What changed in this filing

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Item 1. Business

2021-03-15 compared with 2020-03-06 · 138 added, 77 removed, 209 unchanged (51% of the section changed)

El Pollo Loco is Spanish for “The Crazy Chicken.” We were organized as a Delaware corporation in 2005.

We opened our first location on Alvarado Street in Los Angeles, California, in 1980, and have grown our restaurant system to 482 restaurants, comprised of 195 company-operated and 287 franchised restaurants as of December 25, 2019 .

El Pollo Loco is Spanish for “The Crazy Chicken.” We opened our first location on Alvarado Street in Los Angeles, California, in 1980, and have grown our restaurant system to 479 restaurants, comprised of 196 company-operated and 283 franchised restaurants as of December 30, 2020.

Our restaurants are located in California, Arizona, Nevada, Texas, Utah and Louisiana.

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El Pollo Loco is a differentiated and growing restaurant concept that specializes in fire-grilling citrus-marinated chicken and operates in the limited service restaurant (“LSR”) segment.

We strive to offer food that integrates the culinary traditions of Mexico with the healthier lifestyle of Los Angeles, a combination that we call “LA-Mex”.

Our distinctive menu features our signature product, citrus-marinated fire-grilled chicken, as well as a variety of Mexican and LA-inspired entrees that we create from our chicken.

Every day in every restaurant, we marinate and fire-grill our chicken over open flames, and slice whole tomatoes, avocados, serrano peppers, and cilantro to make our salsas, guacamole, and cilantro dressings from scratch.

The design of our kitchens reveals our cooking process and allows our customers to watch our Grill Masters and team members fire-grill and hand-cut our signature chicken, as well as watch team members make burritos, salads, tostadas, bowls, stuffed quesadillas, and chicken entrees.

We strive to offer food that integrates the culinary traditions of Mexico with the healthier lifestyle of Los Angeles, a combination that we call “LA-Mex.” Our distinctive menu features our signature product, citrus-marinated fire-grilled chicken, as well as a variety of Mexican and LA-inspired entrees that we create from our chicken.

We serve individual and family-sized chicken meals, a variety of Mexican and LA-inspired entrees, and sides, and, throughout the year, on a limited-time basis, additional proteins like shrimp.

Our entrees include favorites such as our Chicken Avocado Burrito, Under 500 Calorie entrees, chicken tostada salads, and Pollo Bowls.

Our entrees include favorites such as our Chicken Avocado Burrito, Pollo Fit entrees, chicken tostada salads, and Pollo Bowls.

Our famous Creamy Cilantro dressings and salsas are prepared fresh daily, allowing our customers to create their favorite flavor profiles to enhance their culinary experience.

Our distinctive menu with healthier alternatives appeals to consumers across a wide variety of socio-economic backgrounds and drives our balanced composition of sales throughout the day (our “day-part mix”), including at lunch and dinner.

Our distinctive menu with better for you and more affordable healthier alternatives appeals to consumers across a wide variety of socio-economic backgrounds and drives our balanced composition of sales throughout the day (our “day-part mix”), including at lunch and dinner.

The Company operates in one operating segment.

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Financial Statements and Supplementary Data.”

COVID-19 Impact

On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus ("COVID-19") originating in Wuhan, China and the risks to the international community as the virus spreads globally beyond its point of origin.

On March 11, 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally.

The COVID-19 pandemic has significantly disrupted our restaurant operations.

Following the pandemic declaration in March 2020, federal, state and local governments began to respond to the public health crisis by requiring social distancing, "stay at home"

directives, and restaurant restrictions - including government-mandated dining room closures - that limited business to off-premise services only (take-out, drive-thru and delivery).

Historically, approximately 20% of our sales are associated with dine-in service.

Many state and local governments continue to implement certain restrictions to try and contain the spread of the virus.

As of December 30, 2020, the majority of our restaurants in markets outside of California have dining rooms open at a limited capacity, while the majority of our restaurants in California are continuing to operate on a take-away, mobile pick-up and delivery basis, as well as maintaining drive-thru operations where available to comply with the government mandates.

Additionally, the Los Angeles market was heavily impacted by a spike in COVID-19 cases near the end of fiscal 2020.

Due to our high concentration in this market, we were disproportionately impacted by this spike.

