Fiesta Restaurant Group, Inc. (NASDAQ:FRGI)
Q1 2014 Earnings Conference Call
May 6, 2014 04:30 p.m. ET
Tim Taft – President and CEO
Lynn Schweinfurth – Chief Financial Officer
Alex Slagle – Jefferies
Jeff Farmer – Wells Fargo
Nick Setyan – Wedbush Securities
Will Slabaugh – Stephens Incorporated
Greetings and welcome to the Fiesta Restaurant Group First Quarter 2014 Earnings Conference Call. (Operator Instructions) as a reminder, this conference is being recorded. I would now like to turn the conference over to your host today, Mrs. Lynn Schweinfurth, Chief Financial Officer for Fiesta. Thank you, you may begin.
Thank you, good afternoon and thank you for joining our call. Our first quarter 2014 earnings release was issued after the market closed today. If you’ve not already seen it, it can be found on our website, www.frgi.com under the Investor Relations section.
Before we begin, I must remind everyone that our call today may include statements that are not based on historical information. These forward-looking statements include, without limitation statements regarding our future financial position and results of operations, business strategy, budgets, projected costs and plans and objectives of management for future operations.
Actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements and we can give no assurance that such forward-looking statements will prove to be correct. Important factors that could cause actual results to differ materially from those expressed or implied by the forward-looking statements can be found in our SEC filings.
Please note that today’s conference call we will discuss certain non-GAAP financial measures, which we believe can be useful in evaluating our 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 our earnings release.
Now I would like to turn the call over to Tim Taft, President and Chief Executive Officer.
Thank you, Lynn, and good afternoon, everyone. Once again our team did an outstanding job delivering strong results for our shareholders. We saw a healthy growth at our top-line that stem from both comparable sales gains and contributions from the newer restaurants. While continues exceptionally strong sales momentum, while Taco has regained traction now that the erratic winter weather is behind us, in addition to our top line growth we expanded restaurant level margins and had meaningful EPS growth.
Lynn will walk you through the numbers in greater detail shortly so I will focus my remarks on our development plans and quarterly brand highlights. As you know we are continuing to accelerate expansion this year versus prior years. In 2014, we are targeting 22 to 26 new company-owned restaurant openings of which 20 to 22 will be Pollo Tropical restaurants and the remaining will be Taco Cabana and Cabana Grills.
Our pipeline continues to support our Go West strategy for Polo Tropical and our Go East strategy for Cabana Grill, with high profile sites in our corporate real estate team has been able to identify and secure. We opened a total of four company-owned Polo Tropical restaurants in the first quarter including three in South Florida specifically March gate, Miami, and Lake Worth as well as our first Texas restaurant in Addison corporate headquarters. We currently have 16 company-owned restaurants under construction.
In the second quarter, we have planned to open approximately seven restaurants including our first Cabana Grill we opened outside of the Atlanta in mid-April as well as six grill restaurants in Florida.
In the third quarter, we are planning approximately 12 openings including 8 Polo restaurants in Texas. The remaining openings will occur in the fourth quarter including our second Cabana Grill which was opened in Jacksonville, Florida. If our Cabana Grill concept performs as planned, it represents another potential growth vehicle for our company.
We are also going to close up the four Taco Cabana restaurants later in the year. These closures relate to (inaudible) for highway development, redevelopment projects and opportunities to offset a close restaurant with a better position new restaurant in same trade area.
At the end of the first quarter, we opened our first Polo Tropical Restaurant in Texas to large crowd and strong sales. This restaurant is the first example of new Polo Tropical prototype and it looks completely different from what we have previously built. The interior and exterior have been extensively redesigned and there is no mistake in putting influence and inspiration.
Our unique exterior is a bold statement that has got much attention and has been very effective in drawing new guests in the restaurants. The interior of the restaurant is totally redesigned including the ergonomically engineered kitchen designed to be more efficient and require fewer labor hours than our other elevated restaurants. The restaurant offers an elevated service model which includes helping guest, locate and reserve the table prior to ordering to the counter delivering to the guest table and assistance throughout the dining experience.
