Fiesta Restaurant (FRGI) 10 Mar 222021 Q4 Earnings call transcript

Good day and welcome to the Fiesta Restaurant Group Fourth Quarter 2021 Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Raphael Gross, Partner at ICR. Please go ahead.

operator. you, Thank fourth after Group's [ph] release earnings Fiesta market quarter close. issued the was Restaurant XXXX

If not the on the you be company's can have website, already accessed www.frgi.com, under Investor section. it Relations it, found

strategy, substitute accordance considered to discussion be be should results future costs begin, of be and information include, results Important future or today, be performance. company differ or not plans, projected as measures is give SEC in without those GAAP regarding operations. that forward-looking call based for Actual comparable company's the limitation, conference that the we forward-looking with statements, differ materially expressed no during for that budget, materially during information. of operations, management will can in a that non-GAAP factors from call, historical company's various such the I'd you forward-looking statements believes can and statements will release. objectives can company useful isolation inform it's Before in that the the which financial to such These outcomes Any may results of prepared GAAP results the on forecasted to correct. earnings will company statements today's assurance be not and business prove make position and and or and reconciliation in in its certain unless evaluating cause are financial like forward-looking the such to statements implied by a could Please note in found measures expressed available discussed, the actual statements filings. company's

Montgomery. Executive Stockinger; me over now Officer, President And to call and Chief Officer, Dirk Rich. I'd Chief and On the Experience today Financial to like the are Officer, call turn Rich with Patty Lopez-Calleja; and Chief

continued quarter the support. I'd financial a Patty Initiatives and then XXXX. on call call topics strategic three have Session. I'll investors the our with Senior their up today, Rafe. of Dirk of before today on thoughts and VP be thank business Lopez-Calleja, and to results, first fourth also for the during with more we Chief status the you, other participants for covering status Thank our like priorities Again, us Q&A update all questions. update Experience Officer of we the color Strategic will our open provide and to on here digital wrap overview a

we We XXXX. are as optimistic begin

have momentum. We line top

levels the Our strategic first Tropical restaurant the enabled EBITDA targeted by margins progress on the of Cabana quarter. fourth end in initiatives Taco quarter. focus reach And of the much are Pollo to divestiture the has on track greater and business

we pleased and accelerate continued Regarding XXXX of Fourth with except the of January restaurant Miami reached fourth consecutive two XXXX versus that levels. Those markets representing all improved XXXX versus stronger X.X% results the quarter sales performance, quarter XXXX, fourth approximately for markets staffing XXXX. are quarter sales Dade in XXXX markets in Pollo comparable and of sales much quarters. levels restaurant X% to XXXX. which XX.X% have comparable been and XXXX restaurant at sales sales comparable have now were major comparable results, were Comparable realized fourth Tropical’s restaurant quarter February versus

January comparable optimistic remain Our and sales same-store growth expand continued of we sales initiatives. in we as not first X.X% with momentum to build And accelerating our in continued about quarter February. the momentum growth in X.X%

the in staff fourth we all As continued availability challenges quarter. industry-wide know,

that XXXX. the are reached select third rate also quarter shifts, At that optimal for incentives incentive plans action challenging schedules. such compared late-night and team units day for proactive have scheduling are added benefits as improved expanded included increases, pay including actions, levels testing parts, and we additional have incentives improved we staffing levels Our recruiting are completed taking hiring working. staffing resources of not wage Current to

benchmark we choice markets. can all and as an against comp changes to remain employer continue make ensure will our our in benefits We total of package our of to and needed peers additional

the fourth for as as phased increasingly we including margins During of significant early plan quarter increases through quarter, X.X% opportunistically continued in reduction. pricing improving and X% environment the in overtime fourth optimization, labor ongoing inflationary March our well an in of XXXX late XXXX, of

outside peer and research XXXX reminder, group. from a analytics pricing competitive As well believe below on XXXX internal our our pricing we consultants, conducted based benchmarking action to price by our was