Due to the impact of the COVID-19 pandemic, during the year ended December 30, 2020, we temporarily closed 154 restaurants, of which all but seven have reopened as of December 30, 2020.

Similarly, during the year ended December 30, 2020, our franchisees temporarily closed 69 restaurants, of which all but three have reopened as of December 30, 2020.

These closures typically lasted from one to three days.

For both franchise-operated and company-operated restaurants, this represents total closures and

may include more than one closure for the same restaurant.

As of December 30, 2020, we had not permanently closed any restaurants due to the COVID-19 pandemic.

Below is a summary of other actions we have taken to enhance financial and operating flexibility for the Company and for our franchisees, and to protect our employees and customers:

● As a precautionary measure, we initially bolstered our existing cash position by fully drawing down our $150 million 2018 Revolver (as defined below), adding $34.5 million of cash to our balance sheet.

However, subsequent to the initial drawdown, we paid down $78.7 million, net of additional borrowings, on our 2018 Revolver.

See Note 6 “Long-Term Debt” in the accompanying “Notes to Consolidated Financial Statements” in this Annual Report for further details regarding our current debt balances.

● We temporarily suspended all share repurchase activity, significantly reduced capital spending, reevaluated essential support center general and administrative expenses, and fine-tuned our restaurant labor model based on indoor dining room restrictions, limited dining room capacity in restaurants located in geographies where indoor dining is permitted, dining room closures and fluctuating sales volume.

● For our franchisees, we deferred 50% of their April royalties until July 1, 2020, when such royalties began to be repaid in even monthly installments over the remainder of fiscal 2020.

As of December 30, 2020, all deferred royalty balances have been repaid.

In addition, we deferred 100% of our franchisees’ 2020 remodel and new restaurant build requirements until the beginning of 2021.

We also established a support team to assist franchisees in accessing funds and benefits provided by the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which was signed into law on March 27, 2020.

● For our employees, we continue to implement actions to help protect them from the coronavirus while working in our restaurants.

These include implementing pre-shift health assessments, enhanced cleaning procedures in our restaurants, providing gloves and masks to all system restaurant employees, installing plexiglass shields at company restaurant cashier stations and initiating other social distancing measures.

We are providing extended sick leave benefits to employees impacted by COVID-19, and we initially granted two weeks paid leave for employees who are 65 or older.

● We have shifted our marketing to highlight our free delivery program;

our Family Meals as a better for you and more affordable option;

and our meaningful value platform.

Additionally, we have added curbside pick-up, enabling customers to pick-up their orders from the safety of their own cars.

● We delayed making April, May and June rent payments on the majority of our leased properties, and we have reached rent abatement and/or deferment agreements with our landlords for those properties.

● We have taken advantage of provisions available under the CARES Act.

Specifically, we have deferred payment of employer Social Security taxes that are otherwise owed for wage payments.

During fiscal 2020, we incurred $4.9 million in COVID-19 related expenses, primarily due to leaves of absence and overtime pay.

The full impact of the COVID-19 outbreak continues to evolve as of the date of this report.

We are continually evaluating the impact of the global crisis on our financial condition, liquidity, operations, suppliers, industry, and workforce and will take additional actions as necessary.

The disruption in operations has led to us considering the impact of the COVID-19 pandemic on our liquidity, debt covenant compliance, and recoverability of long-lived and right-of-use (“ROU”) assets, goodwill and intangible assets, among others.

If these disruptions to our operations from the COVID-19 pandemic continue or worsen, they may have a material negative impact on our financial results, future operations and liquidity.

The extent of such negative impact will depend, in part, on the longevity and severity of the COVID-19 pandemic, including the severity and transmission rates of COVID-19 variants, resurgences of COVID-19 that may continue to occur, the availability, distribution and efficacy of COVID-19 vaccines and how quickly and to what extent normal economic and operating conditions improve.

Due to the rapid development and fluidity of this situation, we cannot determine the ultimate impact that the COVID-19 pandemic will have on our consolidated financial condition, liquidity, and future results of operations, and therefore any prediction as to the ultimate materiality of the adverse impact on our consolidated financial condition, liquidity, and future results of operations is uncertain.

The restaurant industry is divided into two segments:

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We operate within the broader LSR segment, and we strive to offer the food and dining experience of a fast-casual restaurant and the speed, value, and convenience of a quick-service restaurant (“QSR”).

