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Edited Transcript of FRGI earnings conference call or presentation 5-Nov-18 9:30pm GMT

Q3 2018 Fiesta Restaurant Group Inc Earnings Call

SYRACUSE Nov 7, 2018 (Thomson StreetEvents) -- Edited Transcript of Fiesta Restaurant Group Inc earnings conference call or presentation Monday, November 5, 2018 at 9:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Daniel K. Meisenheimer

Fiesta Restaurant Group, Inc. - SVP & COO

* Lynn S. Schweinfurth

Fiesta Restaurant Group, Inc. - CFO, Senior VP & Treasurer

* Raphael Gross

ICR, LLC - MD

* Richard C. Stockinger

Fiesta Restaurant Group, Inc. - CEO, President & Director

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Conference Call Participants

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* Brian Michael Vaccaro

Raymond James & Associates, Inc., Research Division - VP

* Nerses Setyan

Wedbush Securities Inc., Research Division - Senior VP of Equity Research & Senior Equity Analyst

* Nicole Miller Regan

Piper Jaffray Companies, Research Division - MD & Senior Research Analyst

* William Everett Slabaugh

Stephens Inc., Research Division - MD

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Presentation

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Operator [1]

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Good afternoon, and welcome to the Fiesta Restaurant Group Inc. Third Quarter 2018 Earnings Conference Call. (Operator Instructions) I would now like to turn the call over to Raphael Gross, Managing Director at ICR.

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Raphael Gross, ICR, LLC - MD [2]

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Good afternoon, everyone. Fiesta Restaurant Group's third quarter 2018 earnings release was issued after the market closed today. If you have not already accessed it, it can be found on the company's website, www.frgi.com, under the Investor Relations section.

Before we begin, I'd like to inform you that during the call today, the company will make various statements that are not based on historical information. These forward-looking statements include, without limitation, statements regarding company's future financial position and results of operations, business strategies, budget, projected costs and plans and objectives of management for future operations. Actual outcomes may -- and results may differ materially from what is expressed or forecasted in such forward-looking statements, and the company can give no assurance that such forward-looking statements will prove to be correct. Important factors that can cause actual results to differ materially from those expressed or implied by the forward-looking statements can be found in the company's SEC filings. Please note that during today's conference call, certain non-GAAP financial measures will be discussed, which the company believes can be useful in evaluating its performance. Any discussion of such information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP, and a reconciliation to comparable GAAP measures is available in the company's earnings release.

On the call today are President and Chief Executive Officer, Rich Stockinger; Senior Vice President, Chief Operating Officer and Pollo Tropical President, Danny Meisenheimer; and Senior Vice President and Chief Financial Officer, Lynn Schweinfurth.

And now, I will turn the call over to Rich.

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Richard C. Stockinger, Fiesta Restaurant Group, Inc. - CEO, President & Director [3]

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Thank you, Raph. Since the onset of our renewal plan, we have been working intensely to elevate Pollo and Taco and develop a strong long-term business model that can serve as a foundation for Fiesta's future growth. Although these efforts have required substantial near-term investments, they have also led to enhance guest experiences through improved food quality and hospitality, and have enabled us to build a track record of comparable restaurant sales momentum and increased profit per transaction. Now that we have stabilized the top line, we are focusing on consistently generating comparable restaurant sales growth at our existing restaurants, adding incremental off-premise sales, expanding margins and optimizing our restaurant portfolio.

For future market expansion beyond 2012, we are working on refining the non-core Pollo Tropical brand and increasing sales and margins at Taco. The third quarter marks a continuation of our positive business momentum, including comparable restaurant sales gains that were positively impacted by comparing against the prior period that was impacted by last year's hurricanes as well as profitability growth. Total revenues increased 10.1%, while consolidated adjusted EBITDA rose 14.2%. These results were made possible through many -- the many initiatives that we have detailed on prior calls, but there is still much more to be accomplished. In fact, we are working on some exciting things now and into next year, as we will discuss shortly. But first, let me start with the high-level sales overview of the third quarter.

