Fiesta Restaurant Group, Inc.
Q4 2015 Earnings Call Transcript
Published:
- Operator:
- Greetings and welcome to the Fiesta Restaurant Group Fourth Quarter and Full Year 2015 Earnings Conference Call. I would now like to turn the conference over to your host today, Ms. Lynn Schweinfurth. Thank you β Senior Vice President and Chief Financial Officer, you may begin.
- Lynn S. Schweinfurth:
- Thank you. Good afternoon and thank you for joining our call. Our fourth quarter and full year 2015 earnings release was issued after the market close today. If you've not already seen it, it can be found on our website, www.frgi.com, under the Investor Relations section. Before we begin, I must remind everyone that our call today will include statements that are not based on historical information. These forward-looking statements include, without limitation, statements regarding our future financial position and results of operations, business strategies, budget, projected costs and plans, and objectives of management for future operations. Actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements and we 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 our SEC filings. Please note that during today's conference call, we will discuss certain non-GAAP financial measures, which we believe can be useful in evaluating our performance. Any discussion of such information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP and a reconciliation to comparable GAAP measures is available in our earnings release. Now, I'd like to turn the call over to Tim Taft, President and Chief Executive Officer.
- Timothy P. Taft:
- Thank you, Lynn, and good afternoon, everyone. This afternoon, we announced the next step for the next evolution of our company. The eventual separation of our two great brands. And as we are early in our new fiscal year, we thought it's appropriate to review, what we believe to be our strengths and areas that will receive the most attention in 2016. As we've discussed as part of our 2016 operating plans, our big three, Pollo Tropical markets, Dade, Palm Beach and Broward counties, will for the first time in years have a full complement of broadcast media, with sufficient media links to help advance these robust restaurant groups. As we have mentioned repeatedly over the last three years, we've been allocating marketing dollars away from the big three to our other Florida markets. As we build those DNAs to a point, where they can be self sufficient from a media standpoint. In addition to our Florida markets being media self-sufficient, we will be increasing our marketing budget approximately 70 basis points, or 3.4% of Pollo Tropical restaurant sales. This not only adds about $5 million to the media coffers, but also from a percentage standpoint, it amounts to a 50% increase versus 2015. Our Nashville, Tennessee markets is now media efficient, with all Pollo Tropical restaurants units reflecting the big three concept. Atlanta will be media efficient by the end of this year and we expect to turn on media support by the beginning of Q4. In San Antonio, we turned on media for the first time last week. This will help us build awareness, as we double the number of Pollo Tropical restaurants to 10 in that market. With each brand, we have distinct strategic objectives; over the last four years we've made significant investments in remodeling and reimaging our Taco Cabana restaurants, and trained restaurant teams to produce at a higher level than they ever have before. We've created new kitchens and creating a new smaller building prototype for smaller markets that will improve unit level economics. We believe we'll shortly be in a position to ramp up our development of new Taco Cabana restaurants in smaller Texas markets with this lower cost prototype, one that has a lower cost of construction and better margins. We intend to develop a distinct Taco Cabana infrastructure with its own support mechanisms, so that Taco and Pollo will no longer compete with each other internally for resources. This particularly will be a victory for Taco Cabana, a brand that has been relegated to a cash cow and more recently have been reinvigorated through the hard work of the entire team in San Antonio with the support from the Fiesta Corporate Office in Dallas. We believe Taco has met the challenges, but it's often a position where it can control its own destiny, and show the world what a remodel and refocus on core operating principles can do to revitalize a 39 year old Texas icon. Taco Cabana from 2011 to 2015 average unit volumes improved from $1.7 million to $1.9 million, and adjusted EBITDA grew from $26.8 million to $39.7 million. We have now generated same store sales increase 21 quarters of the last 22 quarters. More importantly, we believe the separation of these two companies is in the best interest of our shareholders. We believe the separation will enable us to provide the singular focus critical for Pollo Tropical, a once in a