Meals are presented in the dishware with metal crockery. We are also featuring new menu items in Texas including all natural refreshed juices, one punch, Caribbean beer Calypso beef which consists of tender prime rib strips sought, (inaudible) with the hint of beef gravy and pickled red onions. Based on sales mix and guest feedback these new offerings have solid guest appeal and we are considering adding them to the menu in another elevated markets.
Pollo Tropical Grill restaurant (inaudible) this year calls for at least nine additional openings in Texas. This is intended to create each head in three key Texas DNAs, Dallas Fort Worth, Huston and San Antonio where we already have a strong presence with Taco Cabana. In addition to sharing the infrastructure and supply chain optimization, we stand the benefit from efficiencies in media and marketing.
The balance of our Pollo tropical development will be existing markets that are categorized into three groups. The first group is our legacy south Florida markets from West Palm Beach down to Miami where the brand is well known and posses high restaurant penetration and superior brand awareness. Our primary objective in these markets is to build new restaurants where we have exceptionally high volume, where there is profitability, and improved operational execution well spreading sales across new restaurants.
Under the strategy of planned cannibalization, we expect that the sales of the existing high volume stores will steadily build back and we have seen evidence of that already.
The second group is our lower to medium penetrated market such as Jacksonville, Fort Myers, Tampa and Orlando. We remain very encouraged by current sales volume in these markets and intent to increase our media penetration concurrent with new openings resulting in greater TV and radio rate levels. As an example in Orlando, we have increased average weekly sales over the past three years approximately 25% due to higher media spending and additional restaurants in the market both of which are driving higher brand awareness.
The third group is our emerging markets, Nashville and Atlanta and now the state of Texas. Establishing Pollo in Texas has given us a flexibility of being selective in our expansion plans. Strategically, we are building out Nashville and Atlanta as trade areas of develop and as the sites become available that will deliver desired results from the day of opening.
In the meantime, we have a robust development pipeline currently underway in Texas with many high quality sites we believe are capable of immediate contribution. In addition to our first Cabana Grill that recently opened in Snellville Georgia. We will open up one additional Cabana Grill later this year.
The Snellville opening was extremely encouraging it is evidenced by strong sales and steady line of customers. We are particularly pleased as we achieved notable sales results without offering a breakfast or overnight day park, as a restaurant it’s currently open for lunch and dinner only.
Our second Cabana Grill opening will be in Jacksonville, Florida and is less than two miles from existing Pollo. This additional restaurant will enhance our ability to spend more media and marketing dollars to benefit both brands and the market.
As you know, our plan for Cabana Grill is to bring the best of Taco Cabana delicious authentic Mexican food to southeast United States. We are evaluating the experience with additional menu items, service updates and a new divine element to reflect an authentic Mexican experience but with the broader appeal.
We took the opportunity to refine our floor plan and upgrade our technology. One exciting innovation was to implement a guest facing POS allowing the guest to follow his or her order being taken on a monitor at the counter.
We believe this enhancement will help to optimize order accuracy while assisting the guest in the ordering process. This technology could potentially increase average check by suggesting on-screen other complementary menu items and premium toppings.
The performance of this restaurant will be the basis for evaluating the opportunity for further expansion of Cabana Grill outside of Texas to compliment our aggressive development plans for Pollo Tropical.
Regarding our existing Taco Cabana restaurants, we are forging ahead with our remodeling program with approximately 25 to 30 projects related to completion primarily in Huston in 2014. Financial results for our remodeled restaurants continue to update the system while elevating the overall perception and appeal to the brand.
Before discussing individual brand results and promotions, I would like to touch upon another initiative we believe will enable us to deliver an even better fast casual experience of price, value and convenience to our guests. We are currently testing the smartphone app in conjunction with online ordering which will enable guests to order and pay for their meal via their smartphone or tablets. The guests will also specify a pick-up time, confirm their arrival and parking location to upon their fee will be delivered at kerbside.
