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spk01: Thank you for standing by. This is the conference operator. Welcome to the Fiesta Restaurant Group's first quarter 2021 earnings call. As a reminder, all participants are in a listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star then 1 on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and 0. I would now like to turn the conference over to Raphael Groves, Managing Director at ICR. Please go ahead.
spk03: Thank you. Fiesta Restaurant Group's first quarter 2021 earnings release was issued after the market closed today. If you have 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 versus expressed or forecasted in such forward-looking statements. and a 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 to 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 with me today are President and Chief Executive Officer Rich Stockinger and Chief Financial Officer Dirk Montgomery. And now I'd like to turn the call over to Rich. Thank you, Rafe.
spk07: I'd first like to thank all of the investors and other participants on the call today for their continued support. I'll be covering two topics today, a business update, including an overview of first quarter results and an update on the status of our 2021 strategic priorities. Patty Lopez-Callea, our Chief Experience Officer, will provide a digital platform initiatives update, followed by Dirk wrapping up with a financial update. Overall, we are pleased with our first quarter sales and profit after considering the impact of winter storm URI on February sales, which negatively affected the entire state of Texas for multiple weeks. Both of our brands showed continued positive momentum in sales trends during the first quarter of 2021 compared to the fourth quarter of 2020, which continued in April. Pollo Tropical first quarter 2021 comp sales improved to positive 4.3% compared to 2020 and were 3.3% down versus the first quarter of 2019. Taco Cabana first quarter comp sales improved to minus 4.3% compared to the first quarter of 2020. The negative impact of Winter Storm Yuri on Taco Cabana first quarter comp sales was estimated at a negative 480 basis points. So far in May, both brands are showing encouraging trends early in the month versus 2019. In addition, Taco Cabana had the second highest Cinco de Mayo holiday sales per unit in 10 years, with sales growth above both the 2020 and 2019 Cinco de Mayo holiday results. We continue to maintain strong margins at both brands. First quarter 2021 income from operations was $1.3 million compared to a loss from operations in the first quarter of 2020. Consolidated adjusted EBITDA, a non-GAAP measure, was $12.9 million or 8.9% of total revenues. which includes the estimated negative impact of winter storm URI of approximately $1.9 million. We grew our first quarter consolidated adjusted EBITDA 63% compared to the first quarter of 2020. We estimate that winter storm URI negatively impacted consolidated adjusted EBITDA as a percentage of total revenues by approximately 110 basis points. Both brands grew restaurant-level adjusted EBITDA, a non-GAAP measure, as a percentage of sales to above first quarter 2020 levels. Foyotropical grew restaurant-level margin from 18% in the first quarter of 2020 to 21.4% in the first quarter of 2021. Taco Cabana grew restaurant-level margin from 8.8% in first quarter 2020 to 11.3% in the first quarter of 2021, which includes the estimated negative impact of winter storm URI of approximately 270 basis points. We also continued our positive growth in cash flow during the first quarter, increasing our cash balance and further reducing the level of net debt compared to the fourth quarter levels. Dirk will provide additional details regarding first quarter results and our outlook for the remainder of 2021 as part of his prepared comments. Our operations teams continue to do a great job adjusting to evolving market conditions. The winter storm was a challenge for our Taco Cabana team, with 125 units being impacted at varying levels. All taco units were open and running by early March. And we are in the process of now filing insurance claims and replacing landscaping that was damaged. As you all may know, our industry has been facing staffing availability issues since late March. And we have put in place the following plans to ensure that we have adequate staffing in our restaurants. Beginning in May, we are paying an additional $1 per hour to our hourly operations team members at both brands. We also raised the minimum hourly rate at POYO to $10 per hour, accelerating the change required on the state of Florida minimum wage legislation. We are also evaluating further unit-specific actions needed based on competitive wage rate benchmarking by trade area. In addition to maximize retention, a special bonus incentive for the second quarter was created for all operations management team members that is above our normal bonus target. From a recruiting perspective, we have improved our processes to be more streamlined, to reduce hiring cycle times, and also have added short-term third-party resources to identify and qualify more candidates. At both brands, we are implementing operations simplification plans to reduce complexity, including menu and promotion simplification and guidelines for maintaining service