Good day, ladies and gentlemen, and thank you for standing by. Welcome to the El Pollo Loco First Quarter 2022 Earnings Conference Call. At this time, all participants have been placed in a listen-only mode and lines will be opened for your questions following the presentation. Please note that this conference is being recorded today, May 4, 2022.

And now, I'd like to turn the conference over to Larry Roberts, Chief Executive Officer, Interim Chief Financial Officer. Please proceed..

Thank you, operator, and good afternoon. By now, everyone should have access to our first quarter 2022 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 our marketing initiatives, cash flow expectations, capital expenditure plans, and plans for new store openings, among others. These forward-looking statements are not guarantees of future performance and therefore, you should not put undue reliance on them.

These statements are also subject to numerous risks and uncertainties that could cause actual results to differ materially from what we currently expect. We refer you to our recent SEC filings, including our Form 10-K for a more detailed discussion of the risks that could impact our future operating results and financial condition.

We expect to file our 10-Q for the first quarter of 2022, 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.

With that, I'd like to touch on our first quarter results and the progress we are making on our strategic initiatives. While the COVID resurgence heavily impacted our restaurant performance in January and early February, I'm pleased to say that the Omicron impact largely dissipated and became negligible in the second half of the quarter.

System-wide comparable restaurant sales increased 7.8% in the first quarter, including a 2.3% increase at company-owned restaurants and an 11.5% increase at franchise locations.

From an earnings standpoint, COVID-related costs negatively impacted store level income during the first quarter results by approximately $2.3 million, while commodity and labor inflation also continued to persist, which I will speak to in a moment.

However, despite the challenges, our teams managed the external headwinds well, and we earned pro forma diluted earnings per share of $0.07.

More importantly, the launch of our Shredded Beef Birria limited-time offer on March 17 significantly accelerated our top line momentum, which has continued into the second quarter, with system-wide comparable restaurant sales growth of 12.4% through April 27.

This is our first promotion utilizing several new marketing strategies, so we are very excited by the positive results we are seeing and our prospects for the balance of the year.

To further strengthen our business and accelerate growth in 2022 and beyond, we've been working on executing the four pillars of our strategic priorities during the quarter, which are culture, brand differentiation and awareness, customer service and accelerate development. For today's call, I'd like to update you on two of the pillars.

The first pillar I would like to discuss is brand differentiation and awareness. What clearly distinguishes El Pollo Loco from other restaurant concepts is our food, and this was clearly demonstrated by the Shredded Beef Birria launch.

A couple of years ago, our team identified a popular California food trend in which shredded meat hows and tacos and Burrito was dipped into a Mexican Consomme and eaten similar to beef Au Jus.

As we've said in the past, our food combines our Mexican roots with the culinary culture of Los Angeles and our Beef Birria offering and bodies this characteristic perfectly.

Our take on that product consists of marinated, shredded beef served in tacos, quesadillas and Burritos and comes with a unique Mexican Consomme dipping sauce, all served in a unique box with chips and salsa.

The timing of the offer could not have been better for us as it coincided with the completion of new marketing strategies that have combined to make Shredded Beef Birria one of, if not the most, successful new product launches we have ever implemented.

Our marketing campaign refocus on what differentiates El Pollo Loco, which is a factory prepared food and significantly increase our emphasis on social media.

Not only did we increase our marketing spend on social media, we created new unique content across a major social media platforms, enabling us to send targeted messages to various user groups, particularly to our younger consumers.

As an example, we created a dip and drip Tiktok campaign to promote our Beef Birria offerings using multiple influencers. The campaign has resulted in over 21 million social media impressions and thousands of pieces of organic user-generated content created by customers online.

We recently crossed 125,000 followers on TikTok and the El Pollo Loco hash tag now has more than 120 million views on the platform. The Shredded Beef Birria product and our messaging clearly resonated with our customers as we experienced a strong acceleration in our Birria sales even before our TV marketing went live.

