Good day ladies and gentlemen, and thank you for standing by. Welcome to the El Pollo Loco’s First Quarter 2020 Earnings Conference Call. At this time, all participants have been placed in a listen-only mode and the lines will be opened for your questions following the presentation.

Please note that this conference is being recorded today April 30, 2020.On the call today we have Bernard Acoca, President and Chief Executive Officer and Larry Roberts, Chief Financial Officer.And now I would 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 2020 earnings release.

If not, it can be found at www.elpolloloco.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 are taking in response.

As well as marketing initiatives, cash flow expectations, capital expenditure plans, and plans for new store openings.

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 expect.

We refer all of you to our recent SEC filings 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 2020 tomorrow and we 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 Acoca, I'd like to note that Bernard and I are of course in different locations today.

Please bear with us if you experience any slight delays or minor audio quality issues.Bernard, please go ahead..

Thanks, Larry. Good afternoon, everyone, and thank you for joining us. I'd like to start by saying that while we will briefly touch on our first quarter results, our primary focus on today's call will be the impact that the COVID-19 pandemic has had on our business and the strategic actions we have taken and continue to take in response.

2020 was off to a strong start with our marketing focus driving comparable restaurant sales and transaction growth, building upon last year's momentum.System wide and company operated comparable restaurant sales were up 3.7% and 4.2% respectively through February.

This early sales performance enabled us to deliver pro forma adjusted earnings per share of $0.16 for the quarter. Prior to the impact of COVID-19 we felt very optimistic about our business and the ability to sustain momentum over the balance of the year.

Obviously, COVID-19 changed things.Following the slowdown in March, system-wide comparable restaurant sales for the quarter ended down 1.5%. From March 1st through March 25th system comparable restaurant sales were negative 15.5 % with the last two weeks slightly better than negative 30%.

As the realities of the COVID-19 pandemic set in we responded rapidly and in unprecedented ways.

In keeping with state and local regulations we began operating on our drive-through where available, take out, mobile pickup and delivery basis only.Historically, we have had a sizable off premise mix of approximately 78% including roughly 45% through our drive-through windows, 30% take out, and 3% delivery and thus we were relatively well positioned to operate in this new environment.

We're pleased with the trajectory of our recent sales trends.

While second quarter to date system comparable restaurant sales are down 23%, we have seen sequential improvement in each of the last six weeks with system same-store sales over the last week expected to come in at around negative 10%.I have always felt that it is during difficult times that you truly understand the capability and soul of an organization.

I've worked in some great companies with exceptional people, but I can honestly say that I've never been more proud of the teams and I am my El Pollo Loco family during these last few months.I'm blest to be in the trenches with this phenomenal group of people who are working tirelessly to protect their fellow employees, franchisees and customers while providing a much-needed and valued service to our communities.

I am especially grateful to our restaurant teams.

We're on the front lines everyday working to provide an essential service to our customers.Food is a necessity of course with made scratch healthier food like delicious meals we offer to be a source of comfort and reassurance during these stressful times and provide a small bit of normalcy for people whose lives have changed so dramatically in such a short period of time.

We take this responsibility seriously.I can't thank our restaurant teams enough for their dedication and commitment to one another as well as their customers. Our top priority will always be the wellbeing of our team members, franchisees and customers and we have taken critical steps to ensure the health and safety.

At the restaurant level we have provided and mandated the use of gloves and masks to all company and franchisee employees, and has instituted enhanced cleaning procedures at all restaurants which are now occurring with greater frequency.In addition, we have installed Plexiglas shield at cashier station in all company restaurants and has made them available to franchisees as well.

In our drive-throughs we have implemented contact less payment procedures to keep our transaction as hands-free as possible.Finally, we're purchasing infrared thermometers for the system and we'll begin requiring that all employees undergo a temperature check before being allowed to work a shift.