We strive to offer menu options that are made with fresh ingredients and provide a healthier alternative to typical fast food, which are also inspired by the culinary and cultural traditions of Mexico and our hometown of Los Angeles.

We strive to offer menu options that are made with fresh ingredients and provide a better for you alternative to typical fast food, which are also inspired by the culinary and cultural traditions of Mexico and our hometown of Los Angeles.

Our Competitive Strengths

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We believe that our food, which combines the culinary traditions of Mexico with the healthier lifestyle of Los Angeles, served in contemporary restaurant environments at reasonable prices, positions us well to satisfy the needs of our core Hispanic family market and appeal to the broader general market who seek convenient and high-quality meals at reasonable prices.

We provide our customers with the opportunity to enjoy citrus-marinated, fire-grilled chicken and Mexican-inspired entrees containing distinctive ingredients such as avocados, mangos, and serrano peppers at price points that appeal to a broad consumer base.

We believe that our entree prices are typically lower than

the fast-casual segment, and a slight premium to the QSR segment.

We provide our customers with the opportunity to enjoy citrus-marinated, fire-grilled chicken and Mexican-inspired entrees containing distinctive ingredients such as avocados, mangos, organic greens and serrano peppers at price points that appeal to a broad consumer base.

We believe that our entree prices are typically lower than the fast-casual segment, and a slight premium to the QSR segment.

We prepare our entrees to order in approximately four minutes and allow our customers the option to create their favorite flavor profiles using our freshly-prepared salsas before they enjoy their meals in our dining rooms or take their meals to go from the counter or the drive-thru.

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Our signature product is our chicken, marinated with a proprietary recipe of citrus juice, garlic, and spices, which serves as the foundation of our distinctive menu of flavorful bone-in chicken meals and entrees inspired by Mexico and LA.

With menu items such as our signature individual chicken meals, family dinners, Chicken Tostada Salad, Pollo Bowl®, Chicken Avocado Burrito, and Double Chicken Avocado Salad, we believe that we offer our customers a healthier alternative to traditional food on-the-go.

With menu items such as our signature individual chicken meals, family dinners, Chicken Tostada Salad, Pollo Bowl®, Chicken Avocado Burrito, and Double Chicken Avocado Salad, we believe that we offer our customers a better for you alternative to traditional food on-the-go.

Our entrees are prepared using fresh ingredients with recipes inspired by Mexican cuisine.

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In addition, our rice is seasoned, and simmered in our restaurants throughout each day.

Our bone-in chicken meals and Mexican-inspired entrees accounted for 46% and 47% of our company-operated restaurant sales, respectively, in 2019 .

Our individual and family-sized chicken meals appeal to customers looking to dine at the restaurant or take out during dinnertime, while our Mexican-inspired entrees draw traffic from customers at lunchtime or for an afternoon snack, enabling us to generate sales almost equally between lunch and dinner.

We believe that our family-sized chicken meals provide a healthier and convenient alternative for families looking to solve the “dinnertime dilemma” of providing their families with high-quality meals without investing significant time or money.

In 2019 , approximately 28% of our company-operated sales were generated from family-sized meals.

Our bone-in chicken meals and Mexican-inspired entrees accounted for 46% and 47% of our company-operated restaurant sales, respectively, in both 2020 and 2019, and 46% and 54%, respectively, in 2018.

We believe that our family-sized chicken meals provide a better for you and more convenient alternative for families looking to solve the “dinnertime dilemma” of providing their families with high-quality meals without investing significant time or money.

In 2020, approximately 31% of our company-operated sales were generated from family-sized meals, compared to 28% in both 2019 and 2018.

Operations Infrastructure that Allows for Real-Time Control, Fast Feedback, and Innovation.

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We utilize an operations dashboard that aggregates real-time, restaurant-level information for many aspects of our business.

The dashboard provides corporate and field management, as well as restaurant-level operators, with insight into how we are performing both from the customer’s perspective and also through the eyes of experienced third-party auditors.

The dashboard provides corporate and field management, as well as restaurant-level operators, with insight into how we are performing from the customer’s perspective.

In addition, all company operated restaurants utilize digital “communication boards”, which communicate sales, cost and consumer data in real time to our restaurant managers.

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Most of our senior management team has extensive operating experience in the restaurant industry.