Shredded Beef Birria product mix reached 12.5%, which helped drive new company, franchise and system sales records three weeks in a row during March and April. To build upon this excitement, we promoted the Birria Burrito, on National Burrito day, which resulted in a record sales day for the system.

Sales mix for Beef Birria remained above 10% for six straight weeks, and as a result of this success, we are testing the use of the shredded beef product for future LTOs to further diversify offerings while still staying true to our LAX positioning.

Next up on the marketing calendar or Tostadas, which was our strongest limited time offer promotion last year. Tostadas are a customer favorite, and we believe they will be successful once again, especially when combined with our new marketing tactics. Looking to the longer term, we are furthering our research and customer segmentation efforts.

We believe that COVID has changed the way consumers access our brand, and we have active research underway in overall customer segmentation, value and the family meal group occasion.

In addition, we continue to invest in our loyalty, delivery and digital marketing platforms to improve the user experience into more finally segment consumer data in order to increase the effectiveness of our promotions. These platforms continue to grow with e-commerce now contributing over 12% of our sales mix and delivery of approximately 8%.

Needless to say, we are very excited by our marketing initiatives and believe that they will continue generating strong sales results. That brings us to our next pillar, customer service, which because of employment issues has been a challenge across certain segments of our company-operated restaurants.

While things have improved slightly, hiring and retaining employees has been challenging in a number of areas, especially Las Vegas and east of Los Angeles, where there's heavy competition for casinos and warehouse facilities.

In addition to our cultural initiatives launched last year, we are taking additional actions to recruit, train and retain team members. These include adding both external and internal recruiting resources, further wage adjustments, retention bonuses, revamped training programs and other incentives.

While these may result in incremental cost to our business, we are confident that, they will be more than offset by increased sales from improved customer service. While we have many company-operated restaurants executing at a high level, we are very focused on improving our operations.

To improve execution, we have rolled out a new operation scorecard and tools to enable our area leaders and general managers to better manage their restaurants and remedy issues as they arrive. We've also made drive-through execution, the number one priority for all our company-operated restaurants.

With approximately 55% of our sales coming via the drive-thru, we believe better execution has potential to significantly improve sales at company-operated restaurants.

Longer term, we continue to work on initiatives to simplify our operations, including additional product reductions, revamped back of house processes, new equipment and a revised menu board.

As the gap between franchise and company sales performance demonstrates, many company-operated restaurants have a significant sales opportunity for improving their operations, especially at the drive-thru. As evidenced by our system sales, El Pollo Loco is resonating with consumers.

I'm confident that our company operations will significantly improve, which will just further strengthen our brand. In summary, we believe the strategic initiatives we put in place are gaining traction and positioning the El Pollo Loco brand to capture the opportunities ahead.

Most importantly, I'd like to thank all of our team members and franchise partners for their passion, commitment and dedication in making this brand and this family truly special. With that, let me briefly review our first quarter financial results in greater detail.

For the first quarter ended March 30, 2022, total revenue increased 2.2% to $110.1 million compared to $107.7 million in the first quarter of 2022. Company-operated restaurant revenue decreased slightly to $94 million from $94.2 million in the same period last year.

The decrease in company-operated restaurant sales was primarily due to a $2.6 million decrease due to the sale of eight company-owned restaurants to a franchisee during 2021, and $0.5 million from restaurants closed during the past year.

The decrease was partially offset by a 2.3% increase in company-operated comparable restaurant sales and $1.1 million in non-comparable restaurant sales, which included restaurants temporarily closed due to the pandemic during last year's first quarter.

The increase in company-operated comparable restaurant sales was comprised of a 6% increase in average check and a 3.5% decrease in transactions. During the quarter, our effective price increase versus 2021 was 8.2%.

As I mentioned earlier, our momentum continued into the second quarter and through April 27, second quarter system-wide comparable restaurant sales increased 12.4% consisting of a 6.5% increase at company-owned restaurants and a 16.4% increase at franchise restaurants.

