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 490 restaurants, comprised of 188 company-operated and 302 franchised restaurants as of December 28, 2022.
−Removed: Our restaurants are located in California, Arizona, Nevada, Texas, Utah and Louisiana.
+Added: Our restaurants are located in California, Arizona, Nevada, Texas, Utah, Colorado and Louisiana.
Our typical restaurant is a free-standing building with drive-thru service that ranges in size from 2,200 to 3,000 square feet with seating for approximately 50-70 people.
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.
−Removed: 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.
−Removed: 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.
+Added: We strive to offer food that integrates the culinary traditions of Mexico with the healthier lifestyle of Los Angeles.
+Added: 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.
+Added: 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 beef.
Our entrees include favorites such as our Chicken Avocado Burrito, Pollo Fit entrees, chicken tostada salads, and Pollo Bowls.
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Financial Statements and Supplementary Data.”
−Removed: COVID-19 Impact
−Removed: During the COVID-19 pandemic, we have experienced periods of significant disruption to our restaurant operations.
−Removed: 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).
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: We expect these pressures to continue during fiscal 2022.
−Removed: During fiscal 2021, we incurred $3.9 million in COVID-19 related expenses, primarily due to leaves of absence and overtime pay.
−Removed: During fiscal 2020, we incurred $4.9 million in COVID-19 related expenses, primarily due to leaves of absence and overtime pay.
−Removed: 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
−Removed: 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.
−Removed: See additional information presented in Note 2 “Summary of Significant Accounting Policies” in the accompanying “Notes to Consolidated Financial Statements” in this Annual Report.
−Removed: 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.
+Added: M arket Trends and Uncertainties
+Added: We may face future business disruption and related risks resulting from the ongoing COVID-19 pandemic or from another pandemic, epidemic or infectious disease outbreak, or from broader macroeconomic trends, any of which could have a significant impact on our business.
+Added: During the year ended December 28, 2022, we incurred $3.3 million in COVID-19 related expenses, comprised of $2.3 million due to overtime primarily related to the first quarter and $1.0 million due to leaves of absence related to the remaining three quarters.
+Added: During the year ended December 29, 2021 and December 30, 2020, we incurred $3.9 million and $4.9 million, respectively, in COVID-19 related expenses, primarily due to leaves of absence and overtime pay.
+Added: In addition, while all of our restaurants had dining rooms open as of December 28, 2022, we continue to experience staffing challenges, including higher wage inflation, overtime costs and other labor related costs.
+Added: Labor costs could also be adversely impacted as a result of California Assembly Bill No.
+Added: 257, the Fast Food Accountability and Standards Recovery Act (“FAST Act”), which was signed into law in September 2022 and authorizes the creation of a council to set minimum standards for industry workers in California, including minimum wages.
+Added: The FAST Act, which will take effect if approved by voters in November 2024, could result in increased labor cost at our California restaurants thereby potentially impacting the profitability of our California restaurants.
+Added: Further, this bill could prompt similar legislation in other states.
+Added: We also continue to experience inflationary pressures, which resulted in increased commodity prices and impacted our business and results of operations during the year ended December 28, 2022.
+Added: We expect these pressures to continue during fiscal year 2023.
+Added: Due to the fluidity of the COVID-19 pandemic and current macroeconomic environment, we cannot determine the ultimate impact that the COVID-19 pandemic (and its related economic impacts) and the current macroeconomic environment will have on our consolidated financial condition, liquidity, and future results of operations, and therefore
+Added: 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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In addition, our rice is seasoned and simmered in our restaurants throughout each day.
−Removed: 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.
+Added: Our bone-in chicken meals and Mexican-inspired entrees accounted for 44% and 50% of our company-operated restaurant sales in 2022, respectively, 46% and 48%, respectively, in 2021, and 46% and 47%, respectively, in 2020.
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.
−Removed: 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
−Removed: families with high-quality meals without investing significant time or money.
−Removed: In both 2021 and 2020, approximately 31% of our company-operated sales were generated from family-sized meals, compared to 28% in 2019.
+Added: 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.
+Added: In 2022 approximately 28% of our company-operated sales were generated from family-sized meals, compared to 31% in both 2021 and 2020.
Operations Infrastructure that Allows for Real-Time Control, Fast Feedback, and Innovation.
We believe that satisfying our customers’ dining needs is the foundation for our business, and we have an operations platform that allows us to measure our performance in meeting and exceeding those needs.
−Removed: We utilize an operations dashboard that aggregates real-time, restaurant-level information for many aspects of our business.
+Added: We utilize an operations dashboard that aggregates
+Added: 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 from the customer’s perspective.
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Most of our senior management team has extensive operating experience in the restaurant industry.
−Removed: 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.
+Added: Members of the senior leadership team include Larry Roberts as our Chief Executive Officer and President, Ira Fils as our Chief Financial Officer, Maria Hollandsworth 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.