Starting with Pollo, the brand recorded its third consecutive quarter of comparable restaurant sales growth with a 6.5% gain, inclusive of the positive impact of lapping Hurricane Irma in the prior year period. Quarterly Florida restaurant traffic exceeded the Black Box fast-casual benchmark by 60 basis points on a comparable basis. We were able to maintain solid sales trends in our core markets, with comparable sales growth of approximately 8.2% in Miami-Dade County and 4.9% in Broward County. Taco's strategic repositioning continues to resonate with our evolving guest base. Positive sales trends continued into the third quarter as the brand reported its second quarter of comparable sales growth with a strong 12.2% gain, including the 2% to 3% tailwind from Hurricane Harvey last year. In addition, comparable restaurant transactions exceeded the Texas Black Box quarterly fast-casual benchmark by 140 basis points on a comparable basis, again, partially due to our concentration of restaurants in Houston that were positively impacted by lapping Hurricane Harvey last year.

We continue to see an improving trajectory of comparable restaurant transaction trends, and we believe we are attracting new and loyal guests that will lead to increasing comparable transactions.

With that, I will now turn the call over to Danny for a more detailed update on Pollo initiatives. Therefore -- thereafter, I will provide an overview of Taco initiatives before Lynn goes through our financial results in greater detail.

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Daniel K. Meisenheimer, Fiesta Restaurant Group, Inc. - SVP & COO [4]

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Thank you, Rich. Through the tireless work and dedication of our team, Pollo continues to raise the bar in food, quality and hospitality. Together, these areas of emphasis are taking the Pollo guest experience to a whole new level. Our citrus-marinated crispy chicken platform continues to broaden the brand's demographic appeal and represented about 9% to 10% of all transactions during the third quarter. We're a mix of broadcast, social media and local store marketing. We engage with our guests to drive awareness and frequency. Specifically, we promoted our Crispy Pollo Bite Meal Deals for $5.99 as well as 3 crispy chicken sandwiches that were introduced back in June, which remains our highest selling hand-held item. Social media outreach continued during the quarter, including the extension of our daily deals, such as Marination Mondays, TropiChop Tuesdays, Wildcard Wednesdays and Pollo Time Weekends. Operationally, our main points of focus since launching the renewal program has been hospitality, guest and team engagement, and speed of service. While we continue to make progress, we still can do more to improve. Our updated guest engagement platform rolled out last quarter and has been a tremendous help for our general managers to address any guest experience opportunities more quickly. We are currently in the process of upgrading our portable point-of-sale tablets to access payment to improve speed of service and throughput in our drive-thrus.

Turning to expense management. We are making progress on improving food costs, including working with new chicken providers to reduce costs without impacting our high quality. Let me now give you some updates on off-premise and other technology initiatives. We will be piloting our My Pollo loyalty program in our updated mobile app in the coming weeks. We have launched gift cards at wholesale clubs, including Sam's Clubs and BJ's, earlier this month with digital gift cards potentially ready before the end of the year. We anticipate piloting third-party delivery in South Florida in the coming weeks, with further expansion in 2019. In early 2019, we will begin testing kiosks, which we believe will increase average ticket and improve order accuracy.

Lastly, we're making great progress in building-out our catering infrastructure, including the appropriate operations, marketing and sales staff in place. Our team is now ready to target corporate and social gatherings for the upcoming holiday season. We are planning to utilize centralized kitchens in South Florida and leverage designated hub restaurants in other markets.

In summary, our initiatives are helping to propel the Pollo brand forward, and we will continue to work the plan to further improve restaurant performance and enhance hospitality in the months and years ahead.

With that, I'll now turn the call over to Rich.

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Richard C. Stockinger, Fiesta Restaurant Group, Inc. - CEO, President & Director [5]

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Thanks, Danny. Let's now review several initiatives related to the Taco renewal plan. Product improvements are the cornerstone of Taco's turnaround efforts, with enhancements centered around proteins across menu categories. During the quarter, we promoted our loaded Tacos Duos, which delivers on our promise of high quality and fresh ingredients at a great value. All-day breakfast and Tacos by the Dozen also continued to build traction and deliver relevant meal solutions to our guests. Shareables like the Kickin' Grand Nachos are being added to the menu to further broaden the appeal of the brand and support our TC patio program that we continue to expand.

