El Pollo Loco Holdings, Inc.

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the El Pollo Loco First Quarter 2021 Earnings Conference Call. At this time, all participants have been placed in a listen-only mode, and the lines will be open for your questions following the presentation. Please note that this conference is being recorded today, May 6, 2021. On the call today, we have Bernard Okoka, President and Chief Executive Officer of El Pollo Loco, and Larry Roberts, Chief Financial Officer. I would now 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 2021 earnings release. If not, it can be found at www.elpoyoloco.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 the impact of the COVID-19 pandemic on our business and strategic actions we have taken in response, as well as our marketing initiatives, cash flow expectations, capital expenditure plans, and plans for new store openings, among others. 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 that differ materially from what we currently expect. We refer you to our recent SEC filings, including our Form 10-K, 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 2021 tomorrow and 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. Before I turn the call over to President and Chief Executive Officer Bernard Okoka, I'd like to note that Bernard and I are in different locations today. Please bear with us if you experience any slight delays or minor audio quality issues. Bernard, please go ahead.

Thank you, Larry. Good afternoon, everyone. And thank you for joining us today. I hope that you and your families are staying safe and healthy. We are very pleased with our solid start to 2021 and the sales trends we are currently experiencing, which we believe indicate that we are at the start of a strong recovery. After a sluggish start to the first quarter, which was largely a result of an increase in COVID case rates in Southern California and heightened restrictions, we saw steady sales improvement throughout the quarter. culminating in a 26.1% increase in system-wide comparable restaurant sales in March. This acceleration enabled us to deliver system-wide comparable sales of 7.4% for the first quarter. Sales trends that we saw in March have continued to accelerate into the second quarter. I'm pleased to report that through April 28, our second quarter to date, system comparable sales are up 39.1%, and on a two-year basis, system comparable sales have increased 13.5%. In addition to the strong comparable restaurant sales performance, in late March and early April, we achieved record system-wide weekly average unit volumes for three straight weeks, and on April 1st, we posted our highest single day of sales ever on National Burrito Day. Keeping these results at a time when most of our restaurants are operating at limited capacity is particularly impressive and would not have been possible without the hard work and dedication of our team members and franchise partners. As I noted, the ongoing improvement in our greater Los Angeles area restaurants has been a key part of our recent sales improvement. As restrictions have been lifted, we are seeing overall economic activity in the region accelerate, and COVID appears to be having a declining impact on our restaurants and employees. Most of our L.A. area restaurants are currently able to operate at 50% capacity, and while dine-in traffic remains understandably muted, we are optimistic that it will gradually increase as our customers continue to get vaccinated and are more comfortable eating indoors. Outside of Los Angeles, we continue to be pleased with the sales trajectory of our outer market restaurants have consistently achieved positive same-store sales growth since June of last year. While a smaller subset of our overall restaurant base, we have seen outer-market comparable sales improve more dramatically than at our L.A. units, which not only bodes well for the health of our overall system, but gives us even greater confidence about the future of our core L.A. market as economic activity continues to rebound in Southern California. Our restaurant contribution margin for the quarter was 16.1%, which primarily reflects the challenges we experienced in January and February. As the sales and labor impacts of COVID abated during the quarter, company-operated restaurant margins quickly improved with March coming in at over 20%. With sales trends recovering, our team is also making great progress on the four key strategies that make up our acceleration agenda, which are, one, expand the brand, grow in new geographies with franchisees. Two, support the brand, build the right organization for asset-like growth. Three, evolve the brand, digitize the business to compete. And four, focus the brand, exaggerate what makes us so special and different. While I won't focus on each of these strategies in great detail, I would like to give you a brief update. Evolving our brand is all about utilizing technology to better serve our customers. During the quarter, our digital business continued to grow and is now approaching 11% of total system sales, primarily driven by third-party delivery. In addition, our enhanced efforts to grow our loyalty customer base are paying dividends, as we have added approximately 200,000 new members since the beginning of the year. Equally as important, we are seeing an uptick in loyalty transactions, which are the centerpiece of our go-to-market strategy for the long term. We also continue to make progress improving our speed of service as a result of several measures implemented late last year, including efficient labor deployment, readiness guidelines, repacking side items and salsa, and better positioning of equipment in our restaurants. Moreover, during the first quarter, we expanded our tests of order-taking tablets to 10 restaurants. This technology enables our team members to take orders and payment from customers while they're in the drive-thru queue with the goal of cutting our drive-thru times in half by achieving a 45-second order and window time. It's early days, but we are very encouraged by the results we're seeing in our test restaurants. We currently plan to further expand the test in May and are targeting pending achievement of our KPIs to begin rolling out the platform to company restaurants this fall. Turning to our strategy to focus the brand, our team has been working tirelessly to exaggerate what makes us so special and different. To that end, in addition to our regular marketing activities, we will be executing several brand sparks in 2021. We believe that these will give us the opportunity to more deeply connect with our target audience to build brand love and affinity. The first spark will be to celebrate this upcoming Mother's Day. Our Strong Like a Madre Mother's Day grant initiative was designed to recognize, celebrate, and support greater Los Angeles area moms who had to put their career and personal pursuits on pause because of the COVID-19 pandemic. Nominations for moms via Instagram are open now through May 14th, and each of the 12 selected winners will receive a $5,000 moderate ship grant that gives them the opportunities and resources to get back to pursuing their dreams. The role of a mother is never simple, and the past year of pandemic and economic strife has made the world's toughest job even tougher. For mothers of color and single moms, this crisis has been amplified as these communities have been disproportionately impacted by job losses and workforce exits. This is what inspired El Pollo Loco to give back to moms and help them regain their footing after a year of constant setbacks. Most of you have heard me discuss our focus to build a culture at El Pollo Loco centered on leadership with heart. And this is another example of building our culture while also strengthening the bonds with and making a difference in the communities we serve. Finally, we continue to focus our efforts on expanding the brand as we work with existing franchisees and recruit new franchise partners to develop new markets. We feel good about the progress we're making and expect to be announcing new development agreements over the next several months. In summary, our confidence is steadily growing that the worst of the pandemic is behind us. With positive sales trends, continued progress in implementing our acceleration agenda, and vaccines becoming more widely available, our team members and franchise partners are ready to capitalize on a more normalized operating environment. As always, I'd like to thank our dedicated employees and franchise partners who courageously steered us through an incredibly trying period and are now leading us to capitalize on accelerating our growth. Now, I'd like to turn the call over to Larry to review our first quarter results in more detail.