generation brand. Since 2012, Pollo has doubled the number of its non-core restaurants. These initially have been lower volume restaurants, because they are in markets that did not have enough restaurants to justify spending the media dollars necessary to create the requisite level of brand awareness in such markets. As a consequence, these restaurants were forced to stand on their own and unable to advance, like other restaurants in the southern part of Florida. For those that are interested, you can see a clear demonstration of what we're talking about in our most recent presentation, which is in the Investor Relations section of our website. There's a vivid demonstration of the strong favorable response that occurs when we go on TV and sustain net presence over time. Now, let's discuss cannibalization at Pollo, the dilutive negative sales effect on existing stores as new stores are added to the market. In our view, you can't have it be a part of your development strategy without pointing out the pros and cons, the latter of which we believe are short term. It's fair to say that we've been cannibalizing sales of existing restaurants and existing marketplace, whenever and wherever we add restaurants, but we have done so with a strong belief in a much larger overall opportunity. One, we've added restaurants in areas that were underserved and needed more restaurants to increase media and operating efficiencies. Two, we've added restaurant locations to reduce sales pressure in existing restaurants, at which volumes have become incredibly high resulting in pressure on operating teams and impacting the guest experience. By the way, we added 12 restaurants over the last four years in South Florida, our highest volume markets and the average unit volumes of these markets still climb $500,000 per unit since 2012. Moreover, with material cannibalization, we still ended 2015 with 11 units in South Florida that did over $4 million in sales. Three, and finally, cannibalization in the Atlanta and Texas markets. We have been slowly, but steadily adding restaurants in Atlanta and are excited to see how the market performs when it goes on air after reaching the low end of media efficiency by the fourth quarter. In Texas, we've been adding restaurants at an unprecedented rate. You can imagine regardless of how well a restaurant performs, if you rapidly add more and more units to a market where previously you're unknown, and you're in the early stages of building awareness, you're going to cannibalize sales. Development in these markets follows the traditional reality of balancing supply and demand. In Texas, we're not as well known as South Florida. So, the demand is going to be lower for each time you add a new unit to the marketplace, without creating a corresponding increase in demand or awareness. You're going to have dilution. We faced a choice
- Lynn S. Schweinfurth:
- Thank you, Tim. Let me start with the summary of our quarterly financial results, after which I will discuss our updated full year 2016 operating targets. For the fourth quarter, we grew revenues by 14.9% to $179.5 million through sales contributions from new company-owned restaurant openings over the prior year and positive comparable restaurant sales at both brands. Note that the 14th week in the fourth quarter contributed approximately $11.8 million in total revenues. Pollo generated comparable restaurant sales growth of 0.4%, the growth consisted of a 1.5% increase in average check, but was offset by a 1.1% decrease in comparable transactions. Fourth quarter comparable transactions were affected by sales cannibalization, which negatively impacted transactions by about 1.9% in the fourth quarter. Average check was driven by menu price increases that positively impacted restaurant sales by 2.6%. The extra 14th week in the fourth quarter contributed about $6.5 million in revenues for Pollo. Taco generated comparable restaurant sales growth of 3.3% which consisted of a 4% increase in average check, which was partially offset by a 0.7% decrease in comparable transactions. The decline was primarily related to unfavorable weather which alone impacted comparable transactions by about 2%. Average check was driven by menu price increases that positively impacted restaurant sales by 3%, as well as the positive change in sales mix of 1%. The extra 14th week in the fourth quarter contributed about $5.3 million in revenues at Taco. Similar to the last several quarters, the implementation of new menu boards in February of 2015 contributed to the higher sales mix. We eliminated combo meals in the menu board entirely, which has continued to help shift our guest's ordering pattern, to place with additional side items including drinks. In terms of quarterly expense and related cost drivers, I will simply point you to our press release that went out after the market close this afternoon that provides explanations for each P&L line item on a consolidated basis. The 2015 provision