What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2025-03-07 compared with 2024-03-08 · 194 added, 191 removed, 396 unchanged (49% of the section changed)

14 unchanged sentences

53-week years may cause revenues, expenses, and other results of operations to be higher due to the additional week of operations.

Fiscal years are identified in this report according to the calendar years in which they ended.

Fiscal years are identified in this Annual Report according to the calendar years in which they ended.

For example, references to fiscal 2024 refer to the fiscal year ended December 25, 2024.

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

We strive to offer food that integrates the culinary traditions of Mexico with the healthier lifestyle of Los Angeles.

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 segment.

We strive to offer food that integrates the culinary traditions of Mexico with the healthier lifestyle.

Our distinctive menu features our signature product--citrus-marinated fire-grilled chicken--and 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 beef.

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 and shrimp.

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 “better for you” and more affordable 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.

We believe that our distinctive menu with better for you and more affordable 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.

M arket Trends and Uncertainties

On September 28, 2023, Governor Newsom signed AB 1228 into law, which repealed and replaced the FAST Act on January 1, 2024.

Pursuant to AB 1228, the minimum wage at fast food restaurants that are part of brands which have more than 60 establishments nationwide will rise to $20 an hour on April 1, 2024, and a Fast Food Council created by AB 1228 will have limited power to approve annual wage increases until 2029.

Under the law, the Fast Food Council will also have the power to develop and propose minimum standards for fast food workers, including standards for working hours, working conditions, and health and safety.

As a result of AB 1228, we expect our labor and regulatory compliance costs will increase beginning in fiscal 2024 and that our results of operations and profitability will be adversely affected if we are not able to implement other measures to counter these increased costs.

We have experienced inflationary pressures affecting our operations in certain areas such as food cost, labor costs, construction costs and other restaurant operating costs.

On September 28, 2023, Governor Newsom signed AB 1228 into law in California, which repealed and replaced the FAST Act on January 1, 2024.

Pursuant to AB 1228, the minimum wage at fast food restaurants that are part of brands which have more than 60 establishments nationwide increased to $20 an hour on April 1, 2024, and a Fast Food Council created by AB 1228 has limited power to approve annual wage increases until 2029.

Under AB 1228, the Fast Food Council also retains the power to develop and propose minimum standards for fast food workers, including standards for working hours, working conditions, and health and safety.

As a result of AB 1228, we have experienced an increase in our labor and regulatory compliance costs and we expect these cost increases to continue into fiscal 2025.

Although we have been able to substantially offset these cost pressures through various actions, such as increasing menu prices, managing menu mix, and productivity improvements, we expect these cost pressures to continue into 2025 and we may not be able to offset cost increases in the future.

Additionally, we are impacted by macroeconomic challenges, such as inflationary pressures and changes in trade policies, that have in the past, and may continue to in the future, affect our operations in certain areas such as food cost, labor costs, construction costs and other restaurant operating costs.

We have been able to substantially offset these inflationary and other cost pressures through various actions, such as increasing menu prices, managing menu mix, and productivity improvements.

However, we expect these inflationary and other cost pressures to continue throughout fiscal year 2024 and we may not be able to offset cost increases in the future.

However, we expect these inflationary and other cost pressures to continue in fiscal 2025 and we may not be able to offset cost increases in the future.

Current uncertainties about increases in tariffs of imported products from countries, including Mexico, may have an adverse effect on our Company.

On February 1, 2025, the U.S.

government proposed tariffs up to 25% on imports from certain countries, including Mexico and Canada, and implemented other tariffs on countries including China.

Some of our produce, packaging and other items are procured from outside of the U.S.

(including from Mexico, Canada and China), and any new or increased import duties, tariffs, trade sanctions or taxes, or other changes in U.S.

trade or tax policy could result in higher food and supply costs that would adversely impact our financial results.

While we are still evaluating the potential impacts of these proposed tariffs, as well as our ability to mitigate their related impacts, we anticipate it might adversely impact our revenue and cost of goods sold in the United States.

For additional information, see “Item 1A.

Risk Factors”, including the risk factor titled “ We are vulnerable to changes in political and economic

conditions, such as trade policies, tariff and import regulations by the United States, as well as consumer preferences.”

Growth Strategies and Outlook

We plan to continue to expand our business, drive restaurant sales growth, and enhance our competitive positioning, by executing the following five key strategies :

● attract, hire, and retain top talent ;

● EPL hospitality ;

● be known for our famous fire-grilled chicken ;

● digital-centric in service of improving the customer experience;

● expand as an asset light company.

● Brand That Wins;

● Hospitality Mindset ;

● Digital First ;

● Winning Unit Economics;

● Drive Unit Growth Again with National Expansion.

See subsection titled “Our Growth Strategy” in Item 1.

Business in this Annual Report for a detailed description of the five key pillars of our growth strategy.

As of December 25, 2024, we had 498 locations in seven states.

In fiscal 2024, we opened two new company-operated restaurants in California and our franchisees opened two new restaurants, one in California and one in Texas.

In fiscal 2023, we opened two new company-operated restaurants in Nevada and our franchisees opened three new restaurants, one in California, one in Colorado and one in Utah .

