to capitalize on where our customers are spending the majority of their time these days. We believe these 4 marketing focus areas have been key to our efforts to first stabilize and then begin improving our sales over the last 5 to 6 weeks.

As important as these marketing initiatives have been to our sales results, just as critical has been the progress we've made on the operations front. In addition to protecting our employees, we've placed a great deal of focus on our drive-through operations which now make up over 70% of our sales mix. Changes in labor deployment and other efficiencies have enabled us to enhance our drive-through speed and accuracy.

This will continue to be a major focus as we believe that better drive-through performance can be a significant sales driver and competitive advantage for us in the future. Now, I'd like to turn the call over to Larry for a brief discussion of our current financial operations.

Thanks, Bernard. In terms of our financial response to the COVID-19 pandemic, our focus has been on augmenting our liquidity. As previously announced, a cautionary measure we fully drew down our $150 million revolving credit facility adding $34.5 million of cash to our balance sheet.

In addition, we have temporarily suspended all but essential capital expenditures, re-evaluated essential support [SG&A] and fine-tuned our restaurant labor model based on dining room closures and lower sales volume.

Lastly, we were deferring company payroll taxes as permitted under the CARES Act and negotiating lease deferrals with many of our landlords. Based on these and other actions taken, we feel very good about our financial flexibility and are pleased that at current sales levels we are cash flow positive before lease deferrals.

In keeping with suspending all but essential capital expenditures, we have temporarily halted company operated new unit development and remodel activity. In addition, as Bernard mentioned, we've deferred all franchise 2020 new unit and remodel obligations until 2021. As a result, in 2020, we expect to build one new company-owned restaurant which is already in progress and 2 franchise restaurants, one of which was completed in the first quarter and the other is in progress.

And finally, as previously announced, given the uncertainty surrounding the duration of the impact of COVID-19, we have withdrawn our previously issued guidance for Fiscal 2020. We hope to have more visibility and be able to revisit the topic of guidance in the near future. Now, I'd like to turn the call back over to Bernard.

Thank you, Larry. Before I open up the call for some Q&A, I'd like to reiterate how incredibly proud I am of the extraordinary efforts of our employees and franchisees. They've adapted unbelievably quickly to this new environment and have rallied with their El Pollo Loco family to continue providing a valued service to our loyal customers. We're grateful to be able to do our part to support our communities during these trying times.

I feel very good about our position today, our healthier and affordable menu offerings and every-strengthening access modes are resonating with customers and we are working hard to capitalize on new opportunities as the economy recovers. For these reasons, I look forward to coming out of this crisis even stronger on the other side. This concludes our prepared remarks, we'd like to thank you again for joining us on the call today and we're now happy to answer any questions that you may have.

(Operator Instructions) Your first question comes from Jake Bartlett.

My first question is on the health of the franchise system. And maybe as part of you answering that, I'd be curious to hear what kind of leverage levels you think the average might be across the system. But also what breakeven in terms of same store sales at the restaurant level -- what that number is?

I know you mentioned being in a positive free-cash flow position yourself, but for the franchisees and after royalties, etc., what is the level which they're starting to kind of breakeven?

Yes, Jake, so I'll take that question. So, in terms -- I've done, obviously, the breakeven work on our company restaurants which I think can translate to franchise. Obviously franchisees pay royalties but at the same time they're probably slightly higher on pricing.

So, on a company basis, I estimate at the restaurant level we're cash flow positive. Somewhere around the negative 30%, 35% level is where we're cash flow positive at the restaurant level. So, again, you can probably get a sense that the franchisees are probably roughly in that same ballpark.

In terms of the financial condition of the franchisees, there are a couple of smaller ones that talked about a little bit challenged, especially those that have in-line restaurants, they'll have drive-thrus. But overall, I mean quite frankly, the system seems to be in good health and certainly the improved performance over the last 5 or 6 weeks, I think, has at least put our minds at ease a bit and certain franchisee's minds at ease that this is something that they will be able to get through and we'll all get through it.

