El Pollo Loco Holdings, Inc.

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the El Polo Loco 4th Quarter 2023 Earnings Conference Call. At this time, all participants have been placed in listen-only mode, and lines will be open for your questions following the presentation. Please note that this conference is being recorded today, March 7, 2024. And now, I would like to turn the conference over to Ira Foles, the company's Chief Financial Officer. Please go ahead, sir.

Thank you, operator, and good afternoon. By now, everyone should have access to our fourth quarter 2023 earnings release. If not, it can be found at www.elpoyologo.com in the investor relations section. Before we begin our formal remarks, I need to remind everyone that our discussions today will include forward-looking statements, including statements related to our growth opportunities, strategic and operational initiatives, expectations regarding sales and margins, potential changes to our product platforms, capital expenditure plans, expectations regarding kiosk rollouts, the ability of our franchisees to drive growth, expectations regarding commodity and wage inflation, remodel plans, and our 2024 guidance, 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 to 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-K for 2023 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, which is available in the investor relations section of our website. With respect to the restaurant contribution margin outlook we will be providing on today's call, please note that we have not provided a reconciliation to the most directly comparable forward-looking GAAP financial measure because, without unreasonable efforts, we are unable to predict with reasonable certainty the amount of or timing of non-GAAP adjustments that are used to calculate income from operations and company-operated restaurant revenue on a forward-looking basis. Now, I would like to turn it over to our interim CEO, President and COO, Maria Hollinsworth.

Thank you, Ira, and good afternoon, everyone. During the fourth quarter, we continued to make great progress in reemphasizing what makes our brand unique, our one-of-a-kind, better-for-you grilled chicken offering. As we go forward, we aim to lean into this differentiating strength through our marketing and product development both to drive our top line growth and help us achieve the immense potential we have ahead of us. To that end, our organization is aligned around five key operational pillars. The first operational pillar, attract, hire, and retain top talent, demonstrates our belief that success in the restaurant industry is highly correlated with employee engagement. This includes building a compelling employer brand with strategies aligned with our values, as well as creating a culture of accountability and recognition while fostering a positive and inclusive environment. Our second operational pillar, being known for our famous fire grilled chicken, prioritizes our focus on our key differentiators, including our fire grilled chicken, flavors from Mexico, and better for you positioning consistently and frequently. In late December, we reintroduced double pollo fit bowls to help make New Year resolution planning easier and more convenient. Packed with double the protein, the double pollo fit bowls are a filling and nutritious choice for those craving a delicious, flavorful meal. Since launch, we've seen great reception with guests typically skewing female and a little higher income. Starting in February, we began a promotion of our current tostada platform alongside the introduction of a seasonal shrimp tostada and shrimp taco available for Lent. Additionally, guests can substitute shrimp for chicken or add shrimp to any entree for a small upcharge. We're excited to be able to emphasize our better for you chicken offerings while providing a relevant seafood option during this time of year. Additionally, in late December, we launched a new menu board designed to make it easier for our guests to not only navigate our menu, but also help them find new items and platforms. In addition to new items like the chicken avocado stuffed quesadilla, We also introduced chips and queso blanco, new agua fresca flavors, and the crunchy shredded chicken taco as new add-on items. The new menu board has received positive customer feedback for appearing more modern and premium. Over time, we will continue to evolve our menu to drive more add-on items and provide everyday value for our customers. We are also making progress with our relaunched catering program that we rolled out in late September. During the fourth quarter, we expanded our marketing support on digital and social to include messaging for key catering moments to keep El Pollo Loco top of mind as a great option for group occasions. We were encouraged to see sequential improvement in catering sales from the third quarter. With a new catering menu that provides broader offering beyond our chicken on the bone, we still believe our catering channel mix has the opportunity to grow to approximately 5% of sales over time. To further accelerate the growth of catering, we are aligning marketing resources to focus on menu innovation, driving awareness, and overall customer experience. Our third pillar, Digital-centric in-service of improving the customer experience includes investing in consumer-facing technology to further differentiate our brand and reach customers for whom convenience and value are key decision factors. This includes our loyalty program, digital ordering through our website and mobile app, and our integrated delivery through a third-party service. This also includes the ability for our consumer to order on kiosks. We have been thrilled by the seamless adoptions by our guests. Additionally, when coupled with a cash machine, our test restaurants have been able to allow for a more efficient servicing of our guests with less labor, especially at peak traffic periods. To that end, we remain on track to complete the rollout to all of our company-owned restaurants by mid-2024. Our fourth operational pillar is driving consistency in operations execution with a hospitality mindset through a focus on brand standards. Delivering a consistent experience across the brand starts with having the right flavor. In the quarter, we launched an updated operations manual, inclusive of a hospitality module specific to digital ordering and kiosks. and subsequent training to ensure that we have a consistent customer experience. We also believe that we can drive additional consistency through simplification and labor efficiencies. And we have several initiatives in place to drive that consistent experience and reduce or optimize labor in our restaurants. In addition to the kiosks, which I previously discussed, another labor saving initiative comes from our salsa offering which we divided in two phases. Late last year, we completed the simplification of our salsa lineup by introducing our salsa fresca offering and reducing our salsa count from two to one. With that behind us, our next phase is to roll out our new salsa processing equipment, which will further drive consistency of our product while also improve labor efficiency as the new equipment is both easier to use and easier to clean. We are on track to roll out the Salsa equipment to all our company restaurants by mid-2024 and to franchisees by the end of the year. Lastly, we continue to test other labor savings initiatives and look for operational efficiencies as we thoughtfully enhance our operating model. We are also aggressively exploring all areas of the P&L, from COGS to R&M, utilities, and other controllable expenses. We are leveraging third-party data and really scrutinizing all costs to help offset expected incremental labor costs from upcoming legislative changes. We are doing this carefully to ensure the El Pollo Loco experience is best in class for our customers and consistent across our entire system. Our fifth operational pillar is to build back the fundamentals of winning economics and partner with world-class franchisees to prepare for accelerated growth. I am excited about the work we have done with our franchisees in the past few months in this area. We have put support back into franchise recruitment and new restaurant and market openings with better training materials and best practice sharing. This will ensure operational excellence as new markets open and as we grow in markets where El Pollo Loco is relatively newer and less well-known to consumers. We are also very focused on improving our development capabilities, from helping franchisees with better site selection to significantly cost engineering our new builds for company and franchise units. We know that if we get the economic model right with lower build costs combined with higher sales volumes and store-level margins, the development flywheel will get going. We have initiatives in place in all of these areas and look forward to sharing more details in the quarters to come. In addition, we are excited to announce an acceleration in our remodeling efforts for both the company-owned and franchise system. to continue to enhance our restaurants and provide our customers with a more modern dining experience. We currently expect to remodel 15 to 20 company restaurants and 40 to 50 franchise restaurants in 2024. In closing, I would like to thank our El Pollo Loco team members and our franchisees for the hard work they put in every day to make this brand great. It is an exciting time to be at El Pollo Loco, and I'm thrilled to be working alongside Liz Williams, our new CEO, who starts on March 11th, and the rest of the management team as we unlock our brand's long-term potential. With that, let me turn the call over to Ira for a more detailed discussion of our fourth quarter financial results.