continue improving higher Restaurant to adjusted comments. cost XX% prepared quarter-to-date primarily to following incentives level March. by details maintenance borrowing by declined by provide phased Higher in and and were and restaurant increases, for measure, will QX and offset margins. partially core increases, advertising Again, run margins of restaurant Preliminary of of EBITDA targeted of was results The price the XX pricing sales first expect cost of Fourth G&A cost continuing driven restaurant sales. $X.X from training. recent at portion on $X.X from rate short-term partially total fourth a financial estimated short as XXXX quarter EBITDA labor to non-GAAP we We overtime first wage the quarter continuing which compared QX costs sales are the to as February income reach unforeseen due on of primarily to our operation are offset And above regarding fourth and large million level our percentage XXXX. end higher XXXX, improved the labor our XX% fourth structure both in our costs, increases to XXXX repair Dirk part EBITDA hiring margins, additional costs changes points only quarter a A XXXX environment. basis to of and additional fourth the late of and estimated of hourly the impact margins during operating track operations margins the labor were in was of increase decrease term expenses, action range expenses, through quarter primarily of only of basis or loss by quarter quarter. XXXX. adjusted XXXX million. his of million a compared $X.X labor quarter approximately were

our on strategic update an Next, priorities.

off-premise new for an and by and including QR payment. test and future our enable of to customization, digital use better increase in Two, existing our brand in ease as whenever for the the field wherever I expansion improvements management they and One, in continue for to of speed improving to non-dine-in of geofencing mentioned experience, and our and experience Tropical unit introduction added lastly, and enjoy prior channels growth Three, curbside in investment as all digital design calls, As and have in well drive-thru and year And enhanced our we key make on three our throughout in-hand had enhance choose. investments the Pollo XXXX. and priorities accelerating teams. brand remodels guest pickup technology customers of kiosk channels and in platform refine fourth the across and markets. four, and enabled proposition preparation ordering in the development our strategic a concentrate technology service

fourth the Regarding comparable versus in year-over-year channel growth our quarter quarter delivery continue to the of to growth across the channels, fourth and drive with of sales of efforts all XXXX drive in XXXX. restaurant we growth XX.X%

XXXX grew same-store online compared fourth the comparable addition, In sales to quarter XX.X% XXXX.

Our continue iOS for very to high App stars. out with Android Store for be five and ratings X.X of X.X

of Finally, other the average above XXXX average in online channels. all check continue be to

improved design restaurant still believe we and our fourth fourth daypart tracking, we and upselling. the make in-hand XXXX triple the our in and digital all of an through to app in yet, fully initiatives. over continue XX.X% kitchen Pollo units. reopening priority strides customer the quarter. we is On expected improve the very and was order remodels capability include high-volume third be that Refining faster efficient by unlock ordering in With we progress with is challenges as channel on in payment growth which improved digital to to upside capability service including with hold designs, loyalty Order unit as restaurant quarter Features customer front, kiosk online drive-thru during on compared leading staffing and cycle of in-store sales productivity dollars traffic. which kitchen tested good digital the firm, for experience, and And integration completing remodel successfully comparable engineering and significant sales and drive-through growth retrofit growth design the the our our platform operations implement QR the successfully end-to-end technology check assistance to the We’ve operations reduces experience drive-through from of accuracy, versus and Tropical experience in tested speed delivering improved curbside launching there significantly in made of Digital collectively completed strong demand of XXXX. new The unmet a quarter digital much a that our quarter in times. new, increased units. new was customer-specific enhancing promotions growth and averages placed pilot also to fourth comparable more sales, are our program, improve a line upcoming offer productivity. platform will fourth

meaningful productivity during markets, periods Given drive-through the in car in to potential our incremental lines drive core peak sales. increase long an the has

existing on complete an we units platform key and remodels Customer XX investment average We with in positive. in by with the refreshes XXXX taking three operating disciplined XXXX, approximately and remodels an quarter. with average. remodels the refreshes and but to with are approximately the We being And finished refurbishing restaurant scope, testing majority levels improvements refreshes. $XXX,XXX has in approach completed to elements two $XXX,XXX of and on investment on to of a with full very remodels plan investment design been in fourth one five in refreshes late feedback XX all

the senior directly satisfaction. reduce in operations as Restaurant ultimately directors this existing we are on span execution to and of six our new strategic unit Head serves the execution, priority report we customer enable investment to XX to development who team adding improve part, of of to another me. the improve increase our to RDOs to development retention to in and enable RDO field number senior positions with and the approximately Finally, units execution, reporting are talent focus expanding RDO The Operations, geographies. In to RDOs to growth regional

higher level know priority General people, existing restaurant foremost profits. EGM. by designed and customers process that reinvented includes then EGM a level the and and or In comprehensive Unit development profit. higher Manager on the focus developed the reprioritizes named a we of much first redesigned leadership sales role General focus Executive our first and be EGM was their followed a the and We of addition, to quarter, leaders, to This of higher talent fourth role. to that role a shift management new Manager, team for we that training. place drive the and That focus program people In more leadership training managers to