Turning to off-premise and technology. We have several initiatives in process similar to what we are doing at Pollo. We recently completed a system-wide rollout of the MY TC! loyalty program, as well as our updated online ordering platform and mobile app. Early indications from our guests have been positive. We have also launched our gift card sales in Sam's Club earlier this month, with digital gift cards potentially ready before the end of the year. We are planning to test in-restaurant sales kiosks in 2019 and are in the process of adding upgraded POS tablets at certain locations to accept payment to increase sales in the dining rooms. Related to our off-premise focus, we will conduct a pilot test with a third-party vendor in early 2019, and are currently implementing the infrastructure of our catering program. During the quarter, social media outreach included Margarita Monday, PC Tuesday, National Beer Lover's Day and National Neighbor Day among others. While it's important to build and solidify our sales base in recognizing the investments we made in the four-walled operations, we also need to improve upon our margins through food and labor cost management. Labor initiatives are well underway, including labor scheduling, forecasting and tracking processes and updated batch cooking guides to reduce overtime.

In addition, we are increasing the use of shift leaders to promote leadership development, with the added benefit of reducing costs. Like other competitors in the industry, staffing continues to be a challenge at both brands. We are addressing this challenge by investing in resources to improve recruiting, training and employee engagement and retention. As you can see, we're working hard to bring these 2 unique brands to their fullest potential. In September, we celebrated Taco Cabana's 40th anniversary and are in the process of celebrating Pollo Tropical's 30th anniversary. These are true milestones for these iconic brands, yet we believe we remain in the early innings of a long-term opportunity and we're looking ahead with optimism.

During the third quarter of 2018, we recorded impairment and other lease charges primarily relating to underperforming restaurants. We continue to evaluate our overall portfolio of restaurants. As we move forward, we intend to build and sustain profitable sales growth and execute strategies to drive increased awareness and frequency, while we implement delivery, catering and digital loyalty initiatives. Importantly, we are continuing to plan for the future.

With that, let me turn the call over to Lynn to go through our financials in greater detail.

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Lynn S. Schweinfurth, Fiesta Restaurant Group, Inc. - CFO, Senior VP & Treasurer [6]

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Thank you, Rich. Good afternoon. During the third quarter of 2018, we lapped the anniversaries of Hurricane Harvey and Irma from the prior year, when a large number of Taco and Pollo restaurants were closed and affected by the storms by varying degrees. I will provide additional context as we review the financial results. Total revenues increased 10.1% from the prior year period to $174.6 million, due primarily to comparable restaurant sales growth at both Pollo and Taco. Comparable restaurant sales at Pollo increased 6.5% compared to a 10.9% decrease in the third quarter last year, which included approximately a 5.5% to 6.5% negative impact from the hurricanes in 2017. This year's gain consisted of a 5.2% increase in average check, inclusive of a 4.9% in pricing and a 1.3% increase in comparable restaurant transactions. If you'll recall, last year Pollo went back on broadcast media beginning at the end of the second quarter after a 2-month hiatus and spent more on broadcast media in the third quarter of 2017 to rebuild its momentum.

We believe higher advertising spending in 2017 and speed of service opportunities in 2018 negatively impacted our comparable restaurant transactions in third quarter 2018. We have proactively addressed speed-of-service challenges with the implementation of portable POS tablets in our drive-thrus and promotional calendars for the balance of this year and in 2019. At Pollo, restaurant-level adjusted EBITDA and related margins, non-GAAP measures, as defined in our SEC filings, increased by $3.6 million and 280 basis points, respectively, compared to the prior year period. These increases were driven by comparing against the impact of the hurricanes, closing unprofitable restaurants, sales leverage and lower advertising expense. These positive impacts were partially offset by higher cost of sales as a percentage of restaurant sales due to lapping the hurricanes when we have a limited menu set of items that carried lower food costs and menu enhancement investments that were part of the plan.

