EPL Intermediate, Inc. (“El Pollo Loco” or the “Company”), parent company of El Pollo Loco, Inc., has reported results for the 13 weeks ended March 30, 2011.
El Pollo Loco reported operating revenue for the 13-week period ended March 30, 2011 of $66.9 million, which is a decrease of $1.1 million, or 1.7%, from operating revenue for the 13-week period ended March 31, 2010 of $68.0 million. Operating revenue includes sales at company-operated restaurants and franchise revenue.
The decrease in operating revenue was primarily attributed to a 2.4% decrease in system-wide same-store sales for the first quarter of 2011 compared to the first quarter of 2010. For the 13 weeks ended March 30, 2011, same-store sales at company-operated restaurants decreased 1.7% and same-store sales at franchise-operated restaurants decreased 3.0%. Restaurants enter the comparable restaurant base for the calculation of same-store sales the first full week after the 15-month anniversary of the opening.
Commenting on the Company’s activity during the first quarter of 2011, Steve Sather, president and CEO of El Pollo Loco, Inc., said, “We are energized by the momentum underway across our system. In addition to introducing new tools to assist our restaurant operators in providing our guests an exceptional experience, we are developing crave-able new menu items that highlight our commitment to freshness and bold flavor, collaborating with our new advertising agency, goodness Mfg., to create a fully integrated, dual language campaign scheduled to launch in July, and partnering with a leading global design firm, Gensler & Associates, to develop a new restaurant prototype and remodel program.
“On the marketing front, we believe we continued to provide value while protecting total average check in the first quarter of 2011 through limited time promotions such as our $5.00 Loco Cash Card, which offered guests $5.00 off their next family meal with the purchase of any family meal.
“At the end of January, we introduced two limited time fish taco offerings, a Classic Baja Fish Taco and a Spicy Avocado Fish Taco, featuring sauces prepared with El Pollo Loco’s signature salsa recipes. These tacos exceeded our sales expectations and provided new menu options for our guests who prefer fish or observed Lent.”
Operating income increased $1.3 million, or 31.6%, to $5.7 million for the first 13 weeks of 2011 from $4.4 million for the first 13 weeks of 2010. This increase was primarily due to decreases in both product costs and advertising expenses, as well as expenses related to store closures in the 2010 period that did not occur in the 2011 period. The increase was partially offset by an increase in severance expenses and group medical insurance expense.
Despite having a loss for the 13 weeks ended March 30, 2011 and March 31, 2010, we had an income tax provision of $1.1 million and $0.7 million, respectively, primarily related to the effect of changes in our deferred taxes and the related effect of maintaining a full valuation allowance against the increase in certain of our definite life deferred tax assets as of March 30, 2011 and March 31, 2010.
As a result of the factors cited above, we incurred a net loss of $4.7 million for the 13 weeks ended March 30, 2011 compared to a net loss of $5.6 million for the year ended March 31, 2010.
Commenting on the remainder of 2011, Sather said, “While we expect some continued economic challenges in 2011, since the end of the first quarter of 2011, we continue to see a modest improvement in our company-operated restaurant same-store sales to date which helps to fuel our optimism going forward. Together with our franchisees, we are working to build a strong foundation that will support our future growth through a laser-like focus on delivering our guests exceptional quality, service and cleanliness; crave-able new menu items; compelling new advertising that resonates with consumers; and a new restaurant design that we believe can support our future growth in a variety of real estate formats.”
As previously announced, the Company intends to pay in full the Mandatory Principal Redemption Amount of its 14½% Senior Discount Notes on May 15, 2011. The majority of the funds to pay the Mandatory Principal Redemption Amount will be provided through an equity infusion from Chicken Acquisition Corp., the ultimate parent of the Company. The Company is beginning to explore alternatives it may have to opportunistically refinance its existing debt from a variety of sources.
El Pollo Loco’s restaurant count changes through April 30, 2011 are as follows:
| Company | Franchise | Total | |||||||||||||||||||
| December 29, 2010 | 171 | 241 | 412 | ||||||||||||||||||
| Opened | 0 | 0 | 0 | ||||||||||||||||||
| Closed | (1) | (6) | (7) | ||||||||||||||||||
| April 30, 2011 | 170 | 235 | 405 | ||||||||||||||||||
Addressing the Company’s expansion plans for the remainder of 2011, Sather said, “We plan to open one to two company-operated restaurants and anticipate that our franchisees will open one to three restaurants, all in markets where we now operate restaurants. We currently anticipate more expansion after 2011 assuming the economy recovers and as we finalize our new restaurant design.”
System-wide Sales
Included above is system-wide same-store sales information. System-wide sales are a financial measure that includes sales at all company-operated stores and franchise-operated stores, as reported by franchisees. Management uses system-wide sales information internally in connection with store development decisions, planning and budgeting analyses. Management believes system-wide sales information is useful in assessing consumer acceptance of the Company’s brand and facilitates an understanding of financial performance as the Company’s franchisees pay royalties and contribute to advertising pools based on a percentage of their sales.
El Pollo Loco is the nation’s leading restaurant concept specializing in flame-grilled chicken. Headquartered in Costa Mesa, California, El Pollo Loco, Inc. operates a restaurant system comprised of 170 company-operated and 235 franchise-operated restaurants located primarily in California, with additional restaurants in Arizona, Connecticut, Georgia, Illinois, Nevada, Oregon, Texas, and Utah (as of April 30, 2011). El Pollo Loco’s menu features the Company’s signature citrus-marinated, flame-grilled chicken in individual and family-size meals, along with a variety of contemporary, Mexican-inspired entrees. Such entrees contain the Company’s signature chicken as the central ingredient and include Pollo Bowl entrees, pollo salads, signature grilled burritos, tacos, and chicken tortilla soup. Chicken meals are served with a choice of corn or flour tortillas, freshly-prepared salsas and an assortment of side orders.