completed complete and the class XXXX. results. in We of and this at should retention fourth improved training enhanced investments Our was field execution, satisfaction, which financial to customer training role all quarter improve lead in with leader this all restaurant combined development first levels refined will team will every in talent believe

cash disciplined taking cash of investments. growth, a to we’ll future using and for uses be investments Regarding our for approach

drive X enhance the we the we our of our our strategic repurchase continually past, quarter million for the continued XXXX, effectiveness will common on had and Board operational spending As previously prioritize efficiency. and In of fourth will of we of share Directors purchase in shares aggregate that authorized initiatives program growth stock. brand an image have that

which shares means During approximately a company value. repurchased $X.X the improve is quarter, shareholder fourth the to we million, believe XXX,XXX valued at

plans reducing finalized run As ongoing including last continuing of enhanced summary, we XXXX. reduce about targeted our expand sales expenses in implementation growth to digital to planned rate to range G&A working half the during of are we current on In X.X% with momentum to we sales optimistic toward quarter, mentioned are of we in as G&A investments our a X% positive our XXXX platform. continue initiatives, and second

service to targeted We way margins upgraded will customer across drive believe all on field channels. operations are experience and to EBITDA well this the quarter an talent levels our restaurant recovering initiatives

will Now provide comments. update closing Dirk and financial the

an good afternoon, reviewing our outlook results by Rich, I’ll and update then you, start quarter for you Thank with fourth and our everyone. on provide XXXX.

operations today the be due reminder, the on reviewing and overhead a statements. to Taco on as will Pollo results, fourth in Tropical brand. quarters. were presented sales results I’ll Cabana’s divestiture, for of our of to restaurant with the our operations excluding and The costs, XXXX XXXX, consolidated As at focused levels quarter corporate be continuing are financial fourth discontinued quarter X% sales very pleased We comparable were compared consecutive same-store comparable X performance

$X.X very XXXX, net $XX.X to per from of improve increased improvement of momentum in quarter storm seeing operations, sales are and continued to from to diluted are optimistic million sales average or accounting the $X.XX that continue income accelerate. related staffing Taco to in increases And operations fourth or as an was we favorable discontinued fourth quarter and by diluted a $X.XX $X.XX $XX.X $X.X check sales our by share compared or in X.X% are income momentum adjustment We diluted are loss XXXX net the Fourth continuing related in $X.XX the adjusted $X.X will settlement we fully comp quarter share XXXX XXXX on the Tropical. adjusted The that and or details. compared the positive $X.XX restaurant discontinued gain Fourth basis of quarter XXXX operations XX.X% was resulted staffed. more parcel associated fourth and share comparable channel revenue the XXXX. XXXX to XXXX or Pollo includes we million $X.XX fourth diluted versus of diluted earnings the table Continuing in driven primarily operations. from per tax operations XXXX. from or encouraged non-GAAP per was consolidated loss sale in increase to claim drive-thru markets diluted operations and delivery Fourth more the for net release impact income million of $X.X net And increase impact compares price $X.X consolidated of at in due million and pricing, million Please increases the transactions in $X.XX quarter financial from XXXX adjusted share. a was impart including a product, $X.X million X.X%. by revenue continuing Total per This share from X.X% from quarter income diluted quarter with mix million of net million Uri. winter net increase $X.X slight XXXX On of million $X.XX driven the measure of in restaurant in the X.X%. quarter a decrease to of diluted per consolidated fourth see pricing XXXX has our per continued share Cabana. from insurance negative a $X.X product in per of non-GAAP EBITDA; The channel comparable reconciliation and mix compared X.X% consolidated fourth of per the share. share impact was menu and and million revenue of of of was to levels,

measure points XX.X% adjusted EBITDA XXXX. to restaurant increases, to as Pollo Tropical Turning ahead are short-term in during hiring hourly compared nature, of action quarter XXXX and margin representing a additional planned fourth to XX training margins for the was in incentives rate level in level increases to to labor related a in of declined EBITDA compared sales. those primarily staffing and approximately cost the costs. XX.X% level XXXX, short-term XXXX overtime due results, XX.X% wage restaurant Restaurant overtime $X.X basis incentives non-GAAP and financial million offset in of percentage pricing

part our as September margins revenue inflationary increases reduction. during optimize optimization, pricing XXXX. ongoing for XXXX well And Rich optimization restaurant meaningfully by practices. quarter further productivity of we percentage engineering are our labor labor of Driven optimization December leading decreased a initiatives, wages with to through environment in in fourth a labor opportunistically mentioned, plan increasingly as labor significant as a labor from continued working implementing restaurant by TPA, in an overtime including As improving best to the we phased firm