for income taxes derived by using an estimated annual effective income tax rate of 36.4%, which was slightly lower than the estimated rate of 36.7% in the same period last year. It is important to note that the work opportunity tax credit was reinstated at the end of 2015, and is now applicable for 2015 through 2019. Net income decreased to $8.8 million in the fourth quarter of 2015 or diluted EPS of $0.33 as compared to net income of $9 million in the prior year period where diluted EPS was $0.34. Adjusted net income increased to $10.4 million in the fourth quarter, or diluted EPS of $0.39 as compared to adjusted net income of $9.1 million in the prior year period or diluted EPS of $0.34. Note that our fourth quarter 2015 results included an extra week in the quarter and we are estimating that extra week added diluted EPS of $0.07. Turning to brand margins, consolidated restaurant level EBITDA margins decreased in the fourth quarter by 80 basis points due to margin contractions at Pollo. Pollo's margins decreased by 260 basis points, given commodity cost increases, new restaurant openings and advertising expenses. Operating inefficiencies from the 20 newly opened Pollo restaurants during the third quarter and fourth quarters also led to higher labor and rent expense as a percentage of sales. On the other hand, Taco's margins improved by 100 basis points, as the brand experienced lower cost of sales, rent and other restaurant operating expenses, which were partially offset by higher labor cost and medical expenses. At quarter end, we had a cash balance of $5.3 million and after reserving $5.5 million for letters of credit, we had $73.5 million of borrowing capacity under our senior credit facility. We continue to be in compliance with all related covenants. Primarily, during the second half of 2015, we completed remodeling our Pollo restaurants in Nashville and Orlando, along with one of our restaurants in South Florida. And while it's still early, the results we've seen to date are on track to meet a five year payback on the investment made. We plan to reimage 15 Pollo restaurants in 2016 and look for an average 3% sales lift, and need a five year payback. With that, let's now discuss our financial expectations for the 52 week fiscal year 2016. We are providing a limited, updated set of operating targets, which do not include any impact or costs related to the proposed separation process. We expect comparable restaurant sales growth of at least low single digits at both brands. As a percentage of restaurant sales, we expect cost of sales to improve by approximately 100 basis points at Taco and 180 basis points at Pollo. We expect depreciation and amortization to be between $36 million and $38 million. We are anticipating an effective tax rate of approximately 36% to 37%. We are planning to open between 40 and 44 company-owned restaurants including 36 to 40 Pollo restaurants and up to four new Taco restaurants. And as Tim mentioned, we may close one Pollo restaurant. Finally, our capital expenditures projection continues to be between $95 million and $110 million in total, with an average investment for new restaurants exclusive of any land purchase of between $1.8 million and $1.9 million. As a reminder, we disclose a great deal of brand specific, financial and operating performance in our quarterly earnings release tables and in our SEC filings. This information includes brand specific comp and non-comp, restaurant average unit volumes, and income statement line item details. Turning to new restaurant sales volumes, in 2015, Pollo non-comparable restaurants generated AUVs of about $1.8 million. Tim has laid out the rationale for our development strategy, and why we think it is in the best interests of our shareholders. We continue to believe, that we will approach our investment return goals within a few years after turning on broadcast media in our new markets. While our South Florida markets continue to generate strong performance fairly quickly. You can see an example of what has happened, when we introduce media to new markets on our website, as Tim pointed out. In particular in Naples, Fort Myers we experienced AUV growth in low double-digits, over the first several years. The only new markets that will not be media efficient this year are Dallas and Houston, but we believe that we will be on media in both of these markets at some point next year. In closing, we would like to thank our operating and corporate support teams for their tremendous contributions in 2015. We continue to focus on what is right in the near-term to build long-term value for our shareholders. We look forward to detailed planning and making the investments needed to complete a separation of our business in couple of years, while still having the bandwidth to accomplish our priority goals for 2016. With that, let's open the line for questions.
- Operator:
- Our first question comes from Alex Slagle with Jefferies. Please state your question.
