What changed in this filing

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Item 1. Business

2022-03-11 compared with 2021-03-15 · 70 added, 104 removed, 243 unchanged (42% of the section changed)

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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.

During the COVID-19 pandemic, we have experienced periods of significant disruption to our restaurant operations.

Following the pandemic declaration in March 2020, federal, state and local governments have periodically responded to the public health crisis by requiring social distancing, issuing “stay at home” directives, and implementing restaurant restrictions - including government-mandated dining room closures - that limited business to off-premise services only (take-out, drive-thru and delivery).

Disruptions caused by the COVID-19 pandemic and the measures taken to prevent its spread have adversely affected our operations and financial results, particularly during fiscal 2020 as well as periods of 2021 when COVID-19 infections increased with the spread of new strains of the virus.

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.

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.

While all of our restaurants had dining rooms open as of December 29, 2021, we continue to experience staffing challenges, which resulted in reduced operating hours and service channels at some of our restaurants and resulted in higher wage inflation, overtime costs and other labor related costs.

Further, we experienced inflationary pressures due to supply chain disruptions that resulted in increased commodity prices and impacted our business and results of operations during the year ended December 29, 2021.

We expect these pressures to continue during fiscal 2022.

During fiscal 2021, we incurred $3.9 million in COVID-19 related expenses, primarily due to leaves of absence and overtime pay.

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

During fiscal 2021 as part of the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) , we recognized the Employee Retention Credit in the amount of $3.4 million, which is recorded as an offset to the

corresponding payroll expense and is classified as part of labor and other operating expenses on the consolidated statements of income for the year ended December 29, 2021.

See additional information presented in Note 2 “Summary of Significant Accounting Policies” in the accompanying “Notes to Consolidated Financial Statements” in this Annual Report.

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.

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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, organic greens and serrano peppers at price points that appeal to a broad consumer base.

We provide our customers with the opportunity to enjoy citrus-marinated, fire-grilled chicken and Mexican-inspired entrees containing distinctive ingredients such as avocados, 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.

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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 both 2020 and 2019, and 46% and 54%, respectively, in 2018.

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 split almost equally between lunch and dinner.

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.

Our bone-in chicken meals and Mexican-inspired entrees accounted for 46% and 48% of our company-operated restaurant sales, respectively, in 2021, and 46% and 47%, respectively, in both 2020 and 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, thereby enabling us to generate sales split almost equally between lunch and dinner.

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 both 2021 and 2020, approximately 31% of our company-operated sales were generated from family-sized meals, compared to 28% in 2019.

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

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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, Jennifer Jaffe as our Chief People Officer, and Brian Carmichall as our Chief Development Officer.

Members of the senior leadership team include Larry Roberts as our Chief Executive Officer, President and Interim Chief Financial Officer, Miguel Lozano as our Chief Operating Officer, Anne Jollay as our Chief Legal Officer, Rosanne Setoguchi as our Chief People Officer, Brian Carmichall as our Chief Development Officer and Andy Rebhun as our Chief Marketing Officer.

Our Growth Strategy

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

In 2021, our comparable restaurant sales grew 12.1%.

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 success in the restaurant industry is highly correlated with employee engagement, which is dependent upon hiring, retaining, developing and motivating employees.

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

We continue 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,” which is predicated on servant-led leadership, employee recognition and community involvement.

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

El Pollo Loco Charities, together with the Company, have provided over 15,000 meals per year to underprivileged families, through organizations like Food on Foot, Habitat for Humanity, Children’s Institute, and Court Appointed Special Advocates.

For example, in 2019 we enhanced our community outreach through several initiatives, including (i) implementing a food donation program with Food Donation Connection and donating 75,000 tacos as part of our “Buy One, Feed Many” initiative, (ii) celebrating Caesar Chavez Day by recruiting 500 company employees, franchisees and customers to refresh a high school located in south Los Angeles and (iii) 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.

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.

We believe that our focus on culture and leadership will result in highly engaged and motivated employees, which will lead to a better experience for our customers.