in units that have staffing shortages. The labor shortage has resulted in reduced hours at select locations, although the overall reduction in unit opening hours has not yet reached the material level. We will continue to evaluate additional retention strategies and hourly wage compensation levels going forward to ensure we can adequately staff our restaurants. Nearly all of our dining rooms were opened by the end of March, with Taco Cabana dining room openings slowed by the winter storm repairs. We believe that we can offset the cost impact of increased wage rates through selective price increases while still maintaining attractive value perceptions with our customers. This is based on internal research and research conducted by our outside pricing analytics consultants. Over the last three years, we believe that our brands have taken lower price increases than our peer group. In April, we increased prices by 3% at Pollo Tropicale, and 2% at Taco Cabana and plan to take additional pricing action as needed in late summer in response to cost pressures. Now I'd like to provide an update on our strategic priorities. As I mentioned in the fourth quarter, our strategic priorities are as follows. One, concentrate on accelerating growth in non-dine-in channels and improving the guest experience across all channels to better enable our customers to enjoy our brands wherever and whenever they choose. Two, enhance our digital platform and make improvements in ease of use and speed of service for off-premise including enhanced digital drive-through experience, curbside, geofencing technology enhancements to improve speed and customization of the consumer experience, and continued improvements in our loyalty platform that drive incremental sales from loyalty members. Three, continue refining the Pollo Tropical brand essence in preparation for expansion in existing and new markets. We made good progress growing non-dining channels during the first quarter. At Pollo Tropical, we generated drive-through growth of 4% and delivery and online channel growth of at least 21% in those channels compared to the fourth quarter of 2020. Pollo Tropical first quarter 2021 delivery sales penetration exceeded 10% of total sales, the highest penetration to date. Oil generated strong delivery sales through promotions tied to high delivery volumes occasions during the quarter, including the Super Bowl and March Madness. First quarter Taco Gabbana sales trends by channel are difficult to compare to prior quarters due to the impact of the winter storm. Despite the winter storm impact, first quarter 2021 delivery sales channels more than doubled compared to 2020. and Taco Cabana generated first quarter 2021 online and catering growth above first quarter 2020 and 2019 levels. We are also in the final stages of implementing liquor delivery sales with a leading regional delivery service provider, Favor, which we expect to launch in the second quarter and believe is an opportunity for delivery channel sales growth. Regarding our digital platform, over the first quarter, we continue to make investments to enhance our digital platform and improve the customer experience in those efforts. We'll continue throughout the remainder of 21. Patty will provide additional details on our digital platform plans and progress in a moment. Finally, we made good progress on our third strategic priority, which is to continue refining the Pollo Tropical brand essence in preparation for for expansion in existing and new markets for both company-owned and franchise locations. As I mentioned on the call last quarter, we completed qualitative research on brand positioning and are in the final stages of quantitative research completion. The results of this research will allow us to develop an enhanced brand positioning and will provide a clear brand strategy for both existing and new markets. The development of new restaurants will incorporate what we have learned during COVID-19 pandemic and our market research. As we identify key restaurant design and brand positioning changes, we intend to test them selectively in 2021 remodels to obtain consumer feedback and to inform future new unit designs. We are planning four to eight remodels in 2021 that will incorporate new design and operating model enhancements. We incorporated preliminary design features into a remodel in our first 2021 remodel at the Westin, Florida location, which opened just recently. The design enhancements include updated preliminary interior and exterior design features that reflect the preliminary research results on brand image, the fewer dining room seats, a second make line to improve speed of service, and enhanced mobile pickup capabilities. Although the Westin unit just recently reopened, we are already receiving very positive feedback from our customers. In summary, we will continue to concentrate on non-dine-in trade channels. to match the evolving changes in consumer behavior. And we'll focus on creating a great guest experience across all channels. Our investments in our digital platform will continue throughout 2021. We are optimistic about the remainder of 2021 and believe that our growth initiatives will continue to build momentum and accelerate sales. Now, Patty Lopez-Kale will provide a bit more color on our digital platform strategies in progress. Patty?