Franchise revenue was $9.3 million during the first quarter compared to $7.6 million in the prior year period.

This increase was driven by a franchise comparable restaurant sales increase of 11.5% as well as the opening of four new franchise restaurants during or subsequent to the first quarter of 2021 and revenue generated from eight company-owned restaurants sold to an existing franchisee during 2021.

This was partially offset by the closure of two franchise restaurants during the same period. Turning to expenses. Food and paper costs as a percentage of company restaurant sales increased 360 basis points year-over-year to 29.5% due to increased commodity costs and investments in new packaging, partially offset by higher menu prices.

Commodity inflation during the first quarter was approximately 18%. We have yet to see any easing and commodity inflation and currently expect it to be approximately 21% in the second quarter and 18% for the full year.

Labor and related expenses as a percentage of company restaurant sales increased 210 basis points year-over-year to 34.8% due to higher wage inflation, overtime costs and other labor-related costs. Based on the continued labor pressure that we're experiencing, we're expecting wage inflation of 7% to 8% for the full year.

As I noted, during the first quarter, we incurred approximately $2.3 million of COVID-related expenses, including leave of absence and overtime pay.

Occupancy and other operating expenses as a percentage of company restaurant sales increased 10 basis points to 25.4% due to higher marketplace delivery fees and utility costs, partially offset by lower operating supplies costs. Our restaurant contribution margin for the quarter was 10.3%.

Margins were especially challenged in January, but recovered during the quarter to 14.3% in March. As I noted previously, effective pricing during the first quarter was 8.2% versus 2021. Due to continued commodity inflation, pricing in the second quarter will be approximately 9% and roughly the same for the full year.

Our planned pricing may be adjusted based on economic conditions and consumer sentiment. In addition to our pricing actions, we are currently testing cost reduction initiatives to further mitigate the impact of labor and commodity inflation on our margins.

General and administrative expenses decreased to $10 million from $10.5 million in the year ago period, primarily due to a decrease in management bonus expense. As of recent, the total revenue, G&A decreased approximately 70 basis points to 9%.

We recorded a provision for income taxes of $0.9 million in the first quarter of 2022 for an effective tax rate of 30%. This compares to a provision for income taxes of $1.6 million and an effective tax rate of 28.7% in the prior year first quarter.

We reported GAAP net income of $2.1 million or $0.06 per diluted share in the first quarter compared to GAAP net income of $4 million or $0.11 per diluted share in the prior year period.

Pro forma net income for the quarter was $2.6 million or $0.07 per diluted share compared to pro forma net income of $4.7 million or $0.13 per diluted share in the first quarter of last year. For a reconciliation of pro forma net income and earnings per share to the comparable GAAP measures, please refer to our earnings release.

Regarding development, during the first quarter, one company restaurant was opened in Las Vegas and two franchise restaurants were opened in California. Turning to liquidity. As of March 30, 2022, we had $40 million of debt outstanding and $25.5 million in cash and cash equivalents.

Lastly, due to the uncertainty surrounding the COVID-19 pandemic and current economic conditions, we won't be providing a full financial outlook for the year ending December 28, 2022.

However, we are providing the following limited guidance for fiscal 2022; the opening of three to six company-owned restaurants and six to 10 franchise restaurants; remodeling of 10 to 15 company-operated restaurants in 20 to 30 franchise restaurants; capital spend of $20 million to $25 million, and a pro forma income tax rate of 26.5%.

This concludes our prepared remarks. I'd like to thank you again for joining us on the call today. And I'm now happy to answer any questions you may have..

Thank you. We will now conduct a question-and-answer session. [Operator Instructions] Our first question comes from Jake Bartlett with Truist Securities. Please proceed..

Great. Thanks for taking the question. And congrats, Larry, on the recent improvements. It's great to see in sales..

Thanks..

My first question is, it's -- you mentioned excitement and how much the beef, kind of, beef promotion has helped.