These and other measures are designed to ensure a safe work environment for our employees and protect our customers.I have spoken frequently of our people first culture and our hearts centered leadership approach, both of which have become even more crucial in the current climate.

We remain committed to helping our people take care of themselves and their loved ones. To this end, we have provided two weeks of paid time off to our restaurant employees over the age of 65. Extended sick leave benefits to employees impacted by COVID-19.

And we will be offering low cost heli-doctor services to our restaurant team members might otherwise have difficulty accessing affordable healthcare.For our HIV partners we've deferred 50% of April royalty as well as their 2020 remodel and new build requirements.

In addition we have established a support team to help franchisees access benefits provided by the Cares Act legislation, which three legal consultations for our smaller franchisees we don’t readily have access to these services.Our employees and franchisee partners are family and the best we could ensure that we all get through this is by taking care of each other.

In response to the COVID-19 crisis, we quickly altered our approach to the business to ensure that we not only weather the storm but are well positioned to take advantage of the future recovery.On the marketing side, we've shifted away from our standard eight week LTO calendar, to a program that focuses on four key things; delivery, family meals, value and digital e-commerce.

In early April we launched a one-of-a-kind free delivery; however long is necessary, campaign with Postmates.

In order to make it as easy as possible for our customers to access our food as they shelter in place.While other concepts offer free delivery for limited windows, we are the first to commit to offering it over an extended period of time in order to assist our customers as much a possible while they are confined to their homes, at least partially, as a result of this promotion and our partnerships with GrubHub, DoorDash and Uber Eats.

We have achieved record delivery sales, with delivery as a mix of our total sales tripling.The second theme we're highlighting is our complete family news. Families are spending more time than every at home. And what they are looking for is healthier and affordable meals that the entire family will love.

In addition to our long standing $20, 10 piece familiar dinner promotion. We have recently introduced a special weekend offer exclusively for our loyalty members.

12 pieces of legs and thighs along with three large sized tortillas or chips and salsa at the same $20 price point.Not only did this meal provide incredible value, but this offering to our local rewards members marked a significant step in the evolution of our loyalty program and our targeted marketing capabilities.

What is especially exciting is that the sales from this loyalty offer, look to be highly incremental. Overall, these family meal offerings have resonated very well with our customers resulting in record high family chicken sales mix during the last several weeks.The third marketing theme we are highlighting is one of value.

The importance of the strong value offering goes without saying in this environment, especially given the growing economic pressure our customers are facing. To best the system we will soon be promoting our extremely popular $5 for 5 new combos which have been successful part of our sales mix since they were launched last September.

We believe the customers should not have to trade quality for price and expect a $5 [indiscernible] combos to resonate strongly with value seeking customers looking to maximize their budget.The final marketing theme is the growing importance of e-commerce and the digitization of our business.

If you can recall, last July we re-lunched our e-commerce website and mobile app and it has continued to experience significant growth which has only been accelerated by the crisis.

In the course of 5 weeks we managed to nearly triple our e-commerce business and are setting new record levels of participation in our loyalty program.Lastly, with over 20% of our media budget now focused on social media and digital.

We believe we are well positioned to capitalize on where our customers are spending the majority of their time these days. We believe these four marketing focus areas have been key to efforts to first stabilize and then begin improving our sales over the last five to six weeks.

As important as these marketing initiatives have been to our sales results, just has critical has been the progress we've made on the operations front.In addition to protecting our employees we've placed a great deal of focus on our drive-through operations which now make up over 70% of our sales mix.

Changes in labor deployment and other efficiencies have enabled us to enhance our drive-through speed and accuracy.

This will continue to be a major focus as we believe that better drive-through performance could be a significant sales driver and competitive advantage for us in the future.Now, I'd like to turn the call over to Larry for a brief discussion of our current financial operations..

Thanks Bernard. In terms of our financial response to the COVID-19 pandemic, our focus has been on augmenting our liquidity. As previously announced, a cautionary measure we fully drew down on our $150 million revolving credit facility adding $34.5 million of cash to our balance sheet.