Restaurant wages and related expenses as a percentage of restaurant sales compared to the prior year period were favorable by 0.7%, due primarily to sales leverage partially offset by higher medical claim costs. Sequentially, other operating expenses were negatively impacted in part by higher repair and maintenance costs associated with addressing deferred maintenance needs identified last year and higher utility costs due to seasonality. We expect to complete our deferred maintenance project at both brands by the end of 2018. Year-over-year, other operating expenses improved 40 basis points, due primarily to costs incurred in the prior year period associated with hurricane preparation and repairs and the impact of sales leverage on utility costs.

Comparable restaurant sales at Taco increased 12.2% compared to a 12.6% decrease in the third quarter last year, which included the negative impact from Hurricane Harvey of approximately 2% to 3%. This year's gain consisted of a 12.1% increase in average check, inclusive of 7.7% in pricing and positive sales mix associated with higher-priced promotions and new menu items with higher food costs. Comparable restaurant transactions increased 0.1%, but were negatively impacted by the reduction in unprofitable overnight operating hours, which negatively impacted comparable restaurant sales by approximately 0.9%.

At Taco, restaurant level adjusted EBITDA and related margins decreased by $1 million and declined by 280 basis points respectively compared to the prior year period. Restaurant level adjusted EBITDA margins were negatively impacted by higher cost of sales as a percentage of restaurant sales due primarily to upgrades to food quality, higher other restaurant operating expenses, as well as advertising expenses, partially offset by the impact of sales leverage on labor costs and rent-related expenses. Cost of sales is improving sequentially, due in part to additional controls and processes we have put in place. Year-over-year, we experienced higher cost of sales as a percentage of restaurant sales due primarily to higher cost menu offering improvements and higher commodity costs, partially offset by menu price increases and lower sales mix related to Steak Fajita products.

Restaurant wages and related expenses improved as a percentage of restaurant sales compared to the prior year period due primarily to sales leverage, partially offset by an unfavorable impact associated with higher medical claim costs and higher performance-based compensation expense. Importantly, initiatives we have put in place are improving. Our adherence to labor targets, which we believe will continue to improve controllable labor costs going forward. Sequentially, other operating expenses increased in third quarter 2018, primarily due to higher deferred maintenance costs and higher utility costs due to seasonality.

Year-over-year, as a percentage of restaurant sales, other operating expenses were negatively impacted, primarily due to deferred maintenance costs, higher operating supplies and entertainment expenses associated with the TC patio program at select locations partially offset by the impact of sales leverage on utility costs. Advertising costs were unfavorable as a percentage of restaurant sales by 250 basis points compared to the prior year period due primarily to being off broadcast media in third quarter 2017 while we were implementing key initiatives associated with the plan. G&A increased $1.2 million to $13.3 million, due in part to $0.8 million associated with discontinued certain services, system implementation costs and project-oriented advisory services. In addition, in the prior year period, we recorded reductions of $0.3 million in board and shareholder matter costs and restructuring costs.

During the quarter, consolidated adjusted EBITDA, a non-GAAP measure defined in our SEC filings increased $1.9 million to $15 million, primarily driven by higher restaurant level adjusted EBITDA at Taco -- excuse me, at Pollo Tropical, partially offset by lower restaurant level adjusted EBITDA at Taco Cabana and higher G&A expenses. As a reminder, in the prior year period, we estimated that the hurricanes negatively impacted adjusted EBITDA and income loss from operations by approximately $3 million to $4 million at Pollo and by approximately $1 million to $1.5 million at Taco, or $4 million to $5.5 million in aggregate.

In the third quarter, we recognized $6.4 million of impairment and other lease charges. This consisted of a $5.7 million of impairment charges related to 3 Pollo and 5 Taco restaurants that are underperforming, but that we continue to operate and $0.7 million related to an office relocation and previously closed restaurants due to adjustments to estimates of future lease cost. I should also point out that in our press release today, there is a discussion on how we change the depreciation method for certain assets for federal income tax purposes to accelerate tax deductions. The revaluation of the related decrease in this net deferred tax asset resulted in a onetime adjustment of $3.9 million as a discrete item that decreased our provision for income taxes during the third quarter of 2018.