Do you attribute all the increased improvement to that, or to what degree did increase staffing, your ability to staff the restaurants and operate full hours contribute to that increase, do you think?.

I think that may have helped a little bit, Jake. I do think though we really saw a big inflection point with launch of Birria. We've been seeing steady, I'll call it, comp sales improvement through late February, early March, a pretty consistent basis.

But then the launch of the Birria product with the marketing issues, really, you just saw, again, an inflection point where really accelerated to the point where we're seeing obviously high comp sales, and as I highlighted, record sales across the company, the franchisees in the system for three straight weeks.

So that product launch, again, we are seeing improvements, but that product launch really accelerate that improvement..

Great. Great. That's good to hear. The next question is on the differential between average weekly -- or the same-store sales between the company and the franchise. And it sounded in your comments like you attribute a lot of that differential to operations and the franchisees just running better operations.

The question is, is that true? I mean, is that how you're looking at it now that really is the operations is the opportunity to close that gap, or I think historically over the last year or two, you've talked about the company stores being more impacted by labor shortages, just given where your -- you have the stores.

So, I'm wondering if you can differentiate or just disaggregate the impact of the pace of operations, the quality of operations versus just being in stores that are hindered by staffing more?.

Sure. Yes. So, let me first start by saying a huge shout out to our franchisees and our franchise system. I mean, they have done really a phenomenal job of operating throughout COVID and throughout the current economic challenges.

I mean when you look at the ops metrics or the key ops metrics, they continue to operate and throughout they've operated at really high levels of execution. So, a real shout to our franchisees. And we have a number of company restaurants operating at really high levels.

But when I step back and look at the business and you see the sales gap between company and franchise, in general, it's entirely driven by transactions. So, for example, I think the first quarter, as I highlighted, we were down 3.5% transactions, franchisees were plus 5%.

And the franchisees has been consistently around 5% transaction growth, while we have generally been negative. So, that immediately points to the execution in a number of our restaurants that is creating that gap.

Now, I will say a number of our company restaurants, especially, as I highlight in the call in Vegas, and I'll call it the East of LA, Inland Empire, the Desert area, they are the most staffing challenged. And we have a little bit more exposure in those markets and franchisees, but -- and so that's what we're really focused on.

But again, I just look at the way the franchisees have reacted. And remember, our franchisees tend to be small to midsize. And so when I look at it and I talk to the franchisees, I think the thing that stands out to me is they have been able -- they react very, very quickly to what's going on in the economic environment.

So, they need to make changes quickly, they make it in days. And quite frankly, while we think in the company, we're moving fast, we're still taking too much time. In this environment, we have to move faster. We can't be taking three weeks to a month to make a decision, we need to be moving in days or weeks.

And I think that's one area where the franchisees really excel. I think it's an area that we can emulate our franchisees. And so me and my team are very fond how do we accelerate the adjustments we need to make out in the restaurants where we're especially challenged around staffing to move faster to make sure that we recruit and retain people.

I think the other area where -- and I highlight this a little bit on the call that we're really focused on now is we have a number of new employees in our restaurants. And so that really means we have to build what I would call know-how in the restaurants. I mean we have to build the knowledge in the restaurants.

And obviously, one way right now is training. The other way is to be more prescriptive about what we want people to do from our areas down to our general managers, down to our team members and really layout in detail around here's what you do at certain points of the day for earlier.

Here's when you visit the restaurants, here's what your restaurant visits look like. Here is the coaching you leave behind for them in writing. So we're getting more prescriptive, as we try to build that knowledge base within our system. And like I said, the other thing is just a maniacal focus on the drive-thru. In fact, we're launching.

We're retraining every company restaurant on the drive-thru on May 6th, and then we're going to have a drive-through incentive scheme, which will be, I think, fairly significant that to really drive the execution of drive-through. And I just really believe when you look at our ops metrics, fixing the drive-thru fixes a lot of things.