spk02: Thanks, Rich. Our goal in the digital transformation of our brand is to provide our guests a frictionless omnichannel experience. As Rich mentioned in his comments, our digital strategy focuses on experience customization that we believe will drive growth across all channels. We continue to improve the Pollo Tropical drive-through infrastructure during the first quarter, completing Wi-Fi signal extension work that will allow our drive-through mobile ordering devices to work further back in the drive-through car lanes during peak times, allowing for greater throughput. We are also in the final stages of upgrading all units to faster drive-through payment processing devices that reduce estimated processing speed from 25 seconds to less than five seconds per transaction. We intend to roll out similar improvements going forward at Taco Cabana. We have made progress on our efforts during the first quarter to add geofencing technology capability for curbside pickup to improve speed of service and ease of use. We started a test of the geofencing technology late in the first quarter and plan to continue implementation after we evaluate the test results of our successful pilot program. Partnering once again with the experienced consultancy firm Bottle Rocket, we also began the design phase of our enhanced drive-through digital platform in April, which will continue through the second quarter. We're very excited about the capabilities for improved order accuracy, speed of service, and greater levels of personalized marketing and additional opportunities to showcase our unique brand attributes that this platform will enable. In addition to creating a stable and scalable environment and increased order value, the Minimum Viable Products, or MVP, targeted for the first phase of the digital drive-thru transformation will give us more insight into who our guests are and how they use this channel. We hope to begin a test of the drive-thru digital platform sometime in the second half of 2021. We continue to iterate on what and how we communicate with our loyalty members through our app, leveraging insights to provide more personalized and relevant conversations. We see our mobile applications and the future drive-thru experience as the core components of our digital platform, which will allow for enhanced innovation going forward. Now Dirk will provide the financial update and closing comments.
spk05: Dirk? Thank you, Patty, and good afternoon, everyone. I'll start by reviewing our first quarter results and then provide you with an update on our outlook for the remainder of 2021. We were pleased with our first quarter performance in terms of sales, profit growth, and margin improvement, absent the impact of winter storm Yuri. As a reminder, the COVID-19 pandemic began to have a significant impact on Pueblo Tropical and Taco Cabana sales trends beginning the week of March 16, 2020. and create some level of non-comparability of current year results with prior years. As a result, we will be providing commentary this year for many key measures comparing current year results to both 2020 and 2019. Total revenues decreased 1.3% to $144.7 million in the first quarter of 2021 from $146.7 million in the first quarter of 2020. driven by the comparable restaurant sales decrease at Taco Cabana, which was due principally to the impact of winter storm Uri, and restaurant closures, partially offset by the comparable restaurant sales increase at Pollo Tropical. As we noted previously, our historic penetration of dine-in sales has been approximately 25%, and we made very good progress offsetting the dine-in sales loss through the first quarter of 2021 with strong off-premise and drive-through sales growth. Our first quarter same-store comp sales trend improved from the fourth quarter 2020 levels, with Pueblo Tropical comp trends improving to plus 4.3% for the first quarter compared to the first quarter of 2020 and minus 3.3% compared to the first quarter of 2019. Taco Cabana first quarter same-store comp sales were minus 4.3% compared to the first quarter of 2020. As Rich noted, the estimated negative impact of winter storm URI on Taco Cabana comparable restaurant sales was approximately 480 basis points. Taco Cabana 2021 comparable restaurant sales trends for March, April, and May to date versus the first quarter of 2019 all showed acceleration above fourth quarter 2020 comp sales trends versus 2019. First quarter 2021 consolidated net loss was 2.1 million or $0.08 per diluted share and included approximately $0.09 per diluted share of negative impact, primarily from closed restaurant rent charges and an out-of-period tax adjustment. This compares to a net loss in the first quarter of 2020 of $7.3 million, or $0.29 per diluted share, including a $0.25 per diluted share negative impact, primarily from impairment charges and closed restaurant rent and other charges. Provision for income taxes in the first quarter of 2021 includes a one-time $1.5 million out-of-period adjustment related to tax depreciation on certain assets placed into service several years prior to the formation of FIESTA in 2011. The impact on the provision for income taxes is primarily related to an increase in the valuation allowance on our deferred income tax assets, as well as the effect of a decrease in the federal corporate income tax rate in 2017 on our deferred tax assets and liabilities. On an adjusted basis, first quarter 2021 consolidated net income was 0.2 million or one cent per diluted share compared to an adjusted net loss of 2.9 million or a loss of 11 cents per diluted share in the first quarter of 2020. Please see the non-GAAP reconciliation table and our earnings release