Also, beginning next year, we will be adopting the new lease accounting standard that will require us to record an initial adjustment to retained earnings associated with previously deferred gains on sale-leaseback transactions and we will no longer receive the benefit to rent expense from amortizing previously deferred gains on sale-leaseback transactions. For any future sale-leaseback transactions, the gain adjusted for any off-market terms will be recorded immediately. Currently, we amortize sale-leaseback gains over the lease term. Therefore, due to these sale-leasebacks, we will see rent expense increase prospectively starting in 2019.

Our expectations for 2018 capital allocation and new restaurant openings remains the same, as confirmed in our press release. While we are still finalizing our plans for 2019, we anticipate spending less capital in 2019 compared to 2018, as we expect to open fewer restaurants next year as we refine our four-wall model and evaluate our portfolio and with the completion at the end of 2018 of the deferred maintenance capital project related to the plan, partially offset by more restaurant remodels.

To conclude, our ongoing renewal plan is helping us build a solid foundation for our brand's future. Much has already been accomplished, but still there is more to do as we look ahead to build long-term value for our shareholders.

With that, we will open the line for questions. Thank you.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from the line of Nick Setyan with Wedbush Securities.

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Nerses Setyan, Wedbush Securities Inc., Research Division - Senior VP of Equity Research & Senior Equity Analyst [2]

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The pricing going forward, I mean, how should we think about that not only in Q4, but what's the magnitude of pricing you're kind of thinking about in 2019 as we look at 2019 for both brands?

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Lynn S. Schweinfurth, Fiesta Restaurant Group, Inc. - CFO, Senior VP & Treasurer [3]

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Okay. Nick, for the fourth quarter, as we get to the end of the year, we will be lapping over some pricing. So the pricing will go down from the 7.7% we reported in the third quarter for Taco to a little over 6%, and from 4.9% at Pollo down to low 4% in the fourth quarter. And then as we go into the following year, we currently anticipate taking very modest price next year. So we would not expect to see a lot of incremental pricing added in 2019.

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Nerses Setyan, Wedbush Securities Inc., Research Division - Senior VP of Equity Research & Senior Equity Analyst [4]

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And then I didn't hear any quarter-to-date commentary for Q4. I apologize if you guys said it, but if not, would you mind commenting on the -- on any quarter-to-date trends?

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Lynn S. Schweinfurth, Fiesta Restaurant Group, Inc. - CFO, Senior VP & Treasurer [5]

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Yes, we did not commented on it. In October, we did see a deceleration in terms of traffic across both Florida and Texas, fairly consistent with the industry. In addition, in Texas, we had some record-setting rainfall as well as cold weather that negatively impacted the month.

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Operator [6]

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Our next question comes from the line of Will Slabaugh with Stephens.

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William Everett Slabaugh, Stephens Inc., Research Division - MD [7]

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I had a question on profitability and it looks like at Taco Cabana, in particular. Can you talk about where we are with Taco Cabana profitability in terms of sort of after a good sales number, EBITDA was down. You mentioned obviously that's somewhat driven by improved product quality, but curious where we stood on the other line item within Taco Cabana and how we should think about sort of the evolution of the cost structure from here as we sort of drive a better profitability of that brand?

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Richard C. Stockinger, Fiesta Restaurant Group, Inc. - CEO, President & Director [8]

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Sure. Will, it's Rich. As we mentioned several times, we focused on top, and now it's time to get -- we have to get improved margins. We've been focusing on a lot of detailed reports in the back of the house. So our food costs should get better as we get towards the end of the year and is getting better as we speak today. In terms of labor cost, we've also put in some additional controls. So the labor cost has gone down since we closed the books in September. So we anticipate seeing the margin improvement that we expect to have fully next year, starting in the fourth quarter of this year.

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Lynn S. Schweinfurth, Fiesta Restaurant Group, Inc. - CFO, Senior VP & Treasurer [9]

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And I would just add one other comment and that is, as I mentioned in my opening comments, other operating expenses were up this quarter, primarily due to other -- excuse me, repair and maintenance expenses related to the project we started last year. And so we'll be done with that project by the end of this year. And then in addition to that as you're probably well aware from a seasonality perspective, we do see higher utility costs in the third quarter.