Members of the senior leadership team include Bernard Acoca as our President and Chief Executive Officer ("CEO"), Larry Roberts as our Chief Financial Officer, Miguel Lozano as our Chief Operating Officer, Hector Munoz as our Chief Marketing Officer, Jason Weintraub as our Chief Legal Officer, Jennifer Jaffe as our Chief People Officer, and Brian Carmichall as our Chief Development Officer.

Members of the senior leadership team include Bernard Acoca as our President and Chief Executive Officer (“CEO”), Larry Roberts as our Chief Financial Officer, Miguel Lozano as our Chief Operating Officer, Jennifer Jaffe as our Chief People Officer, and Brian Carmichall as our Chief Development Officer.

Our Growth Strategy

We believe that we are well-positioned for sales growth because of our strong appeal to our core Hispanic family market, appeal to the broader general market, disciplined business model, and strong unit economics.

Our system has experienced annual comparable restaurant sales growth for nine consecutive years through our fiscal year ended December 25, 2019.

Through 2019, our system experienced annual comparable restaurant sales growth for eight consecutive years.

Our system comparable restaurant sales in fiscal 2020 declined 2.4%, which we believe was largely attributable to the COVID-19 pandemic.

We plan to continue to expand our business, drive restaurant sales growth and increase company profits by executing our Transformation Agenda, which consists of the following four key strategies:

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We believe that executing on our mission will result in a better and more meaningful work experience for our employees.

For example, in 2019 we implemented a food donation program with Food Donation Connection, agreed to donate 75,000 tacos as part of our “Buy One, Feed Many” initiative, and celebrated Caesar Chavez Day by recruiting 500 company employees, franchisees and customers to refresh a high school located in south Los Angeles.

For example, in 2019 we implemented a food donation program with Food Donation Connection, donated 75,000 tacos as part of our “Buy One, Feed Many” initiative, and celebrated Caesar Chavez Day by recruiting 500 company employees, franchisees and customers to refresh a high school located in south Los Angeles.

In 2020, we provided funds to 13 Latina owned businesses that were heavily impacted by the COVID-19 pandemic.

We also continue to invest in leadership training to ensure that our managers have the tools they need to be effective leaders and motivating coaches.

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Our marketing and operations teams collaborate to ensure that the items developed in our test kitchen can be executed to our high standards in our restaurants with the convenience and value that our customers have come to expect.

We engage customers through our seasonal product calendar, which features new, unique limited time offers (“LTOs”) and variations of menu items like our Chicken Tostada Salads and Stuffed Burritos.

Our key points of differentiation are communicated through our advertising campaign, which highlights the brand's authenticity, healthier menu options and dedication to high-quality ingredients.

We engage customers through our seasonal product calendar, which features new, unique limited time offers and variations of menu items like our Chicken Tostada Salads and Stuffed Burritos.

Our key points of differentiation are communicated through our advertising campaign, which highlights the brand’s authenticity, better for you menu options and dedication to high-quality ingredients.

We tailor our message from television and direct mail, which garners broad exposure, to our Loco Rewards loyalty program and social media platform where we engage in more personalized marketing.

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During the second quarter of 2017, we introduced a new Loyalty Reward program in an effort to increase sales and loyalty among our customers, by offering rewards that incentivize customers to visit our restaurants more each month.

As of December 25, 2019, there were more than 1.5 million members in the Loco Rewards loyalty program, whom we target with segmented, dynamic campaigns with special offers tailored to each customer segment with the goals of increasing visit frequency and growing overall spend.

As of December 30, 2020, there were 2.1 million members in the Loco Rewards loyalty program, whom we target with segmented, dynamic campaigns with special offers tailored to each customer segment with the goals of increasing visit frequency and growing overall spend.

In June 2018, we implemented delivery through DoorDash, a third-party delivery provider.

DoorDash delivers meals ordered directly from our restaurants or through their market place delivery platform.

For meals ordered through their market place platform, restaurants incur a fee based on a percentage of the ticket.

In September 2019, we added Postmates and Uber Eats, and in February 2020 we added GrubHub, as additional marketplace delivery providers.

For meals ordered through these market place platforms, restaurants incur a fee based on a percentage of the ticket.

As of December 30, 2020, Postmates maintained exclusivity for delivery orders placed directly with our restaurants.

For those ordered directly from the restaurant, no fee is charged to the restaurant as the full delivery cost is borne by the customer.

In September 2019, we added Postmates and Uber Eats as additional marketplace delivery providers.

