Good day, ladies and gentlemen, and thank you for standing by. Welcome to the El Pollo Loco Third Quarter 2017 Earnings Conference Call. At this time, all participants have been placed in a listen-only mode and the lines will be open for your questions following the presentation. Please note that this conference is being recorded today, November 2, 2017. On the call today we have Steve Sather, President and Chief Executive Officer of El Pollo Loco, and Larry Roberts, Chief Financial Officer. And now, I turn the conference over to Larry Roberts. Please begin, sir.

Thank you, operator, and good afternoon. By now, everyone should have access to our third quarter 2017 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. 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 third quarter of 2017 tomorrow and we'd 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 turn the call over to Steve Sather.

Thanks, Larry, and good afternoon everyone and thank you for joining us on the call today. Third quarter results included revenue growth of 5.6% and pro forma net income of $0.15 per share. While our comparable restaurant sales remained positive during the quarter, our earnings reflected the impact of increased labor costs system-wide, continued investments in our loyalty program and ongoing challenges in our Texas markets. System-wide comparable store sales grew 1.7% during the quarter, including a 2.4% increase at franchised restaurants and a 0.9% increase at Company-operated restaurants. Sales growth slowed towards the end of the quarter and has remained soft thus far in Q4. Despite the softness, we remain confident that our efforts to highlight what we believe are our authentic differentiated brand and QSR+ positioning along with initiatives to leverage technology to improve the consumer experience, are the right strategies to drive long-term success of the brand. During the quarter, our entree promotions were focused on overstuffed quesadillas, taco platters and burritos. Our taco platters performed particularly well, receiving strong customer feedback and addressing an area of opportunity on our menu. These craveable taco platters included the choice of Chicken Avocado Tacos, Chicken Bacon Cheddar Tacos, Avocado Tacos al Carbon, our Shrimp Mango Tacos served with seasoned rice and slow-simmered pinto beans. We believe this differentiated offering, which highlighted our fresh ingredients and unique flavors, could become a permanent menu item in the future. Our unique family meal offering also continue to resonate with consumers, offsetting some of the softness we saw in entrees. During the quarter, we kept the focus on the $20 price point, which helped drive our strongest family meal growth of the year, up almost 6% compared to last year. For the balance of the year, we will continue emphasizing this price point…

Thanks Steve. For the third quarter ended September 27, 2017, total revenue increased 5.6% to $101.2 million from $95.8 million in the third quarter of 2016. The growth was largely the result of the increase in Company-operated restaurant sales which rose 5.8% in the quarter to $95 million. We estimate approximately $450,000 of lost sales as a result of Hurricane Harvey in our Houston market. This increase in Company-operated restaurant sales was driven by the contribution from the 25 new restaurants opened during and subsequent to the third quarter of 2016 as well as by the 0.9% increase in comparable restaurant sales. The increase in Company-operated comparable restaurant sales was comprised of a 1.7% increase in average check, partially offset by a 0.8% decrease in transactions. Franchise revenue increased 1.6% in the quarter to $6.2 million from $6.1 million in the third quarter of 2016. This increase was driven by the contribution from 15 new restaurants opened during and subsequent to the third quarter of 2016, as well as by 2.4% growth in comparable restaurant sales, partially offset by a decline in franchise and development agreement fees and fees received from franchised restaurants related to their use of our point-of-sale system. Turning to expenses, food and paper cost as a percentage of Company-restaurant sales decreased 70 basis points year-over-year to 29.3%. The improvement was predominantly due to lower commodity costs, particularly lower contracted chicken prices, partially offset by higher food waste and loyalty program incentives. While we experienced higher avocado prices during the third quarter, they have since come down and as a result we continue to expect full-year commodity deflation of about 2.5%. Labor and related expenses as a percentage of Company-restaurant sales increased 170 basis points year-over-year to 29%. The increase in labor expenses was due primarily to…

Thanks, Larry. In summary, we continue to believe that we will drive sales and profitability through our efforts to highlight what we believe are authentic brand, are differentiated offerings, and are QSR+ positioning. Our loyalty program is gaining momentum and we are getting ready to test a revamped delivery platform that we believe will drive incremental sales. We will continue to invest in technology to bolster convenience and value, and improve the guest experience. We are implementing a comprehensive brand relaunch in Texas, planned to encompass everything from operations to facilities to marketing, designed to drive brand awareness, bring guests into the restaurants, and deliver a wow experience. We believe that our authentic brand, differentiated product, and strong value equation, position us well to drive positive financial results and create long-term value for our shareholders. Again, I'd like to thank you all for your continued interest in El Pollo Loco. We are now happy to answer any questions that you may have. Operator?

