In Q1, franchised restaurant comps lifted 10.5 percent while company-operated stores grew 3.3 percent. The main difference between the two groups is that 74 percent of company-operated locations are based in Los Angeles, a city that’s been greatly restricted for most of the pandemic. L.A. County received the go-ahead to allow 50 percent dining only recently. Acoca also makes the point that El Pollo’s customer base in L.A. skews very heavily Hispanic, and the chain has seen a slower recovery in that particular demographic in comparison to the general market.
So there are specific reasons for the drag on sales. The good news is, both of them are temporary and external factors.
“Outside Los Angeles, we continue to be pleased with the sales trajectory of our outer market restaurants that have consistently achieved positive same-store sales growth since June of last year,” Acoca said. “While a smaller subset of our overall restaurant base, we have seen outer market comparable sales improve more dramatically than at our L.A. units, which not only bodes well for the health of our overall system, but gives us even greater confidence about the future of our core L.A. market as economic activity continues to rebound in Southern California.”
Drive-thru still accounts for just under 70 percent of business. Dining rooms are at 50 percent capacity, and while there’s been a slight uptick in that business, it hasn’t returned anywhere near pre-pandemic figures. As that dine-in channel does come back, El Pollo expects average check to slow down and flatten out as transactions grow, due to the more individualized nature of dine-in orders. To get a sense of where El Pollo is at, average check increased 15.7 percent at company-run stores in Q1 and transactions dropped by 10.7 percent.
Margins in January and February were challenged due to COVID-19 related expenses, but in March they were strong at over 20 percent. Acoca indicated that margins may be impacted as the dine-in channel comes back.
“From a margin perspective, I think a potential impact of the dining room, which we haven't really done too much yet, is just when the dine-in traffic is significant enough, do we need to put some incremental labor in to comply with the regulations around keeping restaurants clean and those types of things,” Acoca said. “So that's to be determined.”
As far as staffing goes, Acoca said the tightness of the labor market isn’t universal across the board. There’s a little bit of aggravation in some restaurants, but not all.
“So right now we are doing a pretty good job contending with it, but with that being said, we are putting in place some additional actions to ensure that we are increasing our staffing levels, and that we are kind of increasing our hiring practices more broadly," Acoca said. "But right now, right now at present, it seems to be manageable, because as I mentioned, it's not widespread. It's more primarily concentrated in some particular areas."
El Pollo’s total revenue was $107.7 million compared to $105.2 million last year. Net income was $4 million, or $0.11 per diluted share, compared to net income of $3.6 million, or $0.10 per diluted share, in 2020. Adjusted EBITDA was $11.9 million, compared to $13.4 million in the prior year.