As with DoorDash, restaurants incur a fee for marketplace delivery orders.

DoorDash currently maintains exclusivity for delivery orders placed directly with our restaurants.

In total, during the fourth quarter of 2019, delivery orders constituted approximately 3% of our total sales mix.

As of December 25, 2019, except for two Corporate and franchise restaurants, all locations offered integrated delivery through a third-party service.

In total, during fiscal 2020, delivery orders constituted 6% of our total sales mix.

As of December 30, 2020, all Corporate and franchise restaurants offered integrated delivery through a third-party service.

We plan to continue investing in our loyalty and delivery programs as well as other technology platforms to continue making it easier for customers to access our food.

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We believe that simplifying our restaurant operations will further enhance our ability to attract and retain the best employees and further improve customer service.

In 2019, we implemented a number of initiatives to make it easier for our employees to operate our restaurants.

These included a reduction in menu items, a new inventory management system, new chicken cooking procedures and simplified standard operating procedures.

Additional initiatives are currently in process, including a systemized restaurant cleaning process and a state-of-the-art human resource management system.

We expect that these initiatives will allow our restaurant employees to increase their focus on customers and speed of service.

In 2020, we implemented several initiatives to make it easier for our employees to operate our restaurants.

These included a systemized restaurant cleaning process, revised drive thru operating procedures and a state-of-the-art human resource management system.

These initiatives have allowed our restaurant employees to increase their focus on customers and speed of service.

We believe that this focus, combined with renewed emphasis on providing an exceptional customer experience, will lead to higher sales over the longer term.

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Our restaurant model is designed to generate strong cash flow, attractive restaurant-level financial results and high returns on invested capital.

We are currently working on a new restaurant design that we believe will clearly differentiate and communicate our brand, both on the exterior and interior.

We have finalized a new restaurant design that we believe will clearly differentiate and communicate our brand, both on the exterior and interior.

In addition, we are redesigning the back-of-house to make it easier for employees to operate the restaurant.

We expect to complete the remodel of several restaurants using the new design by the end of June 2020.

Provided we are pleased with the results, we plan to require all remodels and new builds to use this design starting July 1, 2020.

We believe that this new design will deliver strong new unit volumes and cash on cash returns in both existing and new markets.

We also believe that our remodels using this new design will result in higher

restaurant revenue and a strengthened brand.

This new design replaces our “Vision” design, which was implemented in 2016.

As of December 25, 2019 , including new builds and remodels, 119 restaurants in the system were modeled on the Vision design.

We expect future new unit development to be led by franchisees, with company development being focused on existing markets and new markets opportunistically.

We also believe that our remodels using this new design will result in higher restaurant revenue and a strengthened brand.

As of the end of fiscal 2020, we have completed two remodels using the new asset design.

If these are successful, beginning in 2021, this new design will replace our “Vision” design, which was implemented in 2016.

However, given the uncertainty surrounding the severity and longevity of the COVID-19 pandemic, as a precautionary measure we significantly reduced capital spending, including limiting our remodels in 2020.

Our franchisees did not complete any remodels in 2020 as we have deferred their remodel requirements until 2021.

In 2021, we plan to resume our standard practices for remodels, including 15 company-operated and 40 franchised restaurants.

We expect future new unit development to be led by franchisees, with company development being focused on existing markets.

In order to expand into new markets, we believe that we need to source new franchisees and, therefore, we expect to invest more resources in sourcing and onboarding them in the future.

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We believe that our restaurant model is designed to generate strong cash flow, attractive restaurant-level financial results, and high returns on invested capital, which we believe provide us with a strong foundation for unit growth over the long-term.

In 2019 , we opened two new company-operated restaurants and two new franchised restaurants.

As part of a strategy to focus company-operated restaurant development on our core markets and accelerate franchise development in outer and new markets, in 2019 we sold four company-operated restaurants in the San Francisco area, seven in Phoenix and five in Dallas to existing franchisees.

Each of these transactions included development agreements requiring the franchisees to build new restaurants in those markets over several years.

Going forward, we expect the large majority of new restaurant development outside of core markets to be completed by franchisees.

During 2019 , we closed four company-operated restaurants in Texas and California.

For a discussion of the impairment of these restaurants, see below in "Item 1A.

Risk Factors-Risks Related to Our Business and Industry-We have incurred, and may continue to incur, significant impairment of certain of our assets, in particular in our new markets."