In 2021, we launched a campaign called ValenKIND’s Day, which provided 10,000 meals to community members in our hometown of Los Angeles who are struggling with hunger and homelessness.

For Mother’s Day, we issued $80,000 in grants to help moms in our communities and moms who are restaurant team members pursue their dreams in our “Strong Like A Madre” campaign.

We also continued a 2019 commitment to street artists in our communities by commissioning three new murals on the exterior walls of select Los Angeles area El Pollo Loco locations.

We believe that our focus on leadership and culture will result in highly engaged and motivated employees, which will lead to a better experience for our customers.

Differentiate the Brand – Accentuate our Strengths and Build Upon Them .

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We believe that investing in consumer-facing technology is critical to further differentiating our brand and reaching customers for whom convenience and value are key decision factors.

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.

Our Loco Rewards loyalty program offers rewards that incentivize customers to visit our restaurants more each month.

As of December 29, 2021, there were 2.8 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.

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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.

As of December 29, 2021, DoorDash maintained exclusivity for delivery orders placed directly with our restaurants.

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

In total, during fiscal 2021, delivery orders constituted 7.0% of our total sales mix.

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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 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.

Grow the Business – Responsibly and Profitably for the Long Term.

In 2021, we continued to implement several initiatives to make it easier for our employees to operate our restaurants.

These included a systemized restaurant cleaning process and revised drive thru operating procedures.

These and other initiatives are intended to enable our restaurant employees to increase their focus on customers and speed of service.

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

Accelerate new restaurant development.

We believe that execution of our first three strategies will enable us to grow our restaurant base.

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

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 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.

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.

In 2020, we finalized a new restaurant design that we believe will clearly differentiate and communicate our brand, both on the exterior and interior.

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

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

As of the end of fiscal 2021, we have completed 12 company-operated restaurants remodels using the new design, including 10 during 2021.

In 2021, our franchisees completed five remodels, two of which used the new design.

In 2022, we plan to continue our standard practices for remodels, including 10-15 company-operated and 20-30 franchised restaurants.

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

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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 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.

In 2021, two new company-operated restaurants were opened, one in Nevada and one in California, and two new franchised restaurants were opened, one in Texas and one in Louisiana.

In fiscal 2022, we intend to open three to six new company-operated and six to 10 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 consider the location of a restaurant to be a critical variable in its long-term success and as such, we devote significant effort to the investigation and evaluation of potential restaurant locations.

Our in-house development team has extensive experience building such brands as Taco Bell, The Habit, Carl’s Jr., Baskin Robbins, Wendy’s, Denny’s and Dunkin’ Brands.

Our in-house development team has extensive experience building such brands as Taco Bell, The Habit Burger Grill, Carl’s Jr., Baskin Robbins, Wendy’s, Denny’s and Dunkin’ Brands.

We use a combination of our in-house development team and outside real estate consultants to locate, evaluate, and negotiate new sites using various criteria, including demographic characteristics, daytime population thresholds, and traffic patterns, along with the potential visibility of, and accessibility to, the restaurant.

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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.

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.

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Managers and Team Members

Each of our restaurants typically has a general manager, an assistant manager and two to three shift leaders.

Each of our restaurants typically has a general manager and two to three shift leaders and some restaurants have an assistant manager.

There are between 15 and 35 team members per restaurant who prepare our food fresh daily and provide customer service.

To lead our restaurant management teams, we have area leaders, each of whom is responsible for 7 to 9 restaurants.

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 customers and team members.

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

Overseeing the area leaders are three 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 and a Senior Vice President, Franchise, who reports to the Chief Development Officer.

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

Our team members are the heart of El Pollo Loco and it is our responsibility to equip them with the skills and knowledge necessary to deliver on our high standards and commitments to the customer and team member experience.

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

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.

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

This platform is a central hub for all training efforts and features individual learner profiles to support engagement and accountability on our path toward investing in our people and their growth.

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We use a franchising strategy to increase new restaurant growth in certain markets, leveraging the ownership of entrepreneurs with specific local market expertise and requiring a relatively minimal capital commitment by us.