for more details. Consolidated adjusted EBITDA, a non-GAAP measure, increased 63% versus last year to 12.9 million. This is the third quarter of consolidated adjusted EBITDA growth above prior year despite negative same-store comp sales at Tacos Habana, including the impact of winter storm URI. And both brands grew their adjusted EBITDA margins in the first quarter above 2020 levels. The estimated negative impact of winter storm URI on a consolidated adjusted, unconsolidated adjusted EBITDA was approximately 1.9 million or 110 margin basis points as a percentage of total revenues. Now turning to our individual brands. At Pollo Tropical, first quarter comparable restaurant sales increased 4.3% in the first quarter. The first quarter improvement resulted from a 9.1% decrease in comparable restaurant transactions and a 3.4% increase in the net impact of product channel mix and pricing. The increase in product channel mix in pricing was driven primarily by increases in delivery, online and drive-through average check, and sales channel penetration, and menu price increases of 1.2%. Regarding sales trends by channel, Pueblo Tropical dine-in and counter take-out comparable restaurant sales decreased 39% from the first quarter of 2020 to the first quarter of 2021, due primarily to the negative impact of the pandemic on dine-in traffic and and closures of our dining rooms during part of the first quarter of 2021. The decrease in dining channel sales was offset by strong off-premise channel growth. During the first quarter of 2021, POYO generated drive-through growth of 4% and delivery and online channel growth of at least 21% in those channels compared to the fourth quarter of 2020. With POYO Tropical first quarter 2021 delivery sales penetration, exceeded 10% of total sales for the first time, and that's the highest penetration on delivery we've had to date. Turning to the brand profitability for the first quarter, Poyer restaurant-level adjusted EBITDA margins, a non-gap measure, continue to be strong, with first quarter restaurant-level adjusted EBITDA margins of 21.4% in 2021 compared to 18% in 2020 and 23.3% in 2019. As a percentage of restaurant sales, Puerto Tropical experienced lower first quarter 2021 cost of sales of 31.1% compared to 32.4% in 2020 due to operating efficiencies, lower promotions and discounts, and price increases partially offset by lower rebates and discounts from suppliers. Restaurant wages as a percentage of net sales also declined from 24.5% in the first quarter of 2020 to to 23.2% in 2021, driven primarily by labor efficiencies and lower medical benefit costs, partially offset by higher incentive bonuses. Pollo Tropical did an exceptional job managing food costs and labor to improve restaurant-level adjusted EBITDA margins compared to last year. Other restaurant operating expenses increased in the first quarter compared to 2020, due primarily to increased delivery service provider fees, partially offset by lower utilities costs. Rent in the first quarter increased compared to 2020 due primarily to the impact of stale leaseback transactions and lease renewals at higher rates. We also incurred incremental costs related to COVID-19 of $0.3 million during the first quarter, including quarantine pay and costs related to COVID-19 testing. Due to the severe winter storm that impacted Texas from February 14th through February 21st, 2021, Taco Cabana February revenue and profit were negatively impacted compared to 2020 results. All units were closed for a number of days during that period, with significant reductions in traffic due to poor road conditions. We estimate Winter Storm Uri negatively impacted first quarter 2021 comparable restaurant sales by 480 basis points and adjusted EBITDA by 1.9 million. At Taco Cabana, first quarter 2021 comparable restaurant sales decreased 4.3%, versus 2020. The decrease in comparable restaurant sales resulted from a 15.9% decrease in comparable restaurant transactions and 11.6% increase in the net impact of product channel mix and pricing. The increase in product channel mix and pricing was driven primarily by increases in drive-through and delivery sales channel penetration, growth in average check for drive-through versus last year, and menu price increases of 2.1%. From a sales by channel perspective, Taco Cabana dine-in and counter takeout comparable restaurant sales decreased 64% from the first quarter of 2020 to the first quarter of 2021 due to the negative impact of the pandemic on dine-in traffic and closures of our dining rooms during most of the quarter. The decrease in dine-in channel sales was partially offset by significant off-premise channel growth. Taco's delivery business in the first quarter of 2021 was more than two times the first quarter of 2020 sales, driven by the increase in the number of delivery service providers that began late in the first quarter of 2020. The online and catering channels also realized revenue growth in the first quarter of 2021 versus the first quarter of 2020. Sequential trends from the fourth quarter of 2020 to the first quarter of 2021 were negatively impacted by the winter storm. However, after excluding February, the average weekly sales by channel in the first quarter of 2021 showed growth in the drive-through and delivery channels compared to the fourth quarter of 2020 average weekly sales. Turning to the brand's profitability for the first quarter, Taco Cabana continued to improve margins and dollar profits in the first quarter compared to the first quarter of 2020. Taco restaurant level adjusted EBITDA margins, a non-GAAP measure, grew from 8.8% in 2020 to 11.3% in 2021, including the negative impact of winter storm URI. The