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William Everett Slabaugh, Stephens Inc., Research Division - MD [10]

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Got it. Okay. And then you mentioned labor a minute ago and then also in your script, I think you mentioned improving controllable labor cost. Can you go into that a little bit more in terms of what those initiatives are and how that might show up from an experience perspective for the customer?

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Richard C. Stockinger, Fiesta Restaurant Group, Inc. - CEO, President & Director [11]

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Okay. From a Taco perspective, and I think that's primarily where you're coming from, because I think at Pollo, we're pretty much where we want to be. Taco perspective, one was just changing the role of really one the leadership positions from a -- it's more of the staff moving up to a leader for a shift leader. That's number one. It's at a lower cost. Number two is much tighter labor control schedules. Again, we focus primarily on the top line earlier in the year and now we're going through detailed labor schedules on a daily basis being led by Chuck and his operating team. And number three is for the controlling of the over time. So it's just a matter of reconciling labor on a daily basis, which Chuck and his operating team now are doing extremely well and much better, and we're starting to see the results.

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William Everett Slabaugh, Stephens Inc., Research Division - MD [12]

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Got it. And one last one if I could. How should we think about the marketing spend that you put forward in the third quarter in terms of it being normalized going forward. Are we at a good level here? Or do you think that should sort of flex one way or the other?

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Lynn S. Schweinfurth, Fiesta Restaurant Group, Inc. - CFO, Senior VP & Treasurer [13]

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Well, we're expecting and we continue to expect to recognize about 3.5% in advertising expenses across the full year 2018 for both brands.

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William Everett Slabaugh, Stephens Inc., Research Division - MD [14]

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Is there any look into fiscal '19 as of yet?

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Lynn S. Schweinfurth, Fiesta Restaurant Group, Inc. - CFO, Senior VP & Treasurer [15]

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Not as of yet. Although I think we would expect to see similar expenses in advertising, we might try to find some additional opportunities to save in the next year.

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Operator [16]

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And our next question comes from the line of Brian Vaccaro with Raymond James.

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Brian Michael Vaccaro, Raymond James & Associates, Inc., Research Division - VP [17]

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Just a few topics I wanted to touch on. First, circling back to your quarter-to-date comments, would you be willing to say if the comps are still positive year-on-year at both brands?

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Richard C. Stockinger, Fiesta Restaurant Group, Inc. - CEO, President & Director [18]

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No, we were slightly down at Pollo for the -- in the month of October, just slightly. And again, that had to do with we were lapping over the big positive impact after Hurricane Irma of last year. And we still are with or slightly better than the Black Box or the competition. And at Taco, we were up, we continue to be up. We're down couple of points from where we used to be -- where we were before, but that was again due to the rains. When the rain stops, the business comes back.

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Brian Michael Vaccaro, Raymond James & Associates, Inc., Research Division - VP [19]

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All right. Great. And then on the pricing outlook, assuming you took no additional pricing, what would that look like -- that cadence look like as we move through the first few quarters of '19 for each brand? Can you remind us when you lap the next most significant increases that you took?

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Lynn S. Schweinfurth, Fiesta Restaurant Group, Inc. - CFO, Senior VP & Treasurer [20]

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Yes. We took about 4% of pricing in the early part of 2018 at Taco. And then our next pricing event was in July, so that's the first half of the year. And then for Pollo, we took about 2% in March this year. That will be lapping over in the first half of the year and another percent in May.

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Brian Michael Vaccaro, Raymond James & Associates, Inc., Research Division - VP [21]

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Great. Great. And then 2 more topical, I guess, questions. One is on the Pollo side, Rich, could you expand on your comment just around looking to optimize the portfolio further. You mentioned the impairment of a few units in the quarter, but maybe just a little bit more color on AUVs and margins in the non-South Florida markets in Atlanta? And just how we should frame potential closures over the next few years, if you're able to speak to that?