In the next few months we will expand the smartphone test into the additional markets where system wide implementation planned for the foreseeable future. To build the awareness we will promote this app on point of purchase displays as well as in eBlast and direct mail.
Online order maybe featured on cups, bags, another packaging materials. We believe this app and online ordering will play a critical role in raising our average check and driving additional traffic. Those of you that have not experienced our fresh flavorful food in the restaurant might not necessarily be aware that it travels extremely well which is a key attribute for the guest in deciding what to bring home for dinner.
On a go forward basis, our goal is to prepare even greater percentage of transactions consumed off premise whether these order are via app, online or catering.
Now let's discuss individual brand highlights. The momentum that Pollo Tropical continues with strong sales results and margin improvements, comparable restaurant sales grew 6.3% in the first quarter and consistent of 4.6% in transaction growth and 1.7% in the average check growth accumulative impact of price increase was 1.6% for the quarter.
Noticeably on a two year basis, comparable sales increased 10.1% and on a three year basis, comparable sales increased 19.5%.
In addition, the brand is now into its sixth straight year of positive comparable sales and has generated growth in 18 consecutive quarters. In addition to fresh, flavorful food offering we believe Pollo Tropical is also benefiting from evolved branding with new advertising agency and campaign, newly designed website, and media planning and buying which is more efficient in generating more awareness and interest.
During the January and February, we promoted the Tropical chicken spinach salad and Tropical chicken spinach wrap while in March just in time for the Lenten season. We promoted citrus marinated grilled shrimp in a variety of dishes including Create Your Own Shrimp TropiChop, Shrimp case to be wrapping and shrimp (inaudible) salad.
Ongoing initiatives support Tropical include evaluating new prototype buildings for improvements, evaluating menu products introduced into Texas for possible implementation in another markets and highlighting our five points of focus which is our operating platform through a refined restaurant evaluation process.
From the profitability standpoint, adjusted EBITDA at Pollo Tropical grew nearly 40% in the first quarter of 2014 to 13.7 million before outpacing the 15% increase in restaurant sales in the quarter.
Turning to Taco Cabana, available restaurants sales grew 28% in the first quarter, a comparable sales gain consisted of 2.8% increase in average check and 2% decrease in the guest traffic.
Traffic was negatively impacted by weather and almost 240 fluid remodeled stores in the first quarter of 2014 compared to the same period in 2013. Check on average was positively impacted by new menu board accumulative with the impact of menu price increases at 1.3%.
On a two year basis, comparable sales grew 2.8% and on three year basis, they grew 8.9%. During the first quarter, we promoted Flauta Plate for $4.99, rise and dine breakfast tacos for a dollar nine and shrimp Tampico.
Beginning in the second quarter, we shifted our promotional strategy with media that focuses on a strong value message such as (inaudible) plate for 499 and Cabana bowl and drink for 499. We are also promoting premium products and add-ons in restaurants to support and protect our check average.
Brand initiatives include the completion of menu Board changes in mid January while this happen to raise our check average by leaving guest from combos to a more profitable plates and measures that have improved order accuracy and total guest satisfaction.
From a profitability standpoint, adjusted EBITDA at Taco Cabana increased 8.8% to 7.1% in the first quarter of 2014 which outpaces the 3% increase in restaurant sales. Before I turn the call back over to Lynn, let me express my appreciation to our teams for delivering exceptional results in addition to our financial achievements we kept two big steps forward with Pollo Tropical premium Texas in our Cabana Grill opening in Georgia. We congratulate Danny and Todd the brand team and the fiesta team for delivering such an exciting view of the feature. We continue to be confident in our direction and about what we can deliver to our guests and our shareholders over the long term. Lynn?
Thank you, Tim. We are pleased with our first quarter results and I second Tim’s sentiment that our team is doing an incredible job on behalf of our shareholders. Let me first summarize the quarter and then dive deeper into the results themselves.