estimated negative impact of winter storm URI on Taco Cabana first quarter 2021 adjusted EBITDA margins was negative 270 basis points. As a percentage of restaurant sales, Taco Cabana experienced lower first quarter cost of sales of 28 percent compared to 30.7 percent in 2020 due to lower commodity costs, operating efficiencies, lower promotions and discounts, and price increases partially offset by sales mix and lower rebates from suppliers. Restaurant wages as a percentage of net sales also declined from 32.2 percent in the first quarter of 2020 to 31.4 percent in 2021, driven primarily by labor efficiencies that were partially offset by a higher incentive bonus and medical costs. Despite lower comp sales, Taco Cubana continued to improve efficiency at a sustainable level in managing food costs and labor to improve restaurant-level adjusted EBITDA margins compared to last year. Other restaurant operating expenses increased as a percent of sales in the first quarter compared to 2020 due primarily to increased delivery service provider fees and repair costs due to winter storm URI, partially offset by lower other repair and maintenance costs. Rent in the first quarter increased compared to 2020 due primarily to the impact of lease renewals at higher rates and sale-leaseback transactions. We also incurred incremental costs related to COVID-19 of $0.2 million during the first quarter, including quarantine pay and costs related to COVID-19 testing. Turning now to cash flow-related comments. In the first quarter, our cash balance grew from the fourth quarter balance of $50 million at January 3, 2021, to 59 million at the end of the first quarter of 2021. Net debt, a non-GAAP financial measure, decreased from 23.3 million at the end of the fourth quarter to 14.2 million at the end of the first quarter. During the first quarter, we sold two properties and sale leaseback transactions for total proceeds of 3.1 million and net gains of 0.3 million in the first quarter of 2021. As you may recall, last year we had 16 owned properties that we marketed for outright sale or sale leaseback transactions. Through the end of the first quarter of 2021, we had sold 15 of the 16 properties and expect to close on the one remaining property during the second quarter, although there can be no assurances that a transaction will occur. Total capital expenditures for the first quarter of 2021 were $3.1 million, which included $2 million for maintenance, $0.5 million for technology and corporate, and $0.7 million for remodeling and development. I'll close with a few comments on our outlook for the remainder of 2021. We are encouraged that both brands appear to be gaining momentum during the second quarter to date compared to first quarter trends. Pollo is trending toward flat sales versus 2019, and Taco Cabana is off to a great start in May with the best Cinco de Mayo holiday single-day sales and sales for the holiday week that the brand has seen since 2017. From a margin perspective, Rich mentioned the labor cost pressure we are seeing in our action plans. Based on internal analysis as well as input from our pricing analytics consultants, we believe that we can take additional pricing action if needed to offset cost pressure to maintain margins at historic levels while still keeping the strong value perceptions that our customers have for both brands. Commodity food costs are expected to remain stable through the remainder of 2021 based on current supply commitments that we have in place for calendar 2021 across key commodities. Capital expenditures in 2021 are still expected to be in the range of $33 to $38 million, with the increase compared to 2020 levels primarily driven by investments in our digital platforms, including digital drive-through upgrades. In closing, we believe both brands are entering the second quarter of 2021 with top-line momentum and we believe our revenue-building strategies and off-premise channels and investments in our digital platform will accelerate sales the remainder of the year. Thank you for listening, and we will now open up the call for questions. Operator?
spk01: Thank you. We will now begin the question and answer session. To join the question queue, you may press star then 1 on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star, then two. We will pause for a moment as callers join the queue. Our first question comes from James Rutherford of Stevens Incorporated. Please go ahead.
spk04: Thank you, and good afternoon. Hope you all are doing well.
spk05: I wanted to start off on the split of sales by channel. I appreciate you laying it out in that detail. And it's clear you continue to see drive-through delivery and mobile ordering growth with counter sales down. And we've listened to a lot of earnings calls in the last few weeks. It seems like more and more that delivery and mobile growth. the gains in that would be quite durable. But how do you think about the drive-through versus counter sales mix and where that normalizes? Is there any indication in recent weeks or months that gives you a kind of view in how customers will use your businesses going forward? Sure. So, I mean, it varies a little bit by brand. I think we pre-COVID – From an occasion perspective for Pollo, we had a very large lunch occasion dine-in mix, and we believe that as consumers go back to their regular patterns of behavior, we believe that ultimately that dine-in occasion is going to return, and we're starting to see that. Whether the level of incrementality between drive-through and dine-in, it's still pretty early. It's still difficult for us to determine whether, you know, how much incrementality we're going to retain on drive-through.