Got it, got it. And as a follow-up to kind of the breakeven question, you mentioned free cash flow positive with that at the company level. Does that include the deferral of royalty and rent from the franchisees in the next couple of months?

It includes a deferral of royalty. It does not include any lease deferrals or abatements that we may negotiate.

Okay.

So we -- just to be clear, so we are -- we are currently at current levels, cash flow positive before any lease deferrals.

Got it. And then lastly, as we look to Texas having opened up dining -- dine-in at 25% capacity, what is your plan or your franchisees' plans for reopening in Texas? And I'm curious as to whether 25% capacity is enough given the store configurations to make it worth opening or how are you looking at that?

So, I'll take that one. Jake, I think on that one we're not necessarily going to always follow the timing of whenever a state or a city or municipality chooses to open up. And the thing that we always want to do is make sure that our employees and our customers are -- their safety is always the driving decision behind whether we choose to open or not.

And, quite frankly, given the amount of business we've been driving through our drive-thrus, through delivery, through mobile pickup, through takeout, we're not as hard-pressed to necessarily follow Texas' schedule. So we're going to take more of a gradual approach, look at it state-by-state, city-by-city and not necessarily be automatically tethered to whatever a state decides.

And, quite frankly, at a 25% capacity opening, certainly given what we're doing in other channels, we don't expect it to negatively affect us in any kind of meaningful way, anyway. So that's kind of the general approach we're taking going forward.

Your next question comes from David Tarantino from Baird.

Just wanted to ask about a couple of the sales drivers you mentioned, Bernard, I think first the family meal focus and I think you made the comment that those transactions, you think, are highly incremental. So, I was wondering if you could elaborate on that and what type of either new customer or increased frequency you might be seeing behind that program and what it means for you going forward?

Sure, so David, when we run that offer what we typically see is anywhere between maybe a 3% to 5% incremental same-store sales lift during the days during which we run it. That's one.

Two, I -- the thing that gets us really excited and why we're so optimistic about the future is because, if you can recall, in the middle of last year we started laying down the foundation for the digitization of our business. We re-launched our Website, we re-launched our mobile app, we shifted our media strategy which used to be entirely dependent on television and print to digital and social media which now comprises 20 -- over 20% of what we spend on media.

And the reason why I'm bringing all that up is because what we're starting to see are significant synergies between our family chicken business and the access modes in which we're making investment. So, we're starting to see, for instance, on our ecommerce channel, 50% of what we are selling on the ecommerce channel is our family chicken meals; 50%, nearly 50% of what is going out the door with delivery are family chicken.

And you know as well as I, having covered our business for a while that, one, that's our core product, so our biggest differentiator but, two, quite frankly when we sell more of that product it's a lot better for our business for a bunch of reasons. We turn more product, less waste, fresher, plumper product goes out the door, etc. So, we're highly encouraged by what we're seeing in terms of the strategies that we put in place there.

That's great and then I guess maybe a bigger picture question that perhaps ties into the first question is, I think you mentioned sort of getting beyond this crisis in a better competitive position. But just wondering what your thoughts are on what the brand and business model might look like on the other side of this crisis that's different than where it was heading into the crisis? And how you think that will be a better position than where you were previously?

Well, I think that what this crisis has done is there's, quite honestly, any silver lining in any of this is that it has quite frankly accelerated the channels and the work that we were doing to continue to make progress in those channels at a rate that, quite honestly, surprises me and in a good way.

When I see our delivery business triple, when I see our ecommerce business triple, when I see our loyalty program start to reach double digit participation levels, what it really points to me is, wow, all of these foundational elements that we have been working on for the past 2 years, I feel very fortunate that -- maybe some of it's Monday morning quarterbacking a little bit.

But the fact that we have this already well underway is indicative that, one, they were the right things to focus on and, two, in the face of this crisis, they're proving to be instrumental to our continued progress. So, to put a fine point on your question, I do see that the continued investment and acceleration of our digital business, via ecommerce, via delivery, via our loyalty program we'll continue to be focused on and invested in.