And we have a lot of improvement we can make in the drive-through, in a number of our restaurants. And so that's what we're going to focus on, and that starts May 6th as we kick off the training. And then like I said, the incentives program to really drive that execution. So, just to summarize, it's really around getting faster.

And how we react to the market medicians, really building know-how in our restaurants through being, more prescriptive and more training and then really focus on the drive-through, maniacal about that because, so much of our business goes through the drive-through.

And so much of our consumer feedback and consumer experience is really driven by the drive-through. So that's what we're focused on..

Sure. Great, thank you so much. I appreciate it..

Our next question comes from Andy Barish with Jefferies. Please proceed..

Hey Larry, just trying to kind of level set on some of the margin commentary. Obviously, there's about 250 basis points of COVID stuff in the first quarter, but then, you kind of left the quarter, as you mentioned, doing about 14% in March. I mean, is that kind of a good run rate on restaurant level margins.

Again, taking into account some of what you just went through in terms of some incremental costs from retention and training and wages and things like that.

How should we kind of level set on restaurant level margins here?.

Yeah. If I look at the balance of the year and the things we have in place, especially on the pricing and some of the cost reduction things we're working on. I think March is a starting point, but I expect to see a gradual improvement in margins, through the end of the year. Starting out March, I'll call that, mid-teens.

Again, I would expect to improve every quarter and get, call it, the mid- I call it, the mid upper teens by the end of the year..

Great, thanks, very helpful. And I guess on the learnings from Birria, I mean, it sounds like the consumer certainly associated a crazy chicken chain with beef for the last month or so.

So what else, I guess, did you learn from the Birria and the deep promotion? And how might we see that return at different points later in the year or next year?.

Well, breaking it into two things. The first is the product itself with Birria. I mean, in Birria have the beef with shredded deep fried and you have the Consomé. We are looking to test -- actually it’s in test right now as a limit-time offer item as part of a mix. Some of it will be chicken, some of it will beef.

That we would look to do in what we call module 5, which would be kicking off, I think, early November. So we think there could be a place for beef at least in one more LTO, possibly even a full-time menu item at some point.

We're really looking at the full-blown Birria that we're doing now as something we'll look at during next year as another LTO, given the success and we call it Birria 2.0. So we'll make some changes in terms of the product and the packaging, but we definitely see it as something that we can look to do again next year. So that's on the product side.

The second piece is just around the approach to marketing that we've taken and real kudos, a real shout out to the marketing team and the way they execute against this. And even the ops team, which we executed, we actually rolled out, I got pre-training for this product to make sure the execution was really strong as we roll it out.

But on the marketing side, you're just going to see more and more of what we do with Birria. Again, it just happened to coincide with Birria, these new marketing tactics that we wanted to put in place, which was again heavier spend on social media and really going on those platforms to attract a younger customer.

We really felt like Birria was going to appeal to a younger customer base, and it was a great opportunity for us to bring younger consumers into the brand. And so we really focus, especially on TikTok. I'll just give you insight into how much of the impact that had.

We did a soft roll of Birria, probably got four or five days before we did anything on social media or TV. And it was mixing and so for what you'd expect probably about 1.5%, all you had was point-of-sale materials up, so it wasn't great. We then went on TikTok, in that day, that mix went up to 8.5% just by TikTok.

So it's a phenomenal platform for us, but it just really caught on – so that you can call it going viral. And just that alone really grew it. And then, of course, we went on TV the following week, which just took it up to the 12.5% mix levels that we saw initially with the product.

And so a lot more of that to come as we launch the balance of the year, our limit-time offers and just more and more focused on the social media platforms. And again, creating separate content for the platforms, which we talked about for is a must do. You can't just use your common TV advertising and cut it up and then put it on there.

You really have to create unique content on these platforms and the team did a fantastic job and you're going to see a lot more of that as the year progresses..

That's great. And then the -- just on the product itself, I mean, I know it's priced in a premium band on your menu.

