El Pollo Loco Holdings, Inc.

What they do

El Pollo Loco operates and franchises restaurants in the limited-service segment, serving individual and family-sized fire-grilled chicken meals and Mexican and LA-inspired entrees such as the Double Chicken Tostada, Guacamole Chicken Burrito, and Salsa Verde Chicken Quesadilla. As of December 31, 2025, the system comprised 175 company-operated and 328 franchised domestic restaurants, plus 8 licensed restaurants in the Philippines. The company operates in a 52- or 53-week fiscal year ending on the last Wednesday of each calendar year.

Revenue drivers

• Company-operated restaurant revenue — Sales at the 175 company-operated restaurants; $108.1 million in Q2 2026, the largest revenue line.
• Franchise revenue — Royalties, advertising and other fees from 328 franchised restaurants; $12.9 million in Q2 2026, down 3.8% year over year.
• Comparable restaurant sales — Growth driven mainly by average check, which rose 4.2% at company restaurants in Q2 2026 while transactions declined 1.1%.
• New restaurant development — Franchisees opened 8 restaurants in fiscal 2025 and 11 during or since Q2 2025, adding incremental sales.

Recent performance

For the second quarter ended July 1, 2026, total revenue was $129.6 million versus $125.8 million a year earlier, with system-wide comparable restaurant sales up 3.9%. Income from operations rose to $18.7 million from $11.3 million, and net income was $12.8 million, or $0.43 per diluted share, versus $7.1 million, or $0.24 per diluted share. Restaurant contribution was $21.1 million, or 19.5% of company-operated restaurant revenue, compared with $19.9 million, or 19.1%, a year earlier. General and administrative expenses fell $6.5 million, or 47.9%, largely due to $6.3 million received from a legal settlement, net of legal expenses. Adjusted net income was $8.9 million, or $0.30 per diluted share, and adjusted EBITDA was $19.1 million.

Strategy

Management describes five key strategies, including a 'Brand That Wins' and a 'Hospitality Mindset,' focused on increasing customer frequency, attracting new customers and improving per-person spend. For 2026, the company intends to open three to four company-operated restaurants in California and Texas, while franchisees intend to open 15 to 16 restaurants. The company plans 25 to 35 company-operated remodels and 30 to 40 franchise remodels in fiscal 2026, after completing 17 company and 52 franchise remodels in fiscal 2025. Management cites menu innovation, operational excellence and enhanced digital engagement as drivers of sales and new unit development. CEO Liz Williams said the company remains focused on sustainable traffic growth and margin discipline.

Risks

• California wage and compliance costs — Recent California legislation raising fast food worker wages increased labor and regulatory compliance costs in fiscal 2024 and 2025, and the company expects these pressures to continue in 2026.
• Tariffs and trade policy — Produce, packaging and other items are sourced from outside the United States, including Canada, Mexico and Asia, and increased tariffs could raise food and supplies costs.
• Negative comparable transactions — Company-operated comparable sales growth has come from higher average check while transactions declined 1.1% in Q2 2026 and 1.8% in fiscal 2025.
• New restaurant development risk — The fiscal 2026 plan to open three to four company and 15 to 16 franchised restaurants depends on site selection, permits, construction costs and franchisee financing, all of which are outside the company's control.

Outlook

The Q2 2026 earnings release states that the company raised its 2026 full-year outlook. Management said it remains focused on driving sustainable traffic growth across the system and maintaining margin discipline. The company expects fast food wage and broader inflationary cost pressures to continue in 2026, and it may not be able to offset cost increases in the future.