−Removed: In 2021, our comparable restaurant sales grew 12.1%.
+Added: In 2022 and 2021, our comparable restaurant sales grew 5.9% and 12.1%, respectively.
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:
−Removed: Develop a People-first Culture – Invest in and Grow our Talent.
+Added: Embed our Unique El Pollo Loco Culture.
We believe that success in the restaurant industry is highly correlated with employee engagement, which is dependent upon hiring, retaining, developing and motivating employees.
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We believe that executing on our mission will result in a better and more meaningful work experience for our employees.
+Added: An important part of our culture is to provide greater support to the communities in which we operate.
In 2004, we created El Pollo Loco Charities, a non-profit charity, to support the communities surrounding our restaurants.
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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.
−Removed: 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.
−Removed: 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.
−Removed: Differentiate the Brand – Accentuate our Strengths and Build Upon Them .
+Added: During 2022, we launched our first Round Up for Charity campaign benefiting Feeding America.
+Added: El Pollo Loco Charities committed to match the first 100,000 customer round ups in our effort to reach our goal of raising $400,000 for the charity.
+Added: In addition, in 2022, we donated 15,000 meals to Food on Foot’s Sunday Program, which serves people experiencing homelessness and food insecurity.
+Added: Further, during the holidays in 2022, we participated in toy drives for various local charitable organizations including California Highway Patrol’s CHiPs for Kids.
+Added: Lastly, we also continued a 2019 commitment to street artists in our communities by commissioning three new murals on the exterior walls of our restaurants in the Los Angeles area in celebration of Cesar Chavez Day, Mother’s Day, and Day of the Dead.
+Added: Build Awareness and Own our Lane .
We believe that we are uniquely positioned within the LSR restaurant space.
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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.
−Removed: 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.
+Added: We engage customers through our seasonal product calendar, which features new, unique limited time offers and variations of menu items like our Shredded Beef Birria, Overstuffed Fire-Grilled Chicken and Shredded Beef, and Avocado Quesadillas.
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.
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In total, during fiscal 2022, delivery orders constituted 7.8% of our total sales mix.
−Removed: As of December 29, 2021, all Corporate and franchise restaurants offered integrated delivery through a third-party service.
+Added: As of December 28, 2022, all company-operated 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.
−Removed: Simplify Operations – Make It Easier for Employees and Franchisees to Run Our Restaurants.
−Removed: We believe that simplifying our restaurant operations will further enhance our ability to attract and retain the best employees and further improve customer service.
−Removed: In 2021, we continued to implement several initiatives to make it easier for our employees to operate our restaurants.
−Removed: These included a systemized restaurant cleaning process and revised drive thru operating procedures.
+Added: Deliver Exceptional Service – Profitably.
+Added: We believe that the key to building sustainable, consistent restaurant operations is through the development of restaurant leader bench, including area managers, general managers, assistant managers and shift leaders.
+Added: To that end, we have put a renewed focus on leadership development, not only to benefit our current restaurant base, but also to ensure we have the leaders necessary for the continued growth of the El Pollo Loco brand.
+Added: In addition to leadership development, at the team member level, we have completed the roll-out of an enhanced E-Learning platform across the system.
+Added: We also believe that simplifying our restaurant operations will further enhance our ability to attract and retain the best employees and further improve customer service.
+Added: In 2022, we continued to implement initiatives to make it easier for our employees to operate our restaurants.
+Added: These included eliminating a number of menu items as well as purchasing pre-chopped serrano peppers and fresh cilantro.
+Added: Initiatives currently in test include soak tanks for cleaning grill hoods and broilers, and blenders to simplify salsa production.
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.
−Removed: Accelerate new restaurant development.
+Added: Accelerate Development.
We believe that execution of our first three strategies will enable us to grow our restaurant base.
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We believe that our remodels using this new design will result in higher restaurant revenue and a strengthened brand.
−Removed: As of the end of fiscal 2021, we have completed 12 company-operated restaurants remodels using the new design, including 10 during 2021.
−Removed: In 2021, our franchisees completed five remodels, two of which used the new design.
+Added: During fiscal 2022, we completed six company-operated restaurants remodels using the new design.
+Added: In 2022, our franchisees completed 16 remodels using the new design.
In 2023, we plan to continue our standard practices for remodels, including 10-15 company-operated and 20-30 franchised restaurants.
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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.
−Removed: 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.
−Removed: In fiscal 2022, we intend to open three to six new company-operated and six to 10 new franchised restaurants.
+Added: In 2022, four new company-operated restaurants were opened, two in Nevada and two in California, and nine new franchised restaurants were opened, seven in California, one in Colorado, and one in Utah.
+Added: In fiscal 2023, we intend to open four to six new company-operated and eight to twelve 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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Team members seek to engage in conversation with our customers to ensure satisfaction.