Was it gross margin dilutive or neutral or maybe even slightly favorable, just given how expensive chicken is right now? How should we think about that?.

No, it had a higher food costs. So from a calendar perspective, it was an investment on food costs. So again, through second quarter, you'll have Birria there for really the month of May, obviously, April, it comes off and then we go to Tostadas, which is a lower food cost item.

So Birria is the most expensive item proof food cost percentage that we'll do this year..

That's great. Thanks and have a happy [indiscernible] tomorrow..

All right. Thanks, Andy..

Our next question comes from Sharon Zackfia with William Blair. Please proceed.

Hi, good afternoon. I guess I'm curious on Birria of that kind of 10% plus mix that it generated over the last six weeks. How much of that do you think is incremental versus kind of consumers swapping around on the menu? And I asked that because I think the LTO ends June 1.

So I'm kind of wondering how you think about any potential comp falloff that we should all be thinking about as the Birria LTO ends? And then secondarily, as you brought in these younger consumers, and it sounds like you did bring in maybe some newer demographics to El Pollo Loco, were you successful kind of getting any kind of rewards sign-ups in tandem with those new demographics that were coming in, or how do you kind of plan on continuing the momentum that you've built with those younger demographics?.

Thanks, Sharon. First on the Birria mix, we didn't really see much shift in the menu mix overall across the rest of our categories, maybe a little bit on family difficult to tell because we actually changed our approach on the family meals a bit. But overall, Birria didn't really look to pull much from other items on the menu.

So having said that, we're going in with Tostada’s, -- if you recall, Tostada’s last year, normally, they're like a 7% to 8% mix, somewhere in that range. And they were about 14% mix during our Lumentime[ph] offer last year.

So we really feel like Tostadas is really a strong follow-up to Birria and we'll be able to maintain the momentum we've built now. Shifting to, I'll call it, the demographic piece there's no doubt we have seen a lot of new users coming to the concept at least by the Birria product.

We've seen that through our loyalty program and just some of the consumer research that we have. And now the challenge is how do we keep them coming.

And so as you look at our approach around Tostadas and even the balance of the calendar, a lot of work we're doing is really analyzing what is going to resonate with younger consumers and get them excited.

We do think Tostada is a unique product and has that capability just around the different ways you can eat Tostada in the variations and you can do a lot with that on social media, especially TikTok, they really make it exciting and younger consumers. And then looking at the product balance of the year.

I mean everything we look at now is even just even bone-in chicken. Were we looking at that, saying, well, normally, we just go on there, and we show family being the chicken and just drive the family meals. But the reality is there's a lot of different ways that you can use bone and chicken that could be, I think, exciting for younger consumers.

So that's all the work we're doing is everything through the lens of not just our core customer, but how do we make it interesting and exciting for a younger consumer base to keep them engaged with our brand, Birria really create that engagement..

Larry, in tandem with kind of thinking about the younger consumer, are you talking with the idea of any changes to your hours or doing any kind of later night daypart..

I would say right now, no. Really, right now, given the staffing issues and challenges, I think it would be a challenge to extend it out. I think at some point, as we develop a better menu for late night, that's certainly something on the, I'll call it, longer-term strategy, something to look at.

And the team is starting to look at products that are, I'll call it, more snackable and things that we could put on the menu that would be more appealing one to a young consumer and also to a late-night consumer. So I think that's down the road. It's probably not this year, but maybe something that we look at next year..

Okay. Thank you..

Thanks..

Our next question comes from David Tarantino with Baird. Please proceed..

Hi. Good afternoon, Larry. I wanted to come back to this question about marketing. And I guess the way I think I will ask it is, is there anything in your consumer data or you're learning thus far that would suggest that the lift you've seen from Birria ore about the marketing than the product itself.

And the reason I ask that, I guess, is that would perhaps be a leading indicator for success on future offerings.

So I just wanted to get your thoughts on whether you think it was more about the marketing than the product, or do you think it was the combination of the two?.