I continue to see a renewed and actually -- a renewed focus on the drive-through where we have been really maniacally focused on window time and increasing speed of service and accuracy and we've been doing that through labor deployment and other methods back of house to drive efficiencies there. So I think you'll continue to see that become a major area of focus.

And quite honestly, the third thing that we're asking ourselves is really how do we need to adapt and adjust in this new world? We hope that dine-in will come back strong, but no one has a crystal ball to know how quickly that will occur or not occur. So therefore, we are starting to really look at new channels that we haven't necessarily played in in the past.

Curbside delivery is something that we're testing, as well as continuing a focus around delivery expansion. So there are things like easy catering that we're looking to do in the next couple of months which I think will be the last complement to our full suite of third-party aggregators, etc. So, those are some of the ways that we're looking at it. Larry, I don't know if you have anything else to add?

No, the only thing I would add is -- the other thing we're starting to think about is assuming things continue as they are. We expect to come out of this in good financial condition and really start thinking about what the future has in terms of new unit development and how we execute against that.

Because we do think one of the things that will come out of this is there will be development opportunities that may not have existed previously. And certainly probably supply of restaurants will be less than they were in the past. There could be real estate opportunities and so start thinking about the expansion, once we come out of this, along with all of the things that Bernard talked about on the brand and marketing side.

From a development standpoint how quickly do we want to move? We're going to be in a good financial position. How quickly and how best to take advantage of potentially a situation that will be there as we come out of this. So, that's the other piece that we're thinking about.

Your next question comes from Andy Barish from Jefferies.

Hey guys, good to hear from you. Wondering, just following up on the Texas versus Southern California. Are you seeing demonstrable differences in sort of the sales progression in that market where obviously you don't have the brand awareness and penetration like you do in Southern California?

Well, I'll talk to Houston more specifically because I think the thing that we're seeing there, quite honestly, that it's hard to parse through is the impact that the oil situation has had on that DNA, that city, and how to sort through how much that is affecting the business versus everything else on top of it.

So, yes, to answer your question there, in Houston we have seen performance that is trailing what we are seeing elsewhere. Dallas hasn't been as affected as Houston but has been trailing as well. So, but Houston's where we're keeping a little bit more of a watchful eye right now just given that the oil economy has been particularly harder hit there. Larry, do you have anything else you would add?

No, I think that's right. The only thing I would add is, I think what we saw in Texas was a larger drop-off relative to the base business and then it has been coming back also just as we talked about in the last 5 or 6 weeks, sequential improvement. We've seen it also in Texas but the current levels are still a little bit below or below our base business.

Understood, and then on the new sort of labor deployment that's been going on, you guys have started this last year with the new chicken cooking and kind of a focus on some different things with your labor. Are there some learning's and kind of some permanent changes maybe that come out of this as the business continues to evolve?

Yes, absolutely. So, one of the things that we've been hard at work on is our deployment maps in our restaurant where we're not only just focusing on what labor employment looks like in the drive-through but what deployment looks like in every role in the restaurant.

I mean this is starting to -- I describe it as starting to look like a beautiful well-coordinated ballet where, I have to admit, 2 years ago, sometimes it looked a little bit more like organized chaos. And so what we are doing is we've got not only deployment maps but very clear role definitions around each restaurant team member's responsibility and how those are supposed to be executed with accompanying training programs to ensure that that level of coordination occurs.

So, I just think we've been taking it up and ratcheting it up another level. And certainly the crisis has, quite frankly, not just in this area but across the board, I think the thing that I've been just so proud about is we have probably done, I would say, a good 8 months to 12 months work in what feels like 6 or 7 weeks' time. And a lot of things that was work already underway, we've just managed to really accelerate and focus on as part of just kind of our vital [few] focus. So that's the best way I could describe it to you, Andy.

Got you. And just one more on -- on the free Postmates deal, how is that being paid for, if you will? I know you guys had worked on sort of some curated menus and higher prices for the third-party aggregators. How is that progressing or specifically on that offer?