spk07: Yeah, James, we're focusing a lot, and that's what Patty went over on the digital side with the drive-through. We believe that, yes, at Pollo, especially in the core markets, our lunch is starting to come back. But we also believe that The guest preferences will change in terms of they'll still want to eat at home and not in dining experience that we had in the past. That's why we're putting such focus on the drive-thru and other channels in case that never comes back. We still feel we have a great opportunity to increase our sales system-wide because of the efforts and the investments we're making.
spk05: And even though it's difficult to really – pinpoint true incrementality. On the POYO side, from the fourth quarter to the first quarter, we saw an increase generally across all channels. So that increase in sales was pretty evenly spread across most of the channels as they all more or less maintained their penetration. On the TACO side, we opened up the dining rooms a little bit later. So it's still pretty early for us to really determine how much incrementality we're going to see on the taco side. That sounds pretty encouraging on that 4Q to 1Q growth you saw across channels. On the Puyo restaurant-level margin and specifically on wages, first a clarification. I think your average hourly wage at Puyo was $9.60 the last update. Is that going to $10 per hour, which would be about a 4% increase by my math, or is it that hourly wages across the board are going up by $1, which would be a larger increase? Just wanted to get that correct, first of all. Yes, good question. Good question for clarification. So we had some employees that were below $10 per hour. So we're moving those employees to $10, and then we're giving all employees – another an extra dollar per hour and that that extra dollar per hour is just for the time being to get us through this labor crunch so the ones that you know nine oh sorry i apologize i interrupted you i thought it was it was cutting in and out a little bit there um so that's not a permanent thing you're saying rich
spk07: No, but we are going through and evaluating market by market to see where we are from our wages, and we'll evaluate any additional increases as we get that data. Okay. But that dollar is temporary.
spk04: And then there was a 3% price increase taken in April.
spk05: Is that in addition to the 1.2% price that was already in place in the first quarter? So going forward, it's more like 4%, 4.2% price at Foyle? That's correct. That is correct. Okay. And at a general level, the price increase is a week. I was just going to add that the price increases that we just took, we believe will offset the cost of the changes that we've made to date, even though some of those are short term, as Rich said. Yeah, that was exactly what my next question was going to be. So thanks for that. And then just two more quick ones and I'll turn it over. But on commodities, did I hear correctly that you expect your commodity costs to be flat through the year because of locking in the prices across the board? Correct. So for food, for key commodity categories, we are locked in. We are not locked in in some other categories that are less material, such as packaging. So we are seeing some pressure, I think, like most other players in some of those areas. But on the commodity front, we expect stable costs. Okay. great and last one thanks for giving me so much time here but on the remodels planned for the year are those changes to kitchen and design operations um focused on improving the performance within your existing markets or those more changes made with a mind toward testing out and to see what might work outside of florida yeah it's really both i mean it's it's it's definitely in existing markets as rich said um As we have identified remodels that we'd like to do, we want to try to incorporate some of the new elements from our research to try to get an early read on those elements before we start opening new stores.
spk06: Thanks for all the time.
spk05: I'll turn it over.
spk07: Thanks, James. Thanks, James.
spk01: Our next question comes from Joshua Long from Piper Sandler. Please go ahead.
spk06: Great. Thanks for taking the question, and gentlemen, thanks so much for all the great detail today. I wanted to start off with a clarification understood on Pollo Tropical in terms of it getting back towards some of those, I think you said, 2019 levels. I wanted to see if you could clarify your comments on Taco Cabana. It sounded like things were moving in the right way, but I wanted to make sure I understood the point in terms of how Taco was performing in the quarter-to-day period.
spk05: Sure. So the quarter performance was negatively impacted by winter storm Yuri. So that's this first quarter. So we tend to try to break it. We've broken it down by month, which is why we reflected it in the press release as such. So as we look from January and February into March, April, May, we're definitely seeing acceleration in the taco brand from the levels that they were at at the beginning of the year, even back to the fourth quarter of 2020. So we are focused, I think, like our investment stakeholders on our trend versus 19. And we're seeing improvement in the trend versus 19, particularly as we headed from April into May.