In addition, we have temporarily suspended all capital expenditures, reevaluated federal support G&A and fine tuned our restaurant labor model based on dining room closures and lower sales volume.Lastly, we are deferring company payroll taxes as permitted under the Cares Act and negotiating lease deferrals with many of our landlords.

Based on these and other actions taken, we feel very good about our financial flexibility and are pleased that our current sales levels we are cash flow positive before these deferrals.In keeping with suspending all but central capital expenditures, we have temporarily halted company operated new development and remodel activity.

In addition, as Bernard mentioned we have deferred all franchise 2020 new units and remodel obligations until 2021.

As a result, in 2020 we expect to build one new company owned restaurant which is already in progress and two franchise restaurants, one of which was completed in the first quarter and the other is in progress.And finally, as previously announced, given the uncertainty surrounding the duration of the impact of COVID-19 we have withdrawn our previously issued guidance for fiscal 2020.

We hope to have more visibility and be able to revisit the topic of guidance in the near future.Now, I'd like to turn the call back over to Bernard..

Thank you, Larry. Before I open up the call for some Q&A, I'd like to reiterate how incredibly proud I am of the extraordinary efforts of our employees and franchisees. They have adapted unbelievably quickly to this new environment and have rallied with the El Pollo Loco family to continue providing a valued service to our loyal customers.

We are grateful to be able to do our part to support our communities during these trying times.I feel very good about our position today. Our healthier and affordable menu offerings and ever strengthening axis modes are resonating with customers and we are working hard to capitalize on new opportunities as the economy recovers.

For these reasons, I look forward to coming out of this crisis even stronger on the other side.This concludes our prepared remarks. We would like to thank you again for joining us on the call today. And we are now happy to answer any questions that you may have..

Thank you. [Operator Instructions] Your first question comes from Jake Bartlett. Please go ahead..

Great, thanks for taking the question.

My first question is on the health of the franchise system and may be as part of your answering that, I'd be curious to hear what kind of leverage levels do you think the average might be across the system? But also what breakeven in terms of same-store sales at the restaurant level, what that number is? I know you mentioned being in a positive free cash flow position yourself, but what through the franchisees and after royalties, et cetera, what is the level which they are kind of starting to breakeven?.

Yes Jake, I'll take that question. So, I've done – obviously the breakeven work company restaurants which I think can translate the franchise. Obviously, franchisees pay royalties at the same time, they're probably slightly higher on pricing.

So on a company basis, I estimate at the restaurant level we're cash flow positive somewhere around the negative 30%, 35% level is where we're cash flow positive at the restaurant level.

So again, you could probably give a sense that the franchisees are probably roughly in that same ballpark.In terms of the financial condition of the franchisees, there are a couple of smaller ones that I've talked about a little bit challenged, especially those that have in line restaurants, they'll have drive-throughs.

But overall, I mean, quite frankly the system seems to be in good health and certainly the improved performance over the last five or six weeks. I think it has at least put our minds at ease a bit and franchisees minds at ease that this is something that they will be able to get through and we'll all get through it..

Got it and as a follow up to the kind of the breakeven question, you mentioned free cash flow positive getting comfortable with that at the company level.

Does that include the deferral of royalty and rent from the franchisees next couple months?.

It includes a deferral of royalty. It does not include any lease deferrals or abatements that we may negotiate. We are currently at current levels cash flow positive before any lease deferrals..

Got it. And then lastly, as we look to Texas, have been opened up dining in at 25% capacity. What is your plan or your franchise plan for reopening in Texas, I'm curious to whether 25% capacity is enough given the shore configurations to make it worth opening.

How are you looking at that?.

So I'll take that one. Jake, I think on that one, we're not necessarily going to always follow the timing of whenever a state or city or municipality chooses to open up.