are end of the the changes first on by adjusted reach We XX% run EBIDA barring financial our environment. structure level the a measure basis of XX% in range non-GAAP margins of track XXXX, cost to our restaurant quarter for to unforeseen rate and and targeted on operating

expense of million XXXX short-term guaranteed percentage increases approximately the in $X.X a staffing overtime the compared to due primarily XXXX quarter restaurant cost delivery in as XXXX XX.X% and in training to the XXXX fee fourth delivery fourth cost and sales key as mix to to by Other categories, percentage increased wages sales to compared increases offset a compared XXXX partially XXXX of fourth included the primarily as of trends Restaurant due Regarding renewals fourth operating lease labor due expenses nature. are due restaurant of quarter XXXX XX.X% packaging additional related and quarter wage maintenance to and higher of decreased price of wage rates. short-term hourly a rates costs. due and quarter food to in Higher higher fourth increased increased from and quarter sales and transactions fourth to the were shortages. in in parts incentives, labor rate sales and operations XX% to impact costs at higher of leadership by higher sale-leaseback increases, channel and bonuses and XX.X% sales hiring percentage the short-term and in XXXX increased to the higher labor that expense sales. costs labor primarily overtime of restaurant driven impact incentives of primarily repair quarter costs Rent to compared of by due overtime driven net higher

$XX.X quarter third million. quarter. balance Significant of for now included balance a In repurchases, $X.X at million from of quarter for of stock outflows comments. $XX the cash $X.X quarter related capital fourth flow cash and expenditures million fourth $X.X cash licensing fourth in end to the the the million software to million decrease Turning the our payment

the the finalizing with $X.X also fourth benefits part cash in of in looking the One We process additional to of winter with relief. COVID social insurance close forward I'll defer a from security comments claim reached made quarter, settlement of million insurers. portion expect claim outlook XXXX we approximately employer for of and our Uri. under a We associated XXXX. the proceeds the of our the costs our we one-time with were the are CARES allowed benefit on with as storm partial Act few a from payment payment that is

We very accelerating sales XXXX, to our our initiatives. so continue by are we expect growth encouraged momentum expand in far as which we

We have pricing of major and commodity cost a XXXX finalized actions calendar in on our all offset last are on contracts expected commodities quarter the cost basis. XXXX week for increases fully fourth to dollar and XXXX recent

mentioned, From structure. role at competitive of level reach adjusted barring contracts, XXXX recent are our our restaurant market. cost I of labor wage to end margins wage rates unit the that of we target quarter a our by EBITDA benchmarking XXXX rate As comfortable range the unforeseen that current by our the based a or above to any confirmed cost for increases current expect commodity perspective XX% XX% feel inclusive in are of first level we changes on at rates

the measures We initiatives. labor offset can select from those optimization future have levels. of incentives reached yet action and will continue have that not by ongoing to we be any a combination And successfully in cost believe increases test significant additional staffing units optimal additional pricing that

capital million we we in remodels to and are primarily the by in largely technology range accelerating be changes year in to thus which full are encouraged far XXXX, our $XX infrastructure. spending which which is we we barring expenditures margin continue the investments increase and closing, XXXX $XX refreshes being $X to technology digital million In $X million. driven XXXX million, and platform to million from restaurant by operating in to unforeseen for our sales environment. expect range invest $XX momentum capital of The million. of expect in expenditures $X expect Regarding to Total the

for and the restaurant teams second expenses and for of reach on drive finally, investing we half all in to platform enhancing our the a our of run growth. the of future experience further basis development our and customer questions. sales And across X% targeted rate current We and in continue of proposition will growing management additional unit in open year. will the expect brand service listening G&A up the field digital to now features X.X% channels, to remodel Thank new we Operator? the call design tests refining you range

first Stephens. Instructions] Thank question James with you. is Rutherford Please from [Operator proceed. Our

start from and the heard thanks correctly, staffing good staffing comments. I I XQ for the Hey improve wanted questions. taking fourth on If quarter to levels. I afternoon did think

you've I'm if wrong and benefits me rolled lot know correct there, – XXXX. I of a but So new out starting

look in here percentage today March? however levels So or can way how you of up a of XXXX that, does your kind that quantify a to target early If staffing or us? percentage frame perhaps there's for levels of