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Richard C. Stockinger, Fiesta Restaurant Group, Inc. - CEO, President & Director [22]

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One thing we will comment on is that we will be continuing, as you do every quarter, to take a hard look at the portfolio. And especially, as it relates -- and it goes to both brands. In the renewal effort, we closed some down early on, then you go put in the improvements, and now we're taking a real hard look at some of these restaurants that may or may not have, even with the improvements, done any turn. So I expect that we'll continue to look -- take a very hard look as we go into 2019, and that will happen again this quarter as we started to take a hard look at the last quarter.

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Brian Michael Vaccaro, Raymond James & Associates, Inc., Research Division - VP [23]

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Okay. And then just last one for me, if we can shift gears to the crispy chicken product line. I think you said the mix was in the 9% to 10% range. Can you speak to how the product is performing in South Florida versus non-South Florida markets, including Atlanta? And I think the last call, I think you mentioned you've been -- you would be conducting some consumer research. And I'm just curious if you have new insights as to what percent of the sales mix might be bringing in a new user versus more existing customers trying out the product?

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Daniel K. Meisenheimer, Fiesta Restaurant Group, Inc. - SVP & COO [24]

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Yes. This is Danny. Over at Pollo, the product has performed extremely well in South Florida, in fact, very similar results to the market that's including Atlanta, Tampa, Orlando, Jacksonville. So they've been very similar. The acceptance on it has been very good. The consumer testing, we need a little more time, so we're going to wait until early part of 2019 to get back into the markets to see what the guest reaction is. We've done some so far, intercepts and so forth, but it has tracked very well, but it's a base product right now. We have some exciting, perhaps, opportunities for it as we expand the program going into next year and beyond.

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Richard C. Stockinger, Fiesta Restaurant Group, Inc. - CEO, President & Director [25]

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Brian, the addition -- it's Rich. The acceptance has been widespread across the board. But it's even been more accepted in terms of positively in our colleges and universities. The young people love the crispy program, and we think there is a much more room in that program as we expand the Pollo brand and bringing these younger guests that normally don't come to us on a regular basis.

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Operator [26]

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Our next question comes from the line of Nicole Miller with Piper Jaffray.

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Nicole Miller Regan, Piper Jaffray Companies, Research Division - MD & Senior Research Analyst [27]

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You've had to return to TV and you've definitely benefited an overall comp, certainly in mix, and now transaction's starting to turn. Can you talk a little bit about how you're measuring the return on TV? And how you're weighting your marketing between digital and national TV or cable?

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Richard C. Stockinger, Fiesta Restaurant Group, Inc. - CEO, President & Director [28]

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That is a great question. And it kind of depends brand by brand. At Taco, because of the sales being so positive, we are getting very, very good returns at the Taco level as it relates to TV advertising. As it relates to the TV advertising here at Pollo, it's okay, but it's not acceptable to us as a management team. So we are in the process of looking and we're putting together our plans for next year, where you'll see more money, time and effort go into the nontraditional, which is away from the TV ads and more into the mobile and social media.

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Nicole Miller Regan, Piper Jaffray Companies, Research Division - MD & Senior Research Analyst [29]

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That's very helpful. I also want to know about the kiosk launch. Maybe review what percentage of sales are the in-dining? Do you expect the benefit from mix? Or can it also be a transaction or traffic driver? And then would there be an ability if that maybe alleviates labor somewhere along the way to redeploy that labor out to really guest satisfaction touchpoints in the dining room?

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Lynn S. Schweinfurth, Fiesta Restaurant Group, Inc. - CFO, Senior VP & Treasurer [30]

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Yes, Nicole. Round numbers, we do about half hour business inside the restaurant, whether it would be dine-in or take-out. And our kiosk pilot will start likely very early in 2019. We would hope to experience a higher-average check, better accuracy. And to your specific question about would we redeploy dollars to guest satisfaction or other labor needs, I think the answer is, that's what we anticipate. But we haven't even started the pilot, so it's very difficult to really set an expectation for what we think the kiosk will do. But that's why we're going to go ahead and pilot and be thoughtful as we move forward.

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Operator [31]

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There are no further questions in the queue. This does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.