The thing that we always want to do is make sure that our employees and our customers are - their safety is always the driving decision behind whether we choose to open or not.And, quite frankly, given the amount of business we've been driving through our drive-throughs, through delivery, through mobile pickup, through takeout, we're not as hard pressed to necessarily follow Texas's schedule.

So we're going to take more of a gradual approach, look at it state-by-state, city-by-city, and not necessarily be automatically tethered to whatever a state decides. And quite frankly, at a 25% capacity opening, certainly given what we're doing in another channels, we don't expect it to negatively affect us in any kind of meaningful way anyway.

So that's kind of the general approach we're taking going forward..

Great, I appreciate it..

Thank you. Your next question comes from David Tarantino from Baird. Please go ahead..

Hi, good afternoon. Hope you both are doing well. Just wanted to ask about a couple of the sales drivers you mentioned Bernard. I think first the family meal focus, and I think you made the comment that those transactions you think are highly incremental.

So I was wondering if you could elaborate on that and what type of either new customer or increased frequency you might be seeing behind that program and what it means for you going forward?.

Sure. So David, when we run that offer, what we typically see is anywhere between maybe a 3% to 5% incremental same-store sales lift during the days, during which we run it, that's one.

Two, the thing that gets us really excited and why we're so optimistic about the future is because if you can recall in the middle of last year we started laying down the foundation for the digitization of our business.We re-launched our website, we re-launched our mobile app, we shifted our media strategy, which used to be entirely dependent on television and print to digital and social media, which now comprises 20 - over 20% of what we spend on media.

And the reason why I'm bringing all that up is because what we're starting to see are significant synergies between our family chicken business, and the access modes in which we're making investments.So, we're starting to see for instance, on our e-commerce channel 50% of what we are selling on the e-commerce channels are family chicken meals.

50%, nearly 50% of what is going out the door with delivery are family chicken. And you know, as well as I haven't covered our business for a while that one, that's our core product, so our biggest differentiator, but two, quite frankly, when we sell more of that product, it's a lot better for our business for a bunch of reason.

We turn more products, less waste, fresher plumper product goes out the door, et cetera. So we're highly encouraged by what we're seeing in terms of the strategies that we put in place there..

That's great.

And then, I guess maybe a bigger picture question that perhaps ties into the first question is, I think you mentioned sort of getting beyond this crisis in a better competitive position, but just wondering what your thoughts are on what the brand and business model might look like on the other side of this crisis, the difference I mean than where it was heading into the crisis, and how you think that will be a better position than where you were previously?.

Well, I think that what this crisis has done if there is, quite honestly any silver lining in any of this, is that, it has quite frankly accelerated the channels and the work that we were doing to continue to make progress in those channels at a rate that quite honestly surprises in a good way.

When I see our delivery business triple, when I see our e-commerce business triple, when I see our loyalty program starts to reach double-digit participation level, what it really points to me is, wow, all these foundational elements that we have been working on for the past two years, I feel very fortunate that maybe some of its Monday morning quarterbacking a little bit, but the fact that we have authority well underway is indicative that one, it was the right thing to focus on, and two in the face of this crisis they're proving to be instrumental to our continued progress.So to put a fine point on your question, I do see that the continued investment and acceleration of our digital business via e-commerce, via delivery, the loyalty program will continue to be focused on and invested in.

I continue to see a renewed and actually - a renewed focus on the drive-through, where we have been really maniacally focused on window time and increasing speed of service and accuracy. And we've been doing that labor deployment and other methods back of house to drive efficiencies there.

So I think you'll continue to see that become a major area of focus.And quite honestly, the third thing that we're asking ourselves is really, how do we need to adapt and adjust in this new world? We hope that dining will come back strong, but no one has a crystal ball to know how quickly that will occur or not occur.

So therefore, we are starting to really look at new channels that we haven't necessarily played in in the past. So our curbside delivery is something that we're testing as well as continuing our focus around delivery expansion.