So, we've had our bifurcated menu strategy in place for a while now where naturally if you want the full menu, you go to ElPolloLoco.com and you pay essentially what you would pay in our restaurant. If you go to anyone of our third-party aggregators, Postmates included, it's a more curated menu, heavier concentration on family chicken meals and you pay anywhere between, let's call it, a 15% to 20% premium.

That hasn't changed. We believe that's still serving us in good stead. In regards to Postmates, they have been a terrific partner in working with us to provide what, quite honestly, we feel is a unique one-of-a-kind promotion that we have put a lot of television effort behind which is free delivery from now to however long is necessary -- for however long is necessary.

And it was intended to really be a very consumer centric approach recognizing full well that people are confined to their homes. And this is just a small humble gesture to be able to help our customers during a very difficult time where we have -- what inspired this was that we tended to see virtually all brands offer free delivery for maybe 2 weeks to 4 weeks at a time.

From a customer standpoint it's really tough to track who's offering what. As a result, switching behavior tends to occur, you tend to go wherever the free delivery thing is. And so what we said was, let's try to take that off the table. And Postmates took a very enlightened approach in working with us. And so we are willing to offer this for the foreseeable future until we kind of work ourselves through the worst of this crisis. And so we plan to continue offering it at least through the early part of the summer.

Your next question comes from Sharon Zackfia from William Blair.

It sounds like you've got a pretty impressive ramp in the comps as you've gone throughout April and you gave some good color in the commentary. But is there any part of your business that's ramped more quickly as you've gone throughout April if you look week to week? Whether it's been a part of the menu mix or dayparts or a channel, I think that would be helpful to know.

And then kind of building on Andy's question on labor efficiency, I mean, how many hours have you been able to kind of surgically take out of a company-owned restaurant? How do we think about any kind of permanent labor efficiencies that you might have on the other side of this?

I'll let Larry answer the labor portion. I'll take the front portion, Sharon, and then we'll tag team that way. So, in regards to the first part of your question where we're seeing growth. In dayparts, specifically, we are seeing a slight shift of our business where we've historically been stronger at lunch in terms of where the growth over the last few years has primarily come or more, I should say, consistently come.

We started to see more of the growth in the shift occur at the dinner daypart. So, we're encouraged by that. Naturally that coincides with the exponential growth, the record level growth we've seen in our family chicken meals. I talked about the tripling of our delivery business. I talked about the tripling of our ecommerce business.

But quite frankly, what we're starting to see now, which is really remarkable for a brand like ours, and forgive me, if you're a Wendy's or a McDonald's or a Taco Bell, you're kind of historically use to doing about 70% of your business in the drive-through, right? We were not. We were doing about 45% of our business through the drive-through.

So, to see us go from 45% to well over 70% and be where everyone else historically has been and to do it well, I think also opened up our eyes to, wow, we knew this could be a growth channel for us but how much more can we grow it? How does this influence the way we look at the drive-through going forward? So, I think that's another thing that you should take note of as well.

And then naturally, our loyalty program has seen some really nice participation levels. We set a goal for ourselves before this crisis hit. We set a 2020 goal for ourselves to get to 13% of sales driven from our loyalty program as a percentage of our total sales mix. We're starting to see in any given week anywhere between 10% to 12% participation in our loyalty program as the total percent of our sales mix. So, very quickly what we thought would be a 1-year goal looks like we're going to be able to achieve probably a lot sooner.

So, for all these reasons, quite honestly I know a lot of people are looking at the situation as if it's a bit doom and gloom. I'm not -- I know my team's not, because all the things that we were working on are starting to bear fruit. And the things that are within our control are starting to bear fruit. So, I'm actually, as I mentioned earlier, encouraged about where this will ultimately lead for El Pollo Loco.

Yes, and I'll just follow-up on the labor model. And Sharon, the 2 areas where we've really been able to reduce labor hours are, one is just around opening and closing times. And I think probably a lot of other companies have done that also in terms of shortening the time period and being able to reduce hours that way. Because you're basically closing earlier at dayparts, times of the day, when you really weren't generating the sales to cover the labor.