In fiscal 2020, we intend to open three to four new company-operated and five to eight new franchised restaurants.

In 2020, one new company-operated restaurant was opened in Nevada, which was in process prior to the COVID-19 pandemic, and three franchised restaurants were opened, two in California and one in Arizona.

As a result of the COVID-19 crisis, we suspended company-operated new unit development until the timing of the economic recovery and our business improvement become clearer.

In addition, we allowed franchisees to defer their 2020 new unit development obligations until 2021.

In fiscal 2021, we intend to open three to five new company-operated and four to six new franchised restaurants.

There is no guarantee that we will be able to open new company-operated or franchised restaurants, or to increase the overall number of our restaurants.

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We utilize systems that are aimed at measuring our ability to deliver a “best in class” experience for our customers.

These systems include customer surveys, mystery shopper scores, social media ratings and speed-of-service performance trends.

The operational results from all of these sources are then presented on an operations dashboard that displays the measures in an easy-to-read online format that corporate and restaurant-level management and franchisees can utilize in order to identify strengths and opportunities and to develop specific plans for continuous performance improvement.

In addition, all company operated restaurants utilize digital “communication boards”, which communicate sales, cost and consumer data in real time to our restaurant managers.

These systems include customer surveys, social media ratings and speed-of-service performance trends.

The operational results from all of these sources are then presented on an operations dashboard that displays the measures in an easy-to-read online format that corporate and restaurant-level management and franchisees can utilize in order to develop specific plans for continuous performance improvement.

In addition, all company operated restaurants utilize digital “communication boards”, which communicate sales, costs and consumer data in real time to our restaurant managers.

We have food safety and quality assurance programs designed to maintain the highest standards for the food and the food preparation procedures that are used by both company-operated and franchised restaurants.

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To lead our restaurant management teams, we have area leaders, each of whom is responsible for 8 to 12 restaurants.

Overseeing the area leaders are two Vice Presidents of Operations who report to our Chief Operating Officer.

Franchise operations are supported by three directors of franchise who report to one of the Vice Presidents of Operations.

The restaurant development team is supported by four directors who all currently report to the Chief Development Officer.

Overseeing the area leaders are two Regional Directors of Operations and a Vice President of Operations, who reports up to our

Chief Operating Officer.

Franchise operations are supported by three directors of franchise who report to the Senior Vice President, Chief Development Officer.

The restaurant development team is supported by four directors who also currently report to the Senior Vice President, Chief Development Officer.

Our people are the center of the El Pollo Loco customer experience.

Creating a culture of constant learning has been essential in equipping our people with the skills to deliver our high standards and commitments to our guests and employees.

Creating a culture of constant learning has been essential in equipping our people with the skills to deliver our high standards and commitments to our customers and team members.

We strive to find ways to simplify our methodology and invest in elevating our people.

In a rapidly evolving landscape, effective training is not only dependent on quality of content, but also on method of delivery.

In a rapidly evolving landscape, effective training depends not only on the quality of content but also on delivery methods.

To engage our growing base of millennial employees, we employ a Learning Management System called Pollo Zone, our tablet-based learning tool.

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Available for every location and accessible from elpolloloco.com or the El Pollo Loco mobile app, any order can be placed and paid for before arriving at the restaurant.

During 2019, we made it easier for customers to access our food by renovating our website and adding Facebook messenger, Apple ABC chat and Alexa.

For additional convenience, in September 2019 we added two third-party delivery services to our portfolio providing consumers a total of three platforms from which to order from us.

El Pollo Loco has partnered with DoorDash, UberEats, Postmates, and Grubhub as an additional method for ordering.

In 2004, we created El Pollo Loco Charities, a non-profit charity, to support the communities surrounding our restaurants.

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and 4) entering into a relationship with an Orange County-based organization to provide job opportunities for the homeless.

In 2020, we provided funds to 13 Latina owned businesses that were heavily impacted by the COVID-19 pandemic.

Purchasing and Distribution

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In the past, we have entered into contracts ranging from one to two years depending on current and expected market conditions.

We currently source

poultry from six suppliers, with two accounting for approximately 64% of our planned purchases for fiscal 2020.

We currently source poultry from six suppliers, with two accounting for approximately 62% of our purchases for fiscal 2020.