So there are things like easy catering that we're looking to do in the next couple of months, which I think will be the last compliment for a full suite of third party aggregators, et cetera. So those are some of the ways that we're looking at it.

Larry, I don't know if you'd have anything else to add?.

No, the only thing I would add is, the other thing we're starting to think about is assuming things continue as they are. We expect to come out of this in good financial condition.

And really start thinking about what the future has in terms of new development, and how we execute against that because we do think one thing that will come out is there will be development opportunities that may not have existed previously, and certainly probably supply of restaurants will be less than they were in the past.There could be real estate opportunities and so start thinking about the expansion, once we come out of this along with all the things that Bernard talked about on the brand the marketing side, from a development standpoint, how quickly do we want to move? We're going to be in good financial position, how quickly and how best to take advantage of potentially situation that will be there as we come out of this.

So that's the other piece that we're thinking about..

Great, thank you very much..

Thank you. Your next question comes from Andy Barish from Jefferies. Please go ahead..

Hey guys, good to hear from you. Wondering just following up on the Texas versus Southern California, are you seeing demonstrable differences and sort of the sales progression in that market where obviously you don't have the brand awareness and penetration like you do in Southern California..

Well, I'll talk to Houston and more specifically, because I think the thing that we're seeing there quite honestly, that is hard to parse through. The impact that the oil situation has had on that DNA of that that city and how to store through how much that is affecting the business versus everything else on top of it.

So yes, to answer your question there in Houston, we have seen performance that is trailing what we are seeing elsewhere.Dallas hasn't been as affected as Houston, but has been trailing as well. So but Houston is where we're keeping a little bit more of a watchful eye right now, just given that the oil economy has been particularly harder hit there.

Well do you have anything else you would add?.

No, I think that's right. The only thing I would add is, I think what we saw in Texas was a larger drop off relative to the base business.

And it has been coming back also, because as we talked about last five or six weeks, sequential improvement, we've seen it also in Texas, but the current levels are still a little bit below or below our base business..

Understood and then on the new sort of labor deployment that's been going on you guys have started, this last year with the new chicken cooking and kind of a focus on some different things with your labor.

There's some learnings and kind of some permanent changes, maybe that, that come out of this, as the business continues to evolve?.

Yes, that's absolutely, so one of the things that we've been hard at work on is our deployment maps and our restaurant where we're not only just focusing on what labor deployment looks like in the drive through, but what deployment looks like in every role in the restaurant.

I mean, this is starting, I describe it as starting to look like a, beautiful well coordinated ballet where I have to admit, two years ago sometimes they look a little bit more like organised chaos.And so, what we are doing is we've got not only deployment maps, but very clear role definition around each restaurant team members responsibility and how those are supposed to be executed with accompanying training programs to ensure that that level of coordination occurs.

So I just think we've been taking it up and ratcheting it up another level. And certainly the crisis has, quite frankly, not just in this area, but it across the board.I think the thing that I've been just so proud about is we have probably done, I would say a good, you know, 8/12 months work in what feels like six or seven weeks time.

And a lot of things that were - that was work already underway, we've just managed to really accelerate and focused on as part of just kind of our vital few focus so that's the best way I could describe it you Andy..

Got you. And just one more on the free Postmates deal. How is that, being paid for if you will, I know you guys, had worked on sort of some curated venues and higher prices for the third party aggregators.

How is, that progressing or specifically on that on that offer?.

So, we've had our bifurcated menu strategy in place for a while now where naturally if you want the full menu you go to our elpolloloco.com and you pay essentially what you would pay in a restaurant.

If you go to any one of our third-party aggregators Postmates included, it is a more curated menu, have your concentration on family chicken meals, and you pay anywhere between let's call it a 15% to 20% premium. That hasn't changed.We believe that's still serving us in good stead.

In regards to Postmates, they had been a terrific partner and one, in working with us provide what – quite honestly we feel is a unique, one of a kind promotion that we have put a lot of television effort behind, which is free delivery from now to however long is necessary.And it was intended to really be a very consumer centric approach, recognizing full well that people are confined to their homes.