- Alexander Russell Slagle:
- I had a question on the proposed split of the brands, and just want to get your perspective on the efficiencies and inefficiencies to consider with this split in terms of supply chain and marketing and restaurant level labor and real estate resources?
- Timothy P. Taft:
- Yeah, Alex, I think, the β what we've been doing a very good job over the last three years or four years is speaking to the efficiency that we've created between these two brands. We don't believe that it's going to impact either one on a material basis, either from marketing or from supply chain. I think the opportunity that we're focusing on that we think is a big upside is the opportunity for how great these two brands can be when we do split them up. But we don't believe it's going to make a material impact on us.
- Alexander Russell Slagle:
- Okay. Thank you.
- Operator:
- Our next question comes from Will Slabaugh with Stephens, Inc. Please state your question.
- Will Slabaugh:
- Yeah. Thank you. I wanted to ask about Pollo, and it was nice to see the traffic turn positive, but I wanted to ask you also about the average ticket. Can you talk about the movement that you saw there towards the back half of the quarter β I know you had some promotional advertising out there. And then also as we got into 2016? And then lastly, how we should think about that trending throughout the rest of 2016?
- Lynn S. Schweinfurth:
- Well, Will, I β the promotions we ran, particularly in November and December and also in January, had a drag on the sales mix because the promotions were larger this year compared to the prior year. As we're moving forward, we are going to try and find opportunities for add on sales. We'll continue to value promote, probably not at the levels we were doing at the end of 2015. So, the sales mix you should see, likely a slight decline through the year, and that's really been a factor of opening up new restaurants and the fact that family meals take a while to really build in those new markets.
- Will Slabaugh:
- Got it. And a quick follow-up if I could on the proposed spin of Taco. Can you talk about why you chose to pursue a spin versus a sale? And then on the back of that β if you would be open to considering a sale as well, if this news were to spur some sort of interested party?
- Lynn S. Schweinfurth:
- Well, we will always look at any opportunities that we think will create the most shareholder value. I will tell you that the tax basis for Taco is considerably low, and so the tax burden associated with a straight sale would be difficult compared to a spinoff.
- Will Slabaugh:
- Understood. Thank you.
- Operator:
- Our next question comes from Jeff Farmer with Wells Fargo. Please state your question.
- Jeff D. Farmer:
- Thanks. Actually, I've a few myself, and just again to follow-up on the business separation, I'm just curious why you think it's the right time to pursue this now as opposed to maybe a year ago, when both concepts were putting up positive same-store sales and traffic?
- Timothy P. Taft:
- Well Jeff, I think β first of all, it was a year ago that β it was about a year, a year-and-a-half ago that we decided that we'd move into Texas. We believed that β or we thought that we were going to need the assistance of Taco Cabana to really help us either from a marketing standpoint or from an employee, team member standpoint. It really was not the case. We believe that taking a look at it a year ago, the position that we're in now puts us, we believe, it's the right time to do it, or at least announce the split. It's going to take us a while either way whether we started a year ago or whether we start now, it's going to take a couple years for us to be able to put ourselves in a position where we separate, but we believe right now, and feel strongly about the same-store sales and the potential that both of the brands; A, are putting up; and B, that they're capable of going forward. We don't believe that by any stretch we've seen the peak.
- Jeff D. Farmer:
- All right. That's helpful. And then the long-term earnings framework points to 10%, 12% revenue growth further benefited by margin expansion. I understand you're lapping that 53rd week, and it looks like you have a pretty big jump in D&A, but do you expect to deliver on those numbers meaning the 10% to 12% revenue growth and the margin expansion component of your long-term framework in 2016?
- Lynn S. Schweinfurth:
- Well, we've provided a limited set of operating targets that were included in our press release today and in our opening comments. We haven't really made an earnings comment, as that relates to our expectations for the year. We've given you our sales goals, and we've also reiterated in the past that we are expecting margin expansion at both brands. The area that is still to be determined is our G&A and our infrastructure cost that may be impacted during the year, as we start to transition, for future separation. But, as soon as we have a better perspective that we can share externally, we'll certainly do so.