We have fixed prices for 100% of our poultry supply through the end of 2021.

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Our competition includes a variety of locally-owned restaurants and national and regional chains that offer dine-in, carry-out, and delivery services.

Our competition from the broadest perspective includes restaurants, pizza parlors, convenience food stores, delicatessens, supermarkets, and club stores.

There are no significant direct competitors with respect to menus that feature marinated, fire-grilled chicken.

However, we indirectly compete with fast-casual restaurants, including Chipotle, Panera, Qdoba, and Rubio’s, among others, and with chicken-specialty QSRs and Mexican QSRs, such as Chick-fil-A, Church’s Chicken, KFC, Popeyes Louisiana Kitchen, Del Taco and Taco Bell, among others.

We believe that competition within the fast-casual restaurant segment is based primarily on ambience, price, taste, quality, and freshness of menu items, as well as on the convenience of drive-thru service.

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Regulation and Compliance

We are subject to extensive federal, state, and local government regulations, including those relating to, among other things, public health and safety, zoning and fire codes, and franchising.

Failures to obtain or retain food or other licenses and registrations, or exemptions thereto, would adversely affect the operations of restaurants.

Although we have not experienced, and do not anticipate, any significant problems in obtaining required licenses, permits, or approvals, any difficulties, delays, or failures in obtaining such licenses, permits, registrations, exemptions, or approvals could delay or prevent the opening of, or adversely impact the viability of, a restaurant in a particular area.

The development and construction of additional restaurants will be subject to compliance with applicable zoning, land use and environmental regulations.

We believe that federal and state environmental regulations have not had a material effect on operations, but more stringent and varied requirements of local government bodies with respect to zoning, land use, and environmental factors could delay construction and increase development costs for new restaurants.

We are also subject to the Fair Labor Standards Act, the Immigration Reform and Control Act of 1986, and various federal, state and local laws governing such matters as minimum wages, overtime, unemployment tax rates, workers’ compensation rates, citizenship requirements, and other working requirements and conditions.

A significant portion of our hourly staff is paid at rates consistent with the applicable federal, state, or local minimum wage and, accordingly, increases in the applicable minimum wage will increase our labor costs.

We and our franchisees are subject to various federal, state and local laws and regulations that govern our business operations, including those governing:

● employment and wage and hour practices, including, but not limited to, minimum wage rates, overtime, meal and rest periods, prevention of discrimination, harassment, and retaliation, employment of minors, paid and family leave, unemployment tax rates, workers’ compensation rates, suitable seating, and citizen requirements, and other working conditions;

● privacy and data security, including the collection, maintenance and use of information regarding employees and guests;

● compliance with the Americans with Disabilities Act and similar laws affording various protections and accommodations to employees and guests with disabilities;

● environmental practices, including the discharge, storage, handling, release and disposal of hazardous or toxic substances;

regulation of discharges into the air, water and soils, storage and disposal of liquid and solid waste, and clean-up of contaminated soil and groundwater, and regulations restricting the use of straws, utensils and the certain packaging materials;

● compliance with Federal Trade Commission and laws that govern the franchisor-franchisee relationship, including the offer and sale of franchises and certain disclosures to franchisees;

● the preparation, sale and labeling of food, including regulations of the Food and Drug Administration, which oversees the safety of the entire food system, including inspections and mandatory food recalls, menu labeling and nutritional content;

● building and zoning requirements, including state and local licensing and regulation governing the design and operation of facilities and land use;

● health and sanitation and public safety;

● restaurant operations related to COVID-19.

We require each of our franchise partners to comply with all federal, state and local laws and regulations.

We have processes in place to monitor our own compliance with the numerous, complex, applicable laws and regulations governing our operations.

We are subject to new, varied and ever-changing rules and regulations regarding the current COVID-19 pandemic, which have materially impacted our earnings and resulted in significant capital expenditures.

New federal, state and local government regulations regarding COVID-19 are issued and existing regulations are frequently revised, which materially affected, and continues to affect, our operations.

Such regulations govern, for example, employee leave, opening and closing of restaurants and dining rooms, business hours, sanitation practices, guest spacing within dining rooms and other social distancing practices and personal protective equipment.

Other than as described above, the Company’s compliance with federal, state or local laws and regulations, including environmental laws, is not expected to materially affect our earnings or competitive position or result in material capital expenditures.