And this is just a small, humble gesture to be able to help our customers during a very difficult time. But we have – what inspired this was that we tend to see virtually all brands, offer free delivery for maybe two weeks to four weeks at a time.

From a customer standpoint, it's really tough to track who's offering what, as a result, switching behavior tends to occur, you tend to go wherever the free delivery thing is.And so, we said is let's try to take that off the table. And Postmates took a very enlightened approach in working with us.

And so, we are willing to offer this for the foreseeable future, until we kind of work ourselves through the worst of this crisis. And so, we plan to continue offering it at least through the early part of the summer..

Thank you guys, stay well.

Thank you. Your next question comes from Sharon Zackfia from William Blair. Please go ahead..

Hi, good afternoon. It sounds like you've got pretty impressive ramp and the comps that you've gone throughout April.

And you gave some good color in the commentary, but is there any part of your business that's ramped more quickly? And as you gone throughout April, if you look week-to-week, whether it's been, a part of the menu mix or a day part or a channel, I think that would be helpful to know.And then kind of building on Andy's question on labor efficiency mean, how many hours have you been able to kind of surgically take out of a company owned restaurant? How do we think about any kind of permanent labor efficiencies that you might have on the other side of this?.

I'll let Larry answer the labor portion, I'll take the front portion Sharon, and then we'll tag him that way. So in regards to the first part of your question, where we're seeing growth in day parts, specifically, we are seeing a slight shift of our business where we've historically been stronger at lunch.

In terms of where the growth over the last few years has primarily come or more, I should say consistently come.We starting to see more of the growth and the shift occur at the dinner day part. So we're encouraged by that. Naturally, that coincides with the exponential growth – a record level growth we've seen in our family chicken meals.

I talked about the tripling of our delivery business I talked about the tripling of our e-commerce business.

But quite frankly, what we're starting to see now, which is really remarkable for a brand like ours and forgive me.If you're a Wendy's or McDonald's or Taco Bell, you're kind of historically used to doing about 70% of your business in the drive thru right? We were not. We were doing about 45% of our business through the drive thru.

So to see us go from 45% to well over 70% and be where everyone else historically has been, and to do it well I think also opened up our eyes to wow. Okay, we knew this could be a growth channel for us. But how much more can we grow?How does this influence the way we look at the drive thru going forward.

So I think that's another thing that you should take note of as well. And then naturally, our loyalty program has seen some really nice participation levels, we set a goal for ourselves before this crisis hit.

We set a 2020 goal for ourselves to get the 13% of sales driven from our loyalty program as a percentage of our total sales mix.We're starting to see in any given week anywhere between 10% to 12% participation in our loyalty program as a total percent of our sales mix.

So very quickly, what we thought would be a one year goal looks like we're going to be able to achieve probably a lot sooner. So for all these reasons, quite honestly, I know a lot of people are looking at the situation, as if it's a big doom and gloom.

I'm not - I know my team is not because all the things that we were working on are starting to bear fruit. And the things that are within our control are starting to bear fruit. So I'm actually as I mentioned earlier, encouraged about where this will ultimately lead for El Pollo Loco..

Yes, and I'll just follow up on the labor model, and Sharon the two areas where we've really been able to reduce labor hours, one is just around opening and closing times.

And I think probably a lot of other companies have done that also in terms of shortening the time period and being able to reduce hours that way, because you're really closing earlier at day parts times of the day, when you really weren't generating the sales to cover the labor.

But the other big area where we reduced labor is looking at our minimum hours being and once a restaurant drops below a certain level, we have a certain minimum amount number of hours that are required to run a restaurant. And with the ops team, we went back and really reviewed those. And that's the area where we were able to cut back on hours.

You know, especially in non-drive-through restaurants.And so as we look into the future, it's hard to predict, because and I'm not sure what the dining room requirements will be based on the laws and regulations about what's going to take to run reopen the dining rooms. So we'll see how that plays out.