First, we grew total revenue by 8.8% to 145.4 million from 133.6 million due to the impact of 16 net new company restaurants opened over the past year and comparable restaurant sales growth at both brand. Pollo Tropical delivered comp sales growth of 6.3% continuing as competitiveness within the industry and within the staff casual segment while Taco Cabana delivered positive comp sale of 0.8%.
Note that due to Easter falling in the second quarter this year and in the first quarter last year, there was a positive impact of 20 to 30 basis points to comp sale in the first quarter of this year. The impact to each of the brand was about the same.
Then our comparable sales growth momentum in the first quarter has continued in the second quarter at Pollo while at Taco comparable sales growth has been proved to be a little low over 2% so far in the second quarter.
Restaurant level adjusted EBITDA at the percentage of restaurants sales improved by 110 basis points to 21.8% as we effectively managed the middle of the TNL. Pollo Tropical contributed 60% of our consolidated restaurant level adjusted EBITDA in the first quarter compared to 56% in the same period last year reflecting increased importance to our consolidated results. As the margin grew to 180 basis points while our Taco Cabana's margin where essentially flat.
Keeping G&A flat, year-over-year, drove further margin expansion with higher revenues and helped to drive a 27.2% increase in consolidated EBITDA to 20.8 million and 210 basis points improvement of consolidated EBITDA as a percentage of revenue.
On the bottom line, we delivered $0.33 in diluted EPS which compared favorably to the $0.20 in diluted EPS we have reported in the same period last year. Note that the final equity offering last year which increase the share count approximately 15% EPS still grew by more than 16%. Digging further into our P&L cost to sales improved at the percentage of restaurants sales by 50 basis points this quarter compared to the prior year period with a similar improvement at both brands. The positive leverage was due primarily to supply chain initiative the benefit of modest price increases and a shift in sales mix more profitability menu item which more than offset commodity due to inflation, cost to sales is currently expected to continue on the same trajectory in 2014.
Restaurants wages and related cost as the percentage of restaurant sales improved to 120 basis points year-over-year primarily due to the favorable impact of workers compensation claim cost at Pollo and sales average.
Note that the positive adjustment on workers compensation claim cost represented approximately 130 basis points of margin improvement at Pollo in the first quarter. In addition as we open up new elevated restaurant, we expected to see some labor pressure due to less efficient margins in the initial months of operation, as one of the incremental labor to deliver our elevated service model.
In subsequent quarters in 2014, we current expect Pollo restaurant wages at the percentage of restaurant sales to run somewhere between 100 to 150 basis points higher than the first quarter. While we expect Taco restaurant wages as a percentage of restaurant sales to be reasonably comparable to first quarter performance.
Rents expense increased 20 basis points as the percentage of restaurant sales due primarily to new Pollo Tropical restaurants opening and so that lead that transaction that were completed over the course of last year. Other restaurant operating expenses increased slightly by 20 as points as a percentage of restaurant sales.
Advertising expense increased as a percentage of restaurant sales by approximately 30 basis points in the first quarter of 2014 compared to the prior year period being primarily to the timing of promotion that increased media spending. Pre-opening cost increased by $0.1 million to $0.7 million in the first quarter of 2014 due to timing of expenses for future opening which are typically incurred between four to six months prior to the restaurant opening. We continue to effect pre-opening cost of approximately $4 million in 2014. As I previously touched on G&A expenses remain fairly flat at $12.2 million but decreased 80 basis points as the percentage of revenues to 8.4% in the first quarter of 2014 due to the impact of higher sales on flat year-over-year expenses.
Depreciation and amortization increased $0.5 million to $5.3 million in the first quarter of 2014 due to new restaurants openings over the past year that were partially offset by the impact of sale lead back transaction. Interest expenses decreased by $4.4 million to $0.6 million in the first quarter of 2014 compared to the prior year period due to the reduction in our outstanding debt and a lower interest rate on borrowings under the new senior credit facility. Note that our first quarter income tax provision was derived using an estimated annual effective income tax rate of 38.3% following the same period last year the provision for income taxes was derived using an estimated and effective annual income tax rate of 35.8% excluding discrete items.