- Jeff D. Farmer:
- I mean, just one more. It's on the 100 basis points to 180 basis points, or 100 basis points and 180 basis points of favorability at Taco and Pollo respectively. Lynn, how should we think about that hitting the quarter, is that a fairly stable cadence or does it grow or decline as the year progresses?
- Lynn S. Schweinfurth:
- Yeah. There is a little bit of a variation. But generally it's fairly, fairly comparable quarter-over-quarter.
- Jeff D. Farmer:
- All right. Thank you very much.
- Operator:
- Our next question comes from Joshua Long with Piper Jaffray. Please state your question.
- Joshua C. Long:
- Great. Thank you. I was wondering, if we might be able to talk about the pricing outlook, at both brands for the year, just given what's going on in the industry, you know, the competition is starting to tick up again, and so just curious on how you're thinking about pricing or maybe a high level mix promotion opportunities across the brands to support that low-single digit comp this year?
- Timothy P. Taft:
- Well, there's a couple things going on, Josh. First of all, the comp we feel really encouraged, because we have about a 50% increase in marketing dollars that we have to spend against Pollo Tropical versus a year ago. Every one of our Florida markets are now on TV for the first time, the majority of our β and our biggest producing restaurants are in South Florida and they will have a full complement of media being spent against it this year. So we feel strongly about what we're capable of for that brand. Let me add on top of that, there is a new creative β a new campaign, as I mentioned, just began. And with that we believe that β and we're actually pretty excited about what we're seeing, it's still early. But we think, the two of those things in combination will allow us to have positive outlook on same-store sales. And let me just say one other thing about Pollo, that Pollo β when we looked at this year in 2016 versus a year ago. The first quarter is the one that we've looked at with a good deal of hesitation because of such a huge first quarter a year ago. To be on position year-to-date, where we're with all the cannibalization, with suboptimal weather, and still being a little bit positive in transactions, that we view as a strong beginning versus a very strong quarter a year ago.
- Lynn S. Schweinfurth:
- And, I guess I would add, in terms of pricing that's been put in place both on the same date, at both brands, February 8, we added a percentage point of price at Pollo, a percentage point of price at Taco. And then as we kind of look out through the year, Pollo is not intending to take any incremental price for the balance of the year. So, that will be a consistent pricing through the balance of the year. And for Taco, we will likely take 50 basis points again in the spring time, and then there is a consideration of taking another pricing amount in the summer, but that's still to be determined. So, including the spring pricing, we're anticipating the cadence would be about 2.5% in the first quarter, 2.5% in the second quarter, and then it would drop down to about 1% in the third quarter and maybe about 1.5% in the fourth quarter.
- Joshua C. Long:
- Great. Thanks. And Lynn, those numbers were on Taco specifically.
- Lynn S. Schweinfurth:
- Yeah.
- Joshua C. Long:
- How much menu price do you have now at Pollo?
- Lynn S. Schweinfurth:
- At Pollo, as of February 8, we have a percent, there was no pricing essentially as we started the year.
- Joshua C. Long:
- Okay. That's helpful. And then in terms of understanding the COGS guidance there. It was helpful to know that, it's more or less even across the year. As we think about that on a consolidated basis, I mean, is thinking about that, in terms of just weighting based on the sales split between the two brands, is that still a fair way to think about it, I mean, on a consolidated basis that would work out to something in that 140 basis point range?
- Lynn S. Schweinfurth:
- Yeah. I think that's fair and obviously some of our costs are variable. Although, the majority are locked in. But there will be some minor variations to the year based on what we know today.
- Joshua C. Long:
- Okay, great. And another topic that seems to come up a lot lately, is just the outlook on the labor market. And so, I was wondering if you might be able to update us in terms of how you are thinking about that across your brands in terms of some of the training stories you've been able to or have been focused on bringing out and then just maybe the opportunity for pure wage inflation across your restaurant base?