spk06: Okay, thank you for that. And I think previously, we talked about expecting positive growth in 2021, driven in part by the growth initiatives, and then just overall increases across the different segments in terms of traffic as you know, consumer mobility got back to normal. Is that still the outlook and any sort of color additional color there would be helpful.
spk05: Yes, I mean, that is still the outlook. And as we indicated in our prepared comments, I mean, both brands are moving toward flat to 19. with Pollo a little bit ahead of Taco. Pollo basically is flat to 19 at this point. And as we said, I mean, Taco had a fantastic Cinco de Mayo holiday, so May is off to a great start. Obviously, it's still early in May, but they had a fantastic Cinco holiday and week, and that puts them on a good trajectory to meet or beat 19 as we head through the remainder of the year.
spk06: Great. Thanks for that. And I wanted to shift over to some of the qualitative research you were doing, if you could share any of the takeaways there. Perhaps it just underscores some of the learnings or some of the brand attributes and things that we've already known about the brand, but maybe gives you a different perspective or maybe a little bit more firepower as you start to layer in some of these initiatives going forward. And then if you could provide any sort of expected timeline or just general expectations around the flow of some of that quantitative research that you're doing.
spk07: Yeah, Joshua, it's Rich. I'm not ready to publicly disclose it in terms of what the results are, but we've been pretty excited about the results so far. We definitely have strong essence, especially in core, but we're analyzing not just core but also out of core and also potential new markets as what the people want What do people want to use us for and how do they want to use us for? Now, you can read into some of it in terms of where we're putting the money in terms of the digital investments and the drive-through. But we're a little early. I believe, though, that we'll be able to discuss this definitely by the end of the year. And you'll start seeing in some of the newer remodels and the tests that we're doing that kind of what we got out of the research, but clearly the food is the number one qualitative and quantitative result is how much people love the food, the freshness of the food. Those are the two big attributes, and we've worked hard to get there, and the guests are seeing it and appreciating it. Great. Thank you. Thanks, Josh.
spk01: Our next question comes from Ryan Vaccaro from Raymond James. Please go ahead.
spk04: Hi, good evening. I appreciate the monthly sales trend, but can you help us level set where average weekly sales volumes are for each brand? I just want to make sure we're all on the same page trying to work through the one week of calendar shift and the two-year stacks that you disclosed.
spk05: Sure. I mean, I'm giving broad strokes here, but overall, our average weekly sales trend sequentially from the fourth quarter for POYO improves in high single digits. We haven't published the average weekly sales numbers, but you can get to the average sales numbers from using the information that we provided in the press release. and it's from a, excuse me, from a channel perspective, as I mentioned before, we had growth across all of the channels in terms of Q1 average weekly sales compared to Q4, so that we were encouraged by that because we were concerned, like everyone else, about some level of trade-out across the channels. On the taco side, Because of winter storm year, it's very difficult to really compare average weekly sales by quarter. You almost have to look at it by month. And as I mentioned, we did see growth in average weekly sales in the drive-through and the delivery channels, if you exclude February, at taco in Q1 versus Q4.
spk04: All right, so on the Paco side, I think the math is a little over $30,000 a week for the first quarter. Obviously, the winter storm Yuri had a big impact there. Can you help us with where we are in March and April on average weekly sales? We're not.
spk05: I mean, our view of all this is that the reason that we're publishing comps compared to 2019 is really to try to get back to what we think is a comparison that kind of takes out the impact of COVID. We're certainly willing to disclose average weekly sales, consider that if that's an important item to the investment community. But our thought was, at least for this quarter, that we would publish – Comp sales versus 2019 to really give a clean look at what our true trends are against history.
spk04: All right, fair enough. And last one for me, just on G&A, what's a reasonable number to expect for this year on the G&A line, given all the moving parts? And I think you were in the low $50 million range, but there's been some work on streamlining your G&A costs. But just ballpark the G&A expectations for the year. Thank you.
spk05: Yeah, I mean, I think we mentioned on the last call that our goal is to really try to keep G&A as a percentage of revenue flat as we head into 21 against 20. So that's our goal, and I think we believe that that's achievable.
spk04: Okay, thank you.
spk01: This concludes the question and answer session and today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.
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