The 2014 rate is higher than the prior year period due to the expiration of the work opportunity tax credit at the end of 2013. Net income increased $3.9 million to $8.7 million in the first quarter of 2014 as compared to net income of $4.8 million in the prior year period or an increase of over 80%. Diluted EPS increased to $0.33 per share to $0.20 per share or increase over 60%. At quarter end we had a cash balance of $2.4 million and pay down $7 million and borrowings under our senior credit facility compared to the fiscal year end.
After reserving $7.5 million for letters of credit, we have $78.5 million which has to be under or senior credit facility. We were in compliance with our convenience related to our credit facility. Now let's review other 2014 operating target.
We are currently projecting to be at the high end of our previously communicated range for comparable sales growth of 3% to 5% at Pollo. We continue to project comparable sales growth in the range of 1.5% to 3.5% at Taco. DNA is expected to be $48 million to $50 million including equity based compensation which compared with $48.5 million in 2013 driving margin expansion given a higher revenue base.
We are working under the assumption that work opportunity tax credit will not be reinstated in 2014 and our model need and effective tax rate of 38.3%. Note that this rate is currently estimated to be slightly better than the 38.5% to 39.5% range that we have discussed on the fourth quarter conference call. If this credit is reinstated, we would expect the rate of 37% to 38%.
Finally capital expenditures are projected to be in between $60 million and $65 million in total, this includes $45 million to $50 million for our new restaurant development, $12 million to $14 million for re-modeling and capital maintenance and $4 million to $6 million for the additional system investment to realize efficiency, improve management through all team by our restaurant management team and to enhance the guest experience. So in closing we are opt to solid start in 2014 strategically operationally, and financially. Let's open the line for questions. Please.
Op strategically operationally, and financially. Let's open the line for questions. Please.
Thank you. [Operator Instructions] Our first question comes from Alex Slagle with Jefferies. Pleased proceed with the question.
Alex Slagle - Jefferies
Thanks. There are two things I want to clarify. One was the April seems your sales trends, with those sort of figures you gave you have been including the negatively to shift and I guess what it seems like a pretty difficult comparison.
Yes they were inclusive of the (inaudible) shift.
Alex Slagle - Jefferies
Okay. So that’s like 60 to 90 basis points or something in the April comparing in that way?
No, that actually would be lower than that.
Alex Slagle - Jefferies
Okay. And then 2015, you said it is 53 weeks year?
Yes it is.
Alex Slagle - Jefferies
Okay. And question on, sorry this one I have to dive a little more into the new markets so Pollo Tropical and Cabana Grill and obviously very early at this point but some more eager to learn more about so I am just wondering if you could provide a little more color on what you learn with the new market opening, Alison, Novel and anything that surprised you and are you happy with the new restaurants designs and kitchen designs.
To start with Pollo and Alison, the stance to the restaurant just the exterior and interior of the restaurants has really been overwhelmingly positive. Social media has nothing but great things to say about not only the teams but other restaurants and the food. The redesign of the kitchen is handling our throughput issues very, very well. We have got very good and consistent speed, times accuracies is better. It’s always, crowd is better specially when you get new customers with new menu but the response is thus far is you know met or exceeded our expectations from the brand expansion into Texas. Cabana Grill, likewise it has been really remarkable in the way that that brand has done embraced its only three weeks and so the jury is still out. The thing we have learned though is that the kitchen design which is completely different than anyone that we built before in Taco Cabana really does handle volume better than any of the ones we have before so we are using, going to school on that particular layout and we will be building that in future restaurants.
The thing that I guess surprising is that going back to Pollo, I guess I would say it's interesting now in Florida you saw a lot of white rice and in Texas really don’t like white rice but they do like our (inaudible) white rice but they do like our Calypso beef, the alcohol sales Atlanta, people seemed to hang out a little bit more than they do in Texas so you know you are (inaudible) sales are higher but all in all both brands I am very happy with the reception that the brands have received thus far.