But I'd say I'm a little bit optimistic that given a cut down in the minimum hours is you could be starting at a low base on some of these restaurants and maybe you can actually reduce labor hours going forward on that basis.So we have not done anything in terms of our model.

That's a transaction driven labor hour model, so that is still stayed intact, where we've really looked at is just the minimum hours. And so that base from which you're starting from.

But again, as I say going forward, we'll see how it plays out when you start looking at, you know, some of the cleaning requirements and other things required to open up dining rooms in our business..

Thank you..

Thank you. [Operator Instructions] Your next question comes from Matthew DiFrisco from Guggenheim. Please go ahead..

Thank you. Glad to hear you guys are doing well. I just wanted to – I saw in the press release, I think you detailed currently 192 or 195 company and 279 and the 283 franchise stores are open.

Has that changed at all and how is that being accounted for within the comp, where you earlier on where there more stores closed with a more stores open? And is that being factored into the comp or are you doing the comp excluding store closures?.

Well, that the comp is done excluding store closures. So we adjust every day based on restaurants are closed. I mean we've during this time period, we've had a number of restaurants that needed to be closed and then we're quickly reopen.

At a time, if you look at the company numbers, we have three restaurants that given the sales volumes, we just decided let's not reopen these, we'll leave them closed for a while. And a franchise size is basically the same thing.The franchisees had a number of restaurants I think it's four in total, couple those were college campuses.

So there's really no traffic there when they've been near a mall. So again, they've been left closed on a temporary basis. The plan is to reopen them once the traffic comes back to those areas. But that's the way those have been handled. And I can say, well, both us and the franchisees look to reopen those restaurants as the traffic comes back..

Okay, but then again, so the comp improvement is purely sales coming back to a similar store base.

It's not as though you're adding, or have we opened a significant amount of stores over the last couple of weeks?.

No, no. And again, anytime we close the restaurant, it gets taken out the comp base. So we've had to close a restaurant temporarily during this time period, it comes out of the comp base, and then when it reopens, it goes back in the comp base..

Excellent. And then just some other brands have mentioned also that not only is there an opportunity, perhaps for rents to be renegotiated lower, but also some of those municipalities that might have been resisting a drive-through or a pickup or designated parking, et cetera, have been a little bit more open to those ideas now.

You're doing about $1 million it looks like now through the drive-through if the math seems, if I did the math right.

How many stores do you have now in the overall base of the drive-throughs, and is there a potential to convert non-drive-throughs into drive-throughs?.

Yes, so at the time I had, I believe the number in a system entire system of non –drive-throughs, I think it's somewhere in the mid-50s. I think it's around 55 or so, give or take in that range.

I'm going to guess that most of those would not be convertible to a drive-through just because they're in line and there's really going to be no drive-through option there. So I think that's right. So again, that opportunities probably not there.Obviously, the opportunities would be around you.

Do you relocate some of those are going forward? Can you find drive-throughs where previously municipalities are saying no, we don't allow drive-throughs maybe some of those open up and you can find some pads there.

But as of now, we're about mid-50s in terms of non-drive-throughs across the system, I don't think many of those would be convertible into drive-throughs..

Okay, and then last question. Bernard, can you talk a little bit about that the loyalty customer, what are you seeing from that as far as that 10% to 12% that are now doing that. Is that, presumably, that's a larger check, probably a person that comes a little bit more frequently.

Are there certain characteristics more about that customer that you've learned, and that might even be of assistance in the recovery here as the primary core consumer that you can get to come back more frequently?.

Yes, so what we are seeing with that customer is that one, it's very interesting to see how highly engaged that loyalty database is. So that when we do send something out that resonates with them, the reaction that we've been getting has been very, very encouraging to see. I would say I'd say the following.