- Timothy P. Taft:
- Well, first of all, I think with respect to competition, it is getting more and more intense. It seems like every time somebody wants to open up a new restaurant, a new concept, they say we're going to choose Houston to begin with, so Houston is a challenged market. We're also seeing in Houston little signs of β or some initial signs of the impact of oil now being underneath $25. But by and large, one of the things that we β one of the big successes that both brands can point to versus this time a year ago is putting recruiting processes in place, people dedicated and teams dedicated to recruiting, and with the new training stores in each of the different DMAs that were opening that our retention is getting better. And so with better retention and more people getting into our pipeline, we feel very good about the position that we're in versus a year ago.
- Joshua C. Long:
- Great. Thank so much.
- Operator:
- The next question comes from Brian Vaccaro with Raymond James. Please state your question.
- Brian M. Vaccaro:
- Good evening, and thanks for taking my question. Tim, I wanted to ask about the advertising spend increase at Pollo Tropical in 2016 and just confirm I heard you say that the spend is going to go up 70 basis points in 2016 year-on-year. I think that's up a little bit from the 50 basis points you discussed on your last call. And if that's the case, can you give some color on where that incremental spend will be relative to the original plan?
- Timothy P. Taft:
- Well, first let me say that, we are going to be spending additional dollars, and that we said that it was going to be a β it's up as much as 70 basis points versus year ago, which the math adds up to a 50% increase. The money is going to be spent evenly across our system. As we mentioned in the call that, we will first β we've already started being on air in San Antonio, which is a little bit of an investment spend, because there's four restaurants in that marketplace now, and we'll have as many as 10 restaurants by the end of the year. We wanted to demonstrate the impact in the new market of media, we're going to be on the low end of media efficiency in Atlanta. And so, we plan on by Q4, of being on air maybe a little bit of investment spending there. But by and large, Florida, all the markets in Florida will be self-sufficient because of the additional dollars that they'll have as well as our ability to put some pressure on our biggest three markets, the big three down in Dade, Broward and Palm Beach. So I think, it's really across the board. I think the big message is that for the first time in a handful of years that we will be putting appropriate levels or pressure on the big three, which represents such a β still a huge opportunity to move the needle.
- Brian M. Vaccaro:
- Okay. That's helpful. And if you look at those, just the big three South Florida markets, can you give a sense of how much you've been underinvesting and where that's going year-on-year, obviously it's going up more than 50%, it would seem, but can you give directionally a sense of the magnitude of increase year-on-year, just in the big three?
- Timothy P. Taft:
- I think the way that we have been explaining it, Brian, is that we've been β over the last four years, we've been taking money away from the big three, and investment spending it in the other emerging markets as if they had enough restaurants to be media efficient. So as each year has gone by, we've studied and been very careful about how that market responds. So first, we might have taken out a certain kind of radio, and then we took out billboards and then we took out maybe radio or TV weight to be able to take as much money out of the market without adversely impacting it, and spending it in the other markets. So clearly given the average unit volumes of the South Florida big three, it'd be impossible to spend all of that money on those markets. But rest assured that the money that we're going to be spending on it in 2016 will be the most it's seen in the last five years.
- Brian M. Vaccaro:
- Okay. All right. That's helpful. One other quick one if I could, I just wanted to go back to the quarter-to-date period so far at Pollo Tropical. And I believe the $3.99 value promotion you ran that ended in late December, I believe, can you remind us what was featured sort of in the January or the quarter-to-date period? And then one other one, did the first seven weeks that you mentioned in that quarter-to-date, did that benefit from higher advertising spend levels or is that just starting now? Thank you.
- Timothy P. Taft:
- Well, I'll answer the second half of it, the new weight levels began with creative that β especially the new creative that started in early February. And so, I think, that's probably when the biggest part of the weight, that and the new creative has really made its presence known.