[Operator Instructions] Our first question comes from Andy Barish with Jeffrey. Please proceed with your question.

It's Alex Chen on for Andy. I was hoping that you could dig a little bit more into maybe the monthly cadence of the comp, and I know that the family meals have been helping out in the mix, what did that look like in the quarter, and you talked a lot about loyalty, was that offsetting some of the benefit of family meals? Any color would be helpful.

Sure. This is Steve. We started off really in July and August pretty strong. We were at a 2.9% system-wide in July and 2.8% in August. We saw some softening begin in mid-September and that continued so far into Q4, although we are positive as we sit here today in Q4. So, we believe the primary reasons for that softness was there are some heavy competitive discounting that began early in September, and we think some of the customers that were attracted to that and the deep discounting. Also, the biggest impact was in our entree business that we saw. Although we have a very good burrito business, our burrito LTO in September didn't perform quite the expectations that we thought. So, overall a little tough competition in the end of September and that competitive aspect continued on. If you talk about the loyalty aspect, we feel very good on our loyalty program. We talked about that on the last call. In fact, Alex, if you look, right now we've got about over 450,000 members as of today and we continue to add new members on a daily basis. It's a little over 4.7% of sales. We think this is really a long-term sales driver as it increases frequency. Additionally, new to this, and the great part about loyalty is you get great consumer data, and it will help us better understand the customers and drive even more effective promotions. We hired a company called [indiscernible] to help us do this data analysis. So we think that's a long-term driver, especially as we get into the 2018 end of sales.

Alex, just to add to Steve's comments, you were asking a question regarding mix, and I think you were getting at the loyalty incentive impact [indiscernible].

Exactly.

I think you called that out precisely because if you look at it, [indiscernible], mix came in roughly flat to maybe down a 10th, and you certainly saw favorable mix with our family meals, but that was offset by the incentives of our loyalty program. If you look at the average check on loyalty program, it's somewhere around $4 to $5 as a result of those incentives. So you can see when you are driving that program, that mix in the loyalty program is offsetting your favorable mix on your family meals. And then I just also want to, [indiscernible] Steve, it was right around the numbers. We saw some softness in September, and then we have seen that, certainly the start of Q4 has been softer than we expected and hoped for. But as Steve highlighted, we are running positive and we are really positive over 1% so far this quarter.

Got it. Thank you. And then if I might just ask one more, you talked about testing out a third-party delivery, and if I recall, at one point you were working with Olo Dispatch. I'm just curious about whether this is a thing separate from that and were you finding a reason to kind of switch between them and what kind of incremental sales you might have been seeing?

I'll give you a little bit of color on it. We were working with Olo Dispatch and that's really in about 28% of our system right now. What we weren't participating in with that so far was the delivery marketplaces, which many consumers are using. And what we are doing is we are going to test in fourth quarter here with DoorDash to become a delivery service provider. We're going to test that in our Las Vegas market. And they can not only do that, they operate in the marketplace, but also can do our direct orders, which is what we are doing now at a very reasonable fee. So we are very excited about that test, because if it's successful in fourth quarter, we'll roll it into the system next year and we think that will take us from about – currently about 28% of our stores are participating in delivery, we think that will take us to 80%-plus. So we are excited about that test in Las Vegas.

And Alex, just to clarify, I mean Olo, we are still using Olo. Olo is our mobile ordering mobile app provider. And so, whereas previously we were using them along with UberRUSH, we are now looking to test them in conjunction with DoorDash. So, Olo is still a very good partner, we are working with them. So it's really just a delivery service provider what we are looking at, not a mobile app provider.

Yes, we think that DoorDash has a real focus on the large orders and especially catering orders. They have got a very good performance on the catering side, which is a big potential for us with both our family meals and then large office caterings.

Actually that makes me curious, with the mobile so far, are you seeing orders tend toward that higher-ticket kind of larger order or the smaller more maybe loyalty promotional items?

No, so far when we look at the average check per mobile ordering in the mobile app, it's running higher, and certainly a chunk of that is catering orders coming through mobile. So it is running higher, and right now I think it's running, was it 1.4% or 1.5% of sales, is being done via mobile ordering.

[Operator Instructions] At this time, I would like to turn the call back over to Mr. Sather for closing comment.

Thank you, operator. We want to thank everybody for joining us today. We appreciate your time and your interest in our brand. Have a good evening.

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