What we're starting to see, I believe is, our Hispanic consumer, our bread and butter customer, the customer that has been loyal to us from day one continues to provide us with our greatest source of strength.But I think what we are, we believe we're starting to see is that we have cast a wider net, certainly with the expansion of our loyalty channels and through our loyalty program that we are starting to broaden our base a bit more get a younger skewing more millennial, younger, more millennial customer, more general market customers coming into the franchise.

And what we're seeing through the loyalty program again, is record setting levels of check road driven by our family chicken meals, which is where we've been putting the focus.So we're seeing this new delivery where the check level is 25 plus dollars, $24, we're seeing this via our loyalty program et cetera.

So it's encouraging to see the segmentation of our database was something that had been well underway before this crisis started. We believe we adjusted the way we're targeting folks within that given segmentation, given that the crisis has forced us to do so.

But a lot more to come with the loyalty program, but clearly, there is additional 3% to 5% sales comp list that is coming directly as a result of offers driven via that program is super encouraging..

Excellent. And then just a follow up question, sorry it just came to my head. If you're doing a 10% down 10% comp now, and 45% or 50% of your base has drive-throughs that are seeing that type of growth.

Presumably there's a good portion of your based on this probably positive comping right now?.

I haven't looked at store-by-store in a while. I am not sure there is too much of our basis actually positive comps right now..

Okay, thank you..

I know we see it sporadically, but it's hard to set. Yes..

Yes, understood..

Thank you. Your next question is from Todd Brooks from C.L. King & Associates. Please go ahead..

Hey, good evening. Thanks for taking my questions. First of all, just amazed that the shape of kind of where you bought them same store sales wise and what the recovery curves looked like.

With the speed of the recovery to the down 10% same-store sales, could you talk about your team at the restaurant level? Have you actually been able to retain most of your team's intact or how did that work out with the speed of the recovery as far as keeping the people that you already had?.

That's a great question and it's one that's a source of pride for us. Because as we got in our Q1 turnover numbers, what we have been able to share with all of you over a protracted period of time is that our turnover numbers continue to go down virtually across all positions. So year-over-year in quarter one our turnover is down.

We haven't had the furlough or let go a single employees throughout the company during this situation.If anything, maybe at the restaurant level, because we are operating under a slightly reduced hours format, each crew member each restaurant team members maybe being shorted about two hours per week that they would typically work.

But generally speaking, we have been in a very fortunate position in that our turnover levels have been extremely low and year-over-year have actually reduced once again, because it – use to have been, it's been an ongoing trend for the vast majority of 2019 going into 2020. And so, we're very, very proud of that point..

That's a great result. Second question would be, I know you – at one point well, prior to COVID, we were hoping to have a few corporate locations remodeled into the new redesigned prototype.

Thoughts on is that still happening this year, are you planning to delay it in the fiscal 2021 as you've delayed franchisees kind of remodeling and new unit openings as well, just thoughts on timing of maybe seeing this first new prototype location?.

Yes, so I'll take that one..

Go ahead yes..

So, the plan right now is we have suspended cap, non-critical capital spending for now.

Having said that, I would expect that as we watch things evolve over the next month or two and things continued on the current trajectory, then I would look to us to reopen and look to do some remodels back half of the year to the new asset design.At the same time, we are currently working on, we’re looking at the new asset design and thinking about well given the COVID-19 and how that may change consumer behavior going forward are some tweaks that we need to make to that asset design before we actually go out and do the remodel.

So that work is going on now. And like I said, I'd be hopeful that if things continue that we would look to do two or three remodels back half the year using that new asset design..

Okay, great. Thanks so much and continue to be well..

Thanks..

Thank you. That concludes the question and answer session. I would now like to turn the conference back over to Mr. Acoca for any closing remarks..

Thank you very much, operator. So I just want to thank everyone for joining us today. Hope you guys continue to remain safe and healthy with your families. And we look forward to not only speaking with you but hopefully seeing most of you really soon. So be well, take care..