As of December 30, 2020, there were a total of 283 franchised restaurants.

Franchisees range in size from single-restaurant operators to the largest franchisee, which owned 68 restaurants as of December 30, 2020.

As of December 29, 2021, we had a total of 291 franchised restaurants.

Franchisees range in size from single-restaurant operators to our largest franchisee, which owned 68 restaurants as of December 29, 2021.

Our existing franchise base consists of many successful, longstanding, multi-unit restaurant operators.

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We strive to distinguish the El Pollo Loco brand by building a brand equity that we believe not only accentuates our strengths but also deepens the strong emotional connections we have with our customers.

In October 2018, we completed codifying our brand architecture in a comprehensive brand book, which shapes our strategic brand decisions and influences how we communicate the El Pollo Loco brand to consumers.

We promote our restaurants and products by emphasizing our points of differentiation, which include our Mexican and LA heritages, our fresh ingredients and made-from-scratch preparation, and the cooking of our citrus-marinated chicken on open fire grills in our kitchens, as well as the convenience and quality we offer for families.

We use multiple marketing channels, including television, radio, digital, and print, to broadly drive brand awareness and purchases of our featured products.

We use multiple marketing channels, including television, radio and digital.

We advertise on local broadcast and cable television.

Over the past year, we have significantly increased our percentage of media dedicated towards digital advertising.

Through our public relations efforts, we engage notable food editors, influencers and bloggers on a range of topics to help promote our products.

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Our online ordering program makes it easy for customers to skip the line and order ahead.

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.

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.

El Pollo Loco Charities has provided over 15,000 meals per year to underprivileged families, through organizations like Food on Foot, Habitat for Humanity, Children’s Institute, and Court Appointed Special Advocates.

In addition, during 2019 we enhanced our community outreach through several initiatives, including:

1) the implementation of a food donation program in which restaurants donate food that would otherwise be discarded;

2) committing to donate 75,000 tacos to charity as part of our “Buy One, Feed Many” National Taco Day promotion;

3) recruiting 500 company, franchise and customer volunteers to refresh a high school located in south Los Angeles;

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.

Available at 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.

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

El Pollo Loco also operates direct delivery via elpolloloco.com or the Loco Rewards App, which is exclusively fulfilled by DoorDash.

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 62% of our purchases for fiscal 2020.

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

We currently source poultry from five suppliers, with two accounting for approximately 75% of our purchases for fiscal 2021.

More than half of our poultry purchases have a fixed price through the end of 2022.

Intellectual Property

We have registered El Pollo Loco ® , Pollo Bowl ® , The Crazy Chicken ® , and certain other names used by our restaurants as trademarks or service marks with the U.S.

Patent and Trademark Office (the “PTO”), and El Pollo Loco ® in approximately 42 foreign countries.

Patent and Trademark Office (the “PTO”), and El Pollo Loco ® in approximately 43 foreign countries and the European Union.

In addition, the El Pollo Loco logo, website name and address, Facebook, Twitter, Instagram and YouTube accounts are our intellectual property.

Our policy is to pursue and maintain registration of service marks and trademarks in those countries where business strategy requires us to do so, and to oppose vigorously any infringement or dilution of the service marks or trademarks in those countries.

We maintain the recipe for our chicken marinade, as well as certain proprietary standards, specifications, and operating procedures, as trade secrets or as confidential proprietary information.

maintain the recipe for our chicken marinade, as well as certain proprietary standards, specifications, and operating procedures, as trade secrets or as confidential proprietary information.

We operate in the restaurant industry, which is highly competitive and fragmented.

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● 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;

● working conditions, health, sanitation, safety and fire standards, building and zoning requirements, public accommodations and safety conditions, environmental matters, and data privacy;

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

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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

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

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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.

To help protect the health and well-being of all of our employees during the COVID-19 pandemic, during 2020 and continuing through 2021 we invested in creating a safe work environment for our employees by taking additional safety measures.

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

These actions include pre-shift health assessments, enhanced cleaning procedures in our restaurants, providing gloves and masks to all system restaurant employees, 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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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