And in were to will that not and need industry James. as getting you, weekends second. difficulty let we explain quarter. better. the fourth you we lagging company, the to. people than We're Yes. and for and a still else where still me be getting we work have better late callouts behind, tell to where but good we to we whole the We're yet, in want does Dade that But in I everybody talking are Throughout even it's is nights. Miami

ongoing an but are still it's So we battle, making strides.

online systems say, and that rest today. ordering just We the industry improvement want we're of the closing have because where yet. we the are still in, of the because of not hours staffing. mid-January, staffing that being have be either have But seen to disrupted dining to we don't or shutting due starting had, lack We room off continues as

as a that off close to operations is the different at those purpose? gap change and making you're the regional of director Or – of helping done are Okay. staffing, for kind additional on And follow-up GM staffing? the aimed a then that on being the additional to role topic

also that retaining people done satisfaction it's people no there's guest a from in bringing doubt, talent. from our guests and Well, and is but talent perspective and being

staffing. So it about it. There's impact doubt no does the

we've in about bringing as RDO people first and Again, GMs. been we're our bringing in and level then in process improving as and successful also So top it's well existing all people GMs then the profit. at top

there's GM So more better levels. RDOs, or – have no RDOs better doubt we

retention, expect definitely we have to will of improved which decrease need amount in will We the opportunity have staffing. to

for And math then thanks in Okay. the Dirk, you and one comps. year February January year happen a and I what do January to February those two last that on what stack basis? Do comping you providing were have to year myself. just couldn't find were

Sure.

So January just was is now is – – this comp. this a confirm, year to two

it's was February. January X.X% up X.X% up and XXXX, in in So XXXX versus

price you the And Is to January were where that, some and have compared Great. of in right? you price additional in did Okay. February December. component that

We're Yes. that two to levels. from three Correct. XXXX lap price lapping or varying at Correct. XXXX moves we continue through will

exiting first the on I'll is and quarter. is XX% hear is It's really in gets there? to Could short just did us, a but It commitment Dirk, fourth anything component, in price XX% What months? over, to this the XX% few XX%, encouraging just to XX% you My turn between know the the you the else? over four a just question, quarter. bridge I there last you it margins wall the margins. Okay. like looks XX%

Sure.

was quarter all, first the took X.X% of in taken the mid-December. that pricing in So action fourth we late

didn't a pricing full perspective, that restaurant XXXX, get action fourth And quarter in of benefit of we the from the margins. really in margin so the

part is increases. action big of and in beyond. changes No a pricing So above rate wage that additional

the that a and by position, some issues end we as the said, where the drive pricing feel So have we have and units with to by labor in range XX% – our where combined we select to made rate But margins XXXX action we that in we need in recognizing just still we will us comfortable we to very competitive optimization took pricing additional action we at staffing increases put quarter. wage QX the late that last add that week, large, XX% of to the then took incentives. may

very much. right, All Thanks Best of so luck. good.

James. Thanks,

Thank you.

with question Please is EF Eddie proceed. next Our Hutton. from Reily

you wondering Thanks us would full what of guys. I as Hey, a included versus was question. for give be could a if refresh the some remodel? taking examples

Sure.

the Rich the color is new design. said, efficient first at refresh design and store are more we're store the looking kitchen on schemes, on as all, interior remodels for basis, test brand, current. retrofit updated least elements that the So of than the significantly mock to based updated Also, the so test

So remodel refresh noncustomer-facing the say, difference we really and between the what really scope more would elements. is the

the new which got elements fresh customers, this by infrastructure. will store floors, complete when "Hey, ceilings, will Pollo." a it's We've new exterior customers So of of drive and that – the outside like interior feel got certain of is we've paint. because renovation more all design of on pieces notice particularly have the both impact of We tell those they building, enough the of them,

Could comment it. on February you January of Got in and the this year? traffic

Sure.

that So far so range. we're traffic seeing in down mid-single-digit

segment know you that traffic. sure negative I'm is the As in that we seeing believe total

are is digits. single the we weeks where seeing traffic low actually So

to actually continue are going over that year. course we as traffic improve initiatives we see of growth to that implement the believe we So our the

for it you. guys. That’s me Thank

Thank you.

We question-and-answer have management reached over the closing session. turn for comments. back to our end would of the I to conference like

Thank investment we community. everyone, Well, from very support the And and safe. Thank much. our appreciate stay you. we shareholders you have please, again,

you. Thank does conference. today's This conclude

may disconnect lines thank participation. and time at your this your for you You