But the other big area where we reduced labor is looking at our minimum hours being -- and once a restaurant dropped below a certain level, we have a certain minimum number of hours that are required to run a restaurant. And with the ops team we went back and really reviewed those and that's an area where we were able to cut back on hours, especially in non-drive-through restaurants.

And so as we look in the future, it's hard to predict because -- and I'm not sure what the dining room requirements will be based on the laws and regulations about what it's going to take to run a -- reopen the dining rooms. So, we'll see how that plays out. But I'd say I'm a little bit optimistic that given the cut down in the minimum hours, is -- you could be starting at a low base on some of these restaurants and maybe you can actually reduce labor hours going forward on that basis.

So, we've not done anything in terms of our model that's a transaction-driven labor hour model so that has still stayed intact. Where we've really looked at is just the minimum hours and so that base from which you're starting from. But, again, as I say, going forward, we'll see how it plays out when you start looking at some of the cleaning requirements and other things required to open up dining rooms in our business.

(Operator Instructions) Your next question comes from Mathew DiFrisco from Guggenheim.

Glad to hear you guys are doing well. I just wanted -- I saw in the press release I think you detailed currently 192 of your 195 company and 279 of the 283 franchise stores are open. Has that changed at all and how is that being accounted for within the comp? Were you -- earlier on were there more stores closed, were there more stores open? And is that being factored into the comp or are you doing the comp excluding store closures?

Well that -- the comp is done excluding store closures. So we adjust everyday based on a restaurant that is closed. I mean, we've -- during this time period, we've had a number of restaurants that needed to be closed and then were quickly reopened. At the time, if you look at the company numbers, we have 3 restaurants that, given the sales volumes, we just decide let's not rush to reopen these; we'll leave them closed for a little while.

And a franchise is basically the same thing. If franchisees had a number of restaurants, I think it's 4 in total, a couple of those were college campuses so there's really no traffic there. One may have been near a mall. So, again, they've been left closed on a temporary basis, the plan is to reopen them once the traffic comes back to those areas. But that's the way those have been handled. And, like I said, we'll -- both us and the franchisees will look to reopen those restaurants as the traffic comes back.

Okay, but then again, so the comp improvement is purely sales coming back to a similar store base? It's not as though you're adding or have reopened a significant amount of stores over the last couple of weeks?

No, no. And, again, any time we close a restaurant, it gets taken out of the comp base. So, we've had to close a restaurant temporarily during this time period, it comes out of the comp base and then when it reopens it goes back in the comp base.

Excellent. And then just some other brands have mentioned also that not only is there an opportunity perhaps for rents to be negotiated lower, but also some of those municipalities that might have been resisting a drive-through or a pick up or designated parking, etc., have been a little bit more open to those ideas now.

You're doing about $1 million, it looks like now, through the drive-thru if the math seems -- if I did the math right. How many stores do you have now in the overall base that are drive-thrus and is there a potential to convert non-drive-thrus into drive-thrus?

Yes, so, off the top of my head I believe the number in the system, the entire system of non-drive-thrus, I think it's somewhere around -- in the mid-50s. I think it's around 55 or so, give or take, in that range. I'm going to guess that most of those would not be convertible to a drive-thru just because they're in-line and there's really going to be no drive-through option there.

So, I think that's right. So again, that opportunity is probably not there. Obviously the opportunities would be around do you relocate some of those, or going forward can you find drive-thrus where previously municipalities were saying, no, we don't allow drive-thrus, maybe some of those open up and you can find some [pads] there. But as of now we're about mid-50s in terms of non-drive-thrus across the system and I don't think many of those would be convertible into drive-thrus.

Okay. And then last question, Bernard, can you talk a little bit about the loyalty customer. What are you seeing from that as far as that 10% to 12% that are now doing that? Is that -- presumably that's a larger check, probably a person that comes a little bit more frequently. Are there certain characteristics more about that customer that you've learned and that might even be of assistance in the recovery here as the primary core consumer that you can get to come back more frequently?

Yes, so what we are seeing with that customer is that, one, it's just very encouraging to see how highly engaged that loyalty database is so that when we do send something out that resonates with them, the reaction that we've been getting has been very, very encouraging to see.