- Lynn S. Schweinfurth:
- Yeah. So, to Tim's point, for the majority of the window that we've reported year-to-date, we did not have the new creative on air. And we have more incremental weight with the new creative currently underway. And in terms of the promotion itself, we promoted the spinach chicken wrap at Pollo, the current year versus last year we were promoting Tropical Lite and that did have a negative effect in terms of sales mix during the initial part of the year.
- Brian M. Vaccaro:
- Very helpful. Thank you.
- Operator:
- Our next question comes from Nick Setyan with Wedbush Securities. Please state your question.
- Nick Setyan:
- Hi. Thank you. Yeah, the Pollo comp, actually starts off the year pretty well, the Taco definitely starts off the year pretty well with easy comparisons, higher weights, what's the thinking behind I guess, going to the guidance in terms of the comp of just low single-digit, as opposed to what you had previously, which was low single-digit to mid single-digit?
- Timothy P. Taft:
- Well, I think, first of all, we're coming off of what was a challenging fourth quarter of last year, we recognize that we do not operate in a vacuum, that everybody else is kind of in the same boat and people are discounting and spending. And so our position was for us to go over what was a year ago, we can't forget that, a year performance for both brands, to roll over those with 2% to 3% increased projections is still a huge accomplishment. So, I think, we look at it and say let's make sure that that's something that's achievable and given the fact that we didn't know and won't know really for a little bit the impact that the increased weight and the increase β or the new creative, what impact that's going to have on the overall sales mix. That'll be something that we'll be discussing obviously this time in a couple, three months.
- Nick Setyan:
- Fair. Lynn, on the labor at Pollo. Obviously you have less pricing, but hopefully we should get transactions to contribute more. We have not just the pressure from inefficiencies as we build newer units, but we also should have some tailwinds from some of these builds that were in the class of 2015, 2014 actually contributing higher margins. You obviously have to have some labor pressure at the same time, so obviously there is a lot of kind of puts and takes. How should we think about all of those things in terms of as a percentage of sales going forward with all of these new stores here in Q4, we're able to do 100 bps of deleverage. Is that the right level to think about, could it be a little bit lower than that, maybe higher than that?
- Lynn S. Schweinfurth:
- Well, on a consolidated basis, that would be lower than that. I would remind you to that in the fourth quarter, we actually had 20 new restaurants started to open either in the fourth quarter or the third quarter. So we did have our largest number of units within the short timeframe, so that definitely impacted the labor results, but we do expect a drag at Pollo to be partially offset by Taco.
- Nick Setyan:
- Well, just talking about Pollo, obviously β I actually think 100 bps of deleverage is pretty good, given all the new stores that you opened in Q3 and Q4...
- Lynn S. Schweinfurth:
- Right.
- Nick Setyan:
- Is that at Pollo kind of a higher β kind of the upper end of that to think about or can it be a little bit better going forward or could that actually β I mean because we should have some tailwinds from the stores that we opened already, offset by less pricing, so there's lot of moving parts, so how should we β what do you think is the right way to think about?
- Lynn S. Schweinfurth:
- Well, if I could answer the question this way, your estimate is probably pretty good, but as we move through the year and we change our perspective, I will certainly update you in the future. But I think based on what we know now, your estimate is probably pretty good.
- Nick Setyan:
- Okay. And then just last question, on the new unit volume at Pollo, is that just very kind of backend loaded in terms of the openings, did the 14th week have anything to do with the math there in terms of the 390?
- Lynn S. Schweinfurth:
- Yeah. I would say it is a little bit backend loaded, because of the 20 new restaurants that we opened at the end of the year. So, there is a little bit of that effect, and there's lower seasonality, particularly in the non-Florida markets in the second half of the year.
- Nick Setyan:
- Got it. Thank you.
- Operator:
- There are no further questions at this time. This does conclude today's conference. Thank you for your participation. You may disconnect your lines at this time.
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