I definitely think it's a combination of the two. And I just say that Birrias had six straight weeks of over 10% mix. And it's coming down on the curve, but it continues to be a very strong mix, which just tells us and we'll dig into it more with data, but it indicates that there's a good amount of repeat.

Now the one area where we do know that we've seen repeat is around loyalty. There's probably been, I think, in the first couple of weeks that a 25% repurchase rate, which is actually pretty good in that short time frame. So we feel good that the product has definitely resonated.

But certainly, when you see the kickoff with the TikTok and other social media channels and the growth we saw with that clearly indicates I think it's the power of the end when you have a great product that really resonates along with a great marketing strategy.

And again, that's why we're excited about tostada because, again, we know that tostadas is a distinctive product for us, is a great product for us and working through how we promote that similar Birria, our target isn't to get back to last year's mix on tostadas is to beat last year's mix on tostadas and continue driving the brand and how it resonates with the younger consumers..

Makes sense. And then I had one clarification on your margin outlook.

You mentioned – is that the move to high teens, would that be assuming the current momentum in the business continues, or are you making some assumption that the sales trajectory will change in the second half of the year?.

No. I mean it really assumes a continuation of where we are, more or less. I would couch you, I expect from where we are in March to continue improving margins.

I would say it's going to be in between mid- to high teens, where I would project to be out towards the end of the year and -- but that does rely on, I guess, inflation doesn't get any worse in that our sales continue to perform as they have at the current unit volumes that we're seeing..

Got it. Got it. And then on the commodity costs, I think you had locked in chicken prices that perhaps more favorable rates than the current market conditions. I guess, is that correct? And have you given any initial thoughts on what 2023 could look like if the market stays the way it is..

Yes. So we -- the majority of our chicken-in-a-bone is locked in at certainly favorable costs at current market conditions. We do have a portion with one supplier that is not locked in. But the key -- the big inflation drivers, obviously are the boneless breast meat and boneless [indiscernible] nearly boneless breast meat.

So that's what we're really watching. And I don't think at this point, we have an outlook for next year. It just continues to be a tight market chicken as a whole, but especially around boneless breast meat. You see so much demand out there, and suppliers are having a hard time keeping up with that.

So it's a little premature for us to be taking a stab of what next year will look like. We need another quarter or so. And then I think, we'll have a better idea of what next year looks like from a chicken supply standpoint..

Makes sense. Thank you..

All right. Thanks..

[Operator Instructions] Our next question comes from Todd Brooks with The Benchmark Company. Please proceed..

Hi Larry, how are you?.

Todd..

A question for you. With the strength of birria which is impressive in and of itself. Can you give a sense of what your consumer was seeing otherwise? We've heard other concepts talk about stimulus lap in kind of period three, period four as a headwind.

We've heard concepts talk about fuel price increases with the Ukrainian war that we saw in March being a headwind.

Do you have a sense of where your consumer stands? And maybe how much, if any kind of weakness or lap pressure, you were able to overcome with birria actually implying that birria that much more powerful than the reported number?.

Yes. I mean, great question. I guess I go back and look at, again, the first quarter yes, we -- again, we had fairly good momentum coming out of March, especially when you go to our franchisee comps first quarter, 11.5%, and they were still improving.

So it felt like from a consumer standpoint, and I said this on the March call is from a consumer standpoint, our brand looks to be really strong. I mean we're seeing sales growth across the business, our franchisees, especially seeing transaction growth with our franchisees. And the reality is, I mean, their price points are still higher than ours.

So the brand is clearly resonating. Now birria took it to a new level. But when I look at -- are we seeing any consumer pushback at this point? I'm not seeing it yet. That's not to say it won't happen, but our transaction numbers are roughly pretty comparable to where they've been over the last several quarters.

The franchisees are driving positive transactions despite taking pricing. And so, thus far, not seeing the pushback and maybe the other concepts have seen. So, I think birria propelled this new level.