I would say -- I'd say the following, what we're starting to see I believe is -- our Hispanic consumer, our bread and butter customer, the customer that has been loyal to us from day one continues to provide us with our greatest source of strength.

But I think what we are -- we believe we're starting to see is that we have cast a wider net certainly with the expansion of our loyalty channels and to our loyalty program that we are starting to broaden our base a bit more, get a younger skewing, more millennial, younger more millennial customer, more general market customers coming into the franchise.

And what we're seeing through the loyalty program, again, is record setting levels of check growth driven by our family chicken meals which is where we've been putting the focus. So we're seeing this in delivery where the check level is $25.00-plus, $24.00. We're seeing this via our loyalty program, etc.

So, it's encouraging to see the segmentation of our database. It was something that had been well underway before this crisis started. We believe -- we've adjusted the way we're targeting folks within that given segmentation, given that the crisis has forced us to do so. But, a lot more to come with the loyalty program but clearly this additional 3% to 5% sales comp lift that is coming directly as a result of offers driven via that program, is super encouraging.

Excellent. And then just a follow-up question -- I'm sorry, it just came to head. If you're doing a 10% down, 10% comp now and 45% or 50% of your base has drive-thrus that are seeing that type of growth, presumably, there's a good portion of your base then that's probably positively comping right now?

Yes, I have to -- I haven't looked at store-by-store in a while. I'm not sure. I'm not sure there's too much of our base that's actually positive comps right now.

Okay.

I know we see it sporadically but it's hard to say, yes. Yes.

Your next question is from Todd Brooks from C.L. King & Associates.

First of all, just amazed at the shape of kind of where you bottomed same store sales-wise and what the recovery curve has looked like? With the speed of the recovery to the down 10% same store sales, could you talk about your team at the restaurant level? Have you actually been able to retain most of your teams intact or how did that -- how did that work out with the speed of the recovery as far as keeping the people that you already had?

That's a great question and it's one that's a source of pride for us because, as we got in our Q1 turnover numbers, what we have been able to share with all of you over a protracted period of time is that our turnover numbers continue to go down virtually across all positions.

So, year-over-year in Quarter 1, our turnover is down. We haven't had to furlough or let go of a single employee throughout the company during this situation. If anything, maybe at the restaurant level because we are operating under a slightly reduced hours format, each crew member, each restaurant team member is maybe being shorted about 2 hours per week that they would typically work.

But, generally speaking, we have been in a very fortunate position in that our turnover levels have been extremely low and year-over-year have actually reduced, once again, because it seems to have been -- it's been an ongoing trend for the vast majority of 2019 going into 2020 and so we're very, very proud of that point.

That's a great result. Second question would be, I know you at one point -- well, prior to COVID we were hoping to have a few corporate locations remodeled into the new redesigned prototype. Thoughts on -- is that still happening this year? Are you planning to delay it into Fiscal 2021 as you delayed franchisees kind of remodel and new unit openings as well? Just thoughts on timing of maybe seeing the first new prototype location?

Yes, I'll take that one.

Go ahead.

So, the plan right now is, we have suspended cap -- non-critical capital spending for now. Having said that, I would expect that as we watch things evolve over the next month or 2, and if things continued on the current trajectory, then I would look to us to reopen it and look to do some remodels back-half of the year to the new asset design.

Now, at the same time, we are currently working on -- we're looking at the new asset design and thinking about, well, given the COVID-19 and how that may change consumer behavior going forward, are there some tweaks that we need to make to that asset design before we actually go out and do the remodel. So that work is going on now and, like I said, I would be hopeful that if things continue that we would look to do 2 or 3 remodels back half of the year using that new asset design.

That concludes the question-and-answer session. I would now like to turn the conference back over to, Mr. Acoca, for any closing remarks.

Thank you very much, operator. So, I just wanted to thank everyone for joining us today. Hope you guys continue to remain safe and healthy with your families and we look forward to not only speaking with you but hopefully seeing most of you really soon. So be well, take care.