−Removed: In addition, constant monitoring of the dining room occurs to ensure the fresh salsa bar and beverage station are clean and supplied with products.
+Added: In addition, constant monitoring of the dining room occurs to ensure the beverage station is clean and supplied with products.
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, social media ratings and speed-of-service performance trends.
−Removed: The operational
−Removed: 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.
+Added: 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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To lead our restaurant management teams, we have area leaders, each of whom is responsible for 7 to 9 restaurants.
−Removed: Overseeing the area leaders are three Regional Directors of Operations and a Vice President of Operations, who reports up to our Chief Operating Officer.
−Removed: Franchise operations are supported by three directors of franchise and a Senior Vice President, Franchise, who reports to the Chief Development Officer.
+Added: Overseeing the area leaders are three Regional Directors of Operations who report up to our Chief Operating Officer.
+Added: Franchise operations are supported by three directors of franchise and a Senior Vice President, Franchise, who reported to the Chief Development Officer during 2022 and starting in 2023 will report to the Chief Operating Officer.
The restaurant development team is supported by four directors who also currently report to the Chief Development Officer.
−Removed: 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.
−Removed: We strive to find ways to simplify our methodology and invest in elevating our team members.
+Added: 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 our high standards and commitments to the customer and team member experience.
+Added: We strive to find ways to simplify our methodology and invest in elevating our team members and leaders.
In a rapidly evolving landscape, effective training depends not only on the quality of content but also on delivery methods.
−Removed: To engage our growing base of multi-generational employees, we employ a Learning Management System called Pollo Zone, our tablet-based learning tool.
+Added: We believe in a blended approach to training to capture all audiences by integrating digital technology and traditional hands-on training activities.
+Added: To engage our growing base of multi-generational employees, we employ a Learning Management System called Pollo Zone, a tablet-based interactive 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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The program introduces new franchise members to El Pollo Loco with hands-on training in the operation and management of our restaurants.
−Removed: This foundational training is conducted by a general training manager who has been certified by our operations group.
+Added: This foundational training is conducted by a
+Added: general training manager who has been certified by our operations group.
Training must be successfully completed before a trainee can be assigned to a restaurant as a manager.
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Through our public relations efforts, we engage notable food editors, influencers and bloggers on a range of topics to help promote our products.
−Removed: In addition, we engage in one-on-one conversations using a portfolio of social media platforms, including Facebook, Instagram and Twitter.
+Added: In addition, we engage in one-on-one conversations using a portfolio of social media platforms, including Facebook, TikTok, Instagram and Twitter.
We also use social media as a research and customer service tool, and apply insights gained to future marketing efforts.
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Our primary distributor delivers supplies to most of our restaurants three times per week.
−Removed: Our restaurants in Texas utilize regional distributors for produce.
+Added: Our restaurants in Texas, Louisiana and Colorado utilize regional distributors for produce.
Our franchisees are required to use our primary distributor or an approved regional distributor, and franchisees must purchase food and supplies from approved suppliers.
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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.
−Removed: We currently source poultry from five suppliers, with two accounting for approximately 75% of our purchases for fiscal 2021.
+Added: We currently source poultry from six suppliers, with two accounting for approximately 79% of our purchases for fiscal 2022.
More than half of our poultry purchases have a fixed price through the end of 2023.
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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.
−Removed: Patent and Trademark Office (the “PTO”), and El Pollo Loco ® in approximately 43 foreign countries and the European Union.
+Added: Patent and Trademark Office, 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.
−Removed: 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.
+Added: 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.
We operate in the restaurant industry, which is highly competitive and fragmented.
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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.
−Removed: 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.
+Added: See Item 1A “Risk Factors” and “Environmental Matters” above in 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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The health and well-being of our employees and guests have always been and continues to be our top priority.
−Removed: 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.
−Removed: We encourage our corporate office employees to work remotely unless business needs require them to work in the office.
−Removed: For our restaurant employees, we continue to implement actions to help protect them from COVID-19 while working in our restaurants.
−Removed: 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.
−Removed: We are also providing extended sick leave benefits to employees impacted by COVID-19.
+Added: We have maintained enhanced safety measures and continue to monitor cases of COVID-19 to help protect the health and well-being of all of our employees.
+Added: In 2022, we also continued to provide extended sick leave benefits to employees impacted by COVID-19.
Seasonal factors, including weather and the timing of holidays, cause our revenue to fluctuate from quarter to quarter.
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Available Information
−Removed: We make available free of charge on our Internet website our Annual Reports, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (“SEC”).
+Added: We make available free of charge on our Internet website our Annual Reports, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as soon as reasonably practicable after we
+Added: electronically file such material with, or furnish it to, the Securities and Exchange Commission (“SEC”).
Our Internet address is www.elpolloloco.com.
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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.