Alex Slagle - Jefferies
Great. Thank you.
Our next question comes from Jeff Farmer with Wells Fargo. Please proceed with your question.
Jeff Farmer - Wells Fargo
Thank you, when you mentioned it quickly, so I might have missed the details but what is the plant roll out time line for the Pollo smartphone app and if possible could you share some results from your testaments?
I will tell you that right now it's in test in couple of markets. The response has been – it's been very-very good. We have not yet turned on the kerbside that will happen here in the next couple of weeks. It's in Jacksonville right now. We are moving it up to additional markets and we will have it fully implemented in the Texas market some time by June. So I think system-wide we should have it in place by June the middle, middle of June.
Jeff Farmer - Wells Fargo
Okay. That's helpful and then in past quarters you pointed to both speed of service and order accuracy initiatives. I think it’s both pretty meaningful sense for sales drivers, at least some of the meaningful sense for sales driver you have are those still in place? You get out deeper in 2014 are those two things that can both potentially continue to drive some pretty same store results on Pollo in particular?
Yeah. I think it's a great question and the answer is that those two initiatives will always be font center for both of the brands. Accuracy is like an onion you can always be better, you can peel a layer at a time you still have other opportunity not only do you have those help do the service but it also but also helps in releasing rates down and also customer perception but it's not a onetime initiative. Jeff it's something that both brands will focus on from now until the end of time.
Jeff Farmer - Wells Fargo
Alright then final question again I apologize if I missed this but on the commodity bask inflation, I missed if you gave a number for ’14 and what some of your I guess key contracts are and some of the items that are not contracted as well what the commodity landscape looks like for you guys?
Okay. Well when I indicated is cost to bell as the percent of restaurant, as a percent of restaurant sales which is running at about 50 basis points better year-over-year and we expect to continue through the balance over year, we have locked in the majority of our commodity purchases and some of the moving pieces we have actually seen some favorability year-over-year for a whole chicken, for Fajita beef, for Fajita chicken where we are seeing some pressure, some areas of pork as well as cheese and cheese is one of the commodities that we purchase that is not currently on a fixed contract. So that will continue to have an impact over the next few months as we see the trend evolve.
Jeff Farmer - Wells Fargo
Alright. Thank you very much.
Our next question comes from Nick Setyan with Wedbush Securities. Please proceed with your question.
Nick Setyan - Wedbush Securities
Thank you and congrats on another great quarter. On the new Cabana Grill, is it you know we just lunch and dinner, I mean is there reasonable to assume given the first three weeks, I know it’s too much of a time period there but is it theoretically I mean reasonable to assume that we can get to similar average volumes or should we think about that as slightly lower given that it's only sort of lunch and dinner day parts?
Our goal Nick has been to have apple above the system averaging and volumes but today I really—we have Taco Cabana with our breakfast moving that overnight and so today still it’s early but we are again happy and encouraged by what we are seeing so far.
Nick Setyan - Wedbush Securities
That's great to hear. And just the clarification on the commentary for the query dates in terms of when you guys can't talk about similar trends, I mean is that close like a 6% because that would imply a significant acceleration on three year basis or should we think about the similar trend inclusive to two year basis or closer to maybe 4% or 4.5%?
I would say that it’s probably the slimmer.
Nick Setyan - Wedbush Securities
Perfect. Thanks so much. I appreciate it.
Our next question comes from Nicole Miller Regan with Piper Jaffray. Please proceed with the question.
Great, Thanks, this is Josh on for Nicole, one of you might be able to talk about the evolution of the Pollo Tropical units and layouts and you touched down a little bit about of that with the new units there in Texas but it seems like each generation we are getting better add it and so serious if we are now at point where that's the prototype we will use going forward or continue to tweak every time.