I'm not sure from a brand standpoint, whether we were seeing the impact that others have highlighted from reduced stimulus sector and things like that, I just wasn't seeing it in the business leading up to birria..

Perfect. That's great to hear. And then, you talked about still working against staffing, especially in the company stores in some of the tight markets.

Do you have a sense, even though the reported numbers were great for the quarter, what either reduced operating hours or I don't know if you have any full unit closures anymore once we got out of Omicron? But what staffing might have cost you from a same-store sales standpoint on the corporate store side in the quarter?.

Well, in terms of -- what we look at is, not necessarily the impact of overall staffing, but it's the impact where we've had to either close early or reduce our service channels.

And that continues to be 15, 20 restaurants a day, and that can be from staffing from callouts, which as I recall, I have to think the numbers, I mean it could be 1% of sales or 1% sales impact. As I recall, when I look at the numbers, so it's not a huge impact on the business overall. It's a very, very slight drag on our comps, but not huge..

Okay, great. Thanks for the question. Larry, appreciate it..

Thank you..

Our next question comes from Jake Bartlett with Truist Securities. Please proceed..

Great. Thanks for taking the follow-up. Larry, my question is going to require kind of looking way back in time, definitely before your time at the brand. And the question is how polyloco is positioned in a downturn? So, what were same-store sales? I don't mind modest go back that far during the great Recession I don't if you have that.

But just maybe if you could -- if you have that, it would be helpful. And maybe just how the brand is positioned now versus then in terms of value and your ability to pivot towards that, if need be, if this big our word comes to pass..

Okay. You can't hold me 100% accountable for these numbers. But as I recall, Great Recession looked at the numbers years ago, I mean, polyloco was definitely impacted. I think they were down somewhere in the 5% to 10% range during one of the years. So definitely saw an impact. Now, if you go back to that time, polyloco was very, very reliant on.

It was just -- I mean not strictly had entrees, but really reliant on chicken-on-the-bone, family meals and individual meals. I mean, that was the core. If you recall, you're kind of coming out of that time frame is when the brand began shifting more focus or at least emphasizing more the entree side of the business.

So I'd say pre-2013, 2012, as you recall, I mean, we were at 55% to 60% chicken-on-the-bone and the balance was entrees. And then, coming out of 2013, 2014, it flipped around to basically being the other way around.

And so, that part of the business -- so I'm not sure you can use the last recession as the best bellwether, because the business has changed in terms of what we offer in the entree side of the equation and the value we offering on the entree side of the equation.

And so, that's my recollection of what took place back years ago, but I'm also very optimistic that, given our positioning today and even more of the value offerings that we have today, versus where we were previously, that I think were well situated -- if there’re a recession, not that we won't feel something, but I think we'll hold up very well and see hopefully quite a bit of trade down into our brand..

Great. That's really helpful. And actually, I did have another one. And I believe last quarter you gave an indication of what you thought G&A was going to be up year-over-year in 2022. I think the first quarter came in a little lighter than we were expecting.

So any change on just how we should think about G&A for the second through the fourth quarter?.

Yes. I think, second and third -- second through fourth quarter G&A should be a little higher year-over-year than it was. When I look at the full year, I'm expecting it to be, again, higher than last year. I'm thinking probably somewhere in, probably, $2 million to $3 million range, overall..

Great. Thank you so much. It’s helpful..

Okay..

Thank you. At this time, I would like to turn the call back over to Mr. Roberts for closing comments..

No. Well, thanks, everybody, for joining the call today. I really appreciate it. And I hope you took away that we really feel great about where the business is. We're situated.

We've got a lot of great things in the pipeline from a product standpoint, a lot of great marketing initiatives and a real focus on the company operations and a big opportunity there, as we improve those, very confident that we're going to see additional sales growth come from those company restaurants.

So, thanks again, and everybody, have a great night..

Thank you. This does conclude today's teleconference. You may disconnect your lines at this time and thank you for your participation..