However, we cannot predict what laws will be enacted in the future, or how existing or future laws will be administered, interpreted or enforced.

We also cannot predict the amount of future expenditures that we may need to make to comply with, or to satisfy claims and lawsuits relating to, these various laws and regulations.

Further, more stringent and varied requirements of local government bodies with respect to zoning, land use and environmental factors could delay construction and increase development costs for new restaurants.

Moreover, although we have not experienced, and do not anticipate, any significant problems in obtaining required licenses, permits, or approvals, any difficulties, delays, or failures in obtaining such licenses, permits, registrations, exemptions, or approvals could delay or prevent the opening of, or adversely impact the viability of, a restaurant in a particular area.

Additionally, a significant portion of our hourly staff is paid at minimum wage rates consistent with the applicable federal, state, or local laws and, accordingly, increases in the applicable minimum wage will increase our labor costs.

We are also subject to the Americans with Disabilities Act, which prohibits discrimination on the basis of disability in public accommodations and employment, and which may require us to design or modify our restaurants to make reasonable accommodations for disabled individuals.

For a discussion of the various regulatory and compliance risks that we face, see below under "Item 1A.

Risk Factors.”

See Item 1A “Risk Factors” and “Environmental Matters” above of this Form 10-K for a discussion of risks relating to federal, state, local and regulation of our business.

Management Information Systems

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Our in-restaurant back-office computer system is designed to assist in the management of our restaurants and to provide labor and food cost management tools.

The system also provides corporate headquarters and restaurant operations management quick access to detailed business data, and reduces the time spent by restaurant managers on administrative needs.

The system also provides corporate headquarters and restaurant operations management quick access to detailed business data, and reduces the time spent by restaurant managers on administrative

The system further provides sales, bank deposit, and variance data to our accounting department on a daily basis.

For company-operated restaurants, we use this data to generate weekly consolidated reports regarding sales and other key measures, as well as preliminary weekly profit and loss statements for each location, with final reports following the end of each period.

Human Capital

As of December 30, 2020, we had approximately 4,711 employees, of whom approximately 4,561 were hourly restaurant employees comprised of 3,732 crewmembers, 216 general managers/acting general managers, 148 assistant managers, 410 shift leaders, and 55 employees in limited-time roles as acting managers or as managers in training.

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None of our employees are part of a collective bargaining agreement, and we believe that our relationships with our employees are satisfactory.

We believe our efforts to maintain solid relationships with our employees are effective and are grounded in our company values.

Our primary human capital objective is employee engagement, which is dependent upon hiring, retaining, developing and motivating employees.

We strive to build a culture centered around our mission, which is to “Feed the Love that Makes Us All Feel Like Family” and “Heart-Centered Leadership.” We believe this mission is predicated on servant-led leadership, employee recognition and community involvement.

We offer our employees both online and on-the-job training.

Restaurant management trainees participate in comprehensive, multi-week training programs touching on all aspects of the operations, including restaurant leadership.

We provide key restaurant leadership roles with a quarterly cash-based performance bonus awards.

Our corporate employees are provided an annual performance bonus award.

We also have an equity incentive compensation plan to provide certain management-level or other key employees with stock-based awards.

We monitor our progress with metrics such as employee performance measures, turnover rates and restaurant customer surveys.

The health and well-being of our employees and guests have always been and continues to be our top priority.

To help protect the health and well-being of all of our employees during the COVID-19 pandemic, during 2020 we invested in creating a safe work environment for our employees by taking additional measures.

We require our office employees to work remotely unless business needs require them to work in the corporate office.

For our restaurant employees, we continue to implement actions to help protect them from COVID-19 while working in our restaurants.

These actions include implementing pre-shift health assessments, enhanced cleaning procedures in our restaurants, providing gloves and masks to all system restaurant employees, installing plexiglass shields at company restaurant cashier stations and initiating other social distancing measures.

We are also providing extended sick leave benefits to employees impacted by COVID-19.

Refer to “COVID-19 Impact” above for further information on the Company’s COVID-19 response.

Seasonal factors, including weather and the timing of holidays, cause our revenue to fluctuate from quarter to quarter.

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Our Internet address is www.elpolloloco.com.

contents of our Internet website are not part of this annual report, and are not incorporated by reference.

The contents of our Internet website are not part of this annual report, and are not incorporated by reference.

Our Internet address is provided as an inactive textual reference only.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business