I think first we are extremely pleased with the way, not only it looks the way it's been received and the way that the restaurant operates. We will continue to tweak but I don't believe that there is going to be material differences on a go forward basis. We are four or five weeks into may be this restaurant opening, we see opportunities just to move equipment around, repositioning in the kitchen but in large part what you see in Adison, is a restaurants that we are going to be building for the foresee of the future.
Great. That's helpful. Thank you. Then as we shift back over to the commodity side, have we cycled through or when we will recycle through rather the improvements and saving from the supply chain initiates and it may be said differently is there an opportunity as we go through the rest of this year maybe in the next year that we can still find more supply chain savings overtime?
Josh I would answer that question where it's been ongoing thing that we focused on whether it's sales mix shift to more profitability products whether it's the way we are fixing pricing on a go forward basis and looking for ways to really leverage the system where we are purchasing commodities across brands, things like that are ongoing and you know really for that mind, for the brand team and our commodity team.
Great. Thank you.
Our next question comes from Will Slabaugh with Stephens. Please proceed with your question.
Will Slabaugh - Stephens Incorporated
Yeah thanks guys. I had question on trends and just given the update that you give us after 4Q, it sound like the trends are pretty fairly steady throughout the quarters so I just wonder if could confirm that at both brands and then apologize if I missed this but can you give us what the April trends portfolio in Taco?
Well I guess we will start with the second question first. The April trends, we indicated that we saw continuation of the trajectory in the first quarter happened in the second quarter for Pollo and for Taco we saw an improvement quarter-to-date in the second quarter Taco was generating comp sales of about 2% and then in terms of the first question we saw a little bit of movement throughout the month based on some of the comparables from the prior year. We had some weather at Taco in February I believe and then in January we saw softer results that Pollo because of some of the macro impacts that were impacting the brand and certainly the end history last year.
Will Slabaugh - Stephens Incorporated
Great. Thank you and secondly I want to ask a little more about Cabana Grill. Just assuming continuation of the good trends I know it's very early there but assuming that continues and then Jacksonville opens up well, how many Cabana Grills and Pollo grill would you like to be able to build next year and how quickly can this turn into another growth vehicle for you?
Well, I think I will answer by saying we agree but it is early. We are currently looking for additional sites as we speak. We are as I mentioned encouraged by what we are seeing thus far. I think it gets to the bottom line of your question, I think you are going to be – it's like Pollo, you have to get the teams accustomed to the kind of opening frequency that we anticipate. So if you look at Pollo as an example, couple of three years ago we built three union, we built (inaudible) we got 12 or 16 and this year will be 20 to 22. So those kind of wrap up seems reasonable should we get to that level.
Will Slabaugh - Stephens Incorporated
Got you and just lastly what I am asking is about advertising expenses, that was just modest year-over-year, I am just kind of curious Lynn if you knew what we should except the rest of the year in terms of this year versus last year?
You should expect something fairly comparable. It might be a little bit higher this year versus last year and we did pull back in some of our advertising spend at the later part of the last year.
Will Slabaugh - Stephens Incorporated
Got you. Thank you very much.
[Operator Instructions] Our next question comes from (inaudible) Please proceed with your question.
Hi. Thanks for taking the phone call. I knew the food by the way, I live in Florida, I am just wondering are you happy with the teams that are pulling up their restaurants now and do you have any long term plans to increase the ability to built that in the faster pace or in national scale?
Yes I think as we said in the past, what we want to do is make sure that we open up every restaurant and (inaudible) grow as fast as we think we can do it correctly. We have this as we mentioned development is more than one/two proposition and what we have been doing is ramping up the teams and the pace by which we opening this year we will open up more than we opened a year ago and the year before that. I think that what we want to do for the next couple of years is really fill out Texas in the major DNAs where we are going to establish (inaudible) and then probably sometime in the next two- three years be discussing about what it looks like should we move outside of that geography and the pace then.
There are no further questions in queue at this time. And I would like to close the conference for today. Thank you for your participation. You may disconnect your lines at this time.
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