In fiscal 2022, we opened four new company-operated restaurants, two in Nevada and two in California, and our franchisees opened nine new restaurants, seven in California, one in Colorado and one in Utah .

In 2024, we intend to open two new company-operated in California and five to seven new franchised restaurants.

In 2025, we intend to open one to two new company-operated in California and eight to nine new franchised restaurants.

To increase comparable restaurant sales, we plan to increase customer frequency, attract new customers, and improve per-person spend.

1 unchanged sentence

Comparable Restaurant Sales

In fiscal 2023, comparable restaurant sales system-wide decreased 0.3%.

In fiscal 2024, comparable restaurant sales system-wide increased 3.2%.

In fiscal 2023, comparable restaurant sales system-wide decreased 0.3%.

In fiscal 2022, comparable restaurant sales system-wide increased 5.9%.

2 unchanged sentences

System-wide comparable restaurant sales include restaurant sales at all comparable company-operated restaurants and at all comparable franchised restaurants, as reported by franchisees.

Refer to “Comparable Restaurant Sales” definition in the subsection titled “Key Performance Indicators” below for further information.

Comparable restaurant sales at company-operated restaurants increased 2.8%, 0.3%, and 3.7%, respectively, in fiscal 2024, 2023 and 2022.

For company-operated restaurants in 2024, the change in comparable restaurant sales consisted of a 7.9% increase in average check size due to increases in menu prices partially offset by a 4.7% decrease in transactions.

In fiscal 2023, the increase in company-operated comparable restaurant sales consisted of a 2.3% increase in average check size due to increase in menu prices partially offset by a 2.0% decrease in transactions .

In fiscal 2022, the increase in company-operated comparable restaurant sales consisted of a 7.3% increase in average check size partially offset by a 3.3% decrease in transactions.

In fiscal 2021, the increase in company-operated comparable restaurant sales consisted of a 6.3% increase in average check size and a 1.2% increase in transactions.

In fiscal 2023, comparable restaurant sales at franchised restaurants decreased 0.7%.

In fiscal 2022, comparable restaurant sales at franchised restaurants increased 7.4%, and in fiscal 2021, comparable restaurant sales at franchised restaurants increased 15.3%.

In fiscal 2024, comparable restaurant sales at franchised restaurants increased 3.5%.

In fiscal 2023, comparable restaurant sales at franchised restaurants decreased 0.7%, and in fiscal 2022, comparable restaurant sales at franchised restaurants increased 7.4%.

Restaurant Development

In fiscal 2023, we opened two company-operated restaurants, and our franchisees opened three new restaurants.

In fiscal 2024, we opened two company-operated restaurants, and our franchisees opened two new restaurants.

From time to time, we and our franchisees close restaurants.

In fiscal 2023, we did not close any company-operated restaurants, and our franchisees did not close any restaurants.

In fiscal 2024, we did not close any company-operated restaurants, and our franchisees closed one restaurant.

Our restaurant counts at the beginning and end of each of the last three years were as follows:

11 unchanged sentences

Restaurants at end of period

During the year ended December 27, 2023, we completed 15 company-operated restaurant remodels and 33 franchise remodels.

(1) Our restaurant count above includes 498 domestic restaurants and excludes 10 licensed restaurants in the Philippines.

Restaurant Remodeling

During the year ended December 25, 2024, we completed eight company-operated restaurant remodels and 44 franchise remodels.

In fiscal 2025, we plan to continue our standard practices for remodels, which includes completing a total of 30-40 company and 30-40 franchise remodels.

9 unchanged sentences

As points are available for redemption past the quarter earned, a portion of the revenue associated with the earned points will be deferred until redemption or expiration.

As of December 27, 2023, the amount of revenue deferred related to the earned points, net of redemptions, is $0.7 million.

We had more than 3.7 million members in the Loco Rewards loyalty program as of December 27, 2023.

As of December 25, 2024, the revenue allocated to loyalty points that had not been redeemed was $0.8 million.

We had over 4.2 million loyalty program members as of December 25, 2024.

Key Financial Definitions

Our revenue is derived from three primary sources:

(i) company-operated restaurant revenue, (ii) franchise revenue, which is comprised primarily of franchise royalties and, to a lesser extent, franchise fees and sublease rental income, and (iii) franchise advertising fee revenue.

company-operated restaurant revenue, franchise revenue, which is comprised primarily of franchise royalties and, to a lesser extent, franchise fees and sublease rental income, and franchise advertising fee revenue.

See Note 15 “Revenue from Contracts with Customers” in the accompanying “Notes to Consolidated Financial Statements” in this Annual Report for further details regarding our revenue recognition policy.

2 unchanged sentences

The components of food and paper costs are variable in nature, change with sales volume, are impacted by menu mix, and are subject to increases or decreases in commodity costs.

We expect food and paper costs, particularly those items not subject to purchasing commitments, to increase in the short-term due to current inflationary pressures.

Labor and Related Expenses

1 unchanged sentence

Like other expense items, we expect labor costs to grow proportionately as our restaurant revenue grows.

Factors that influence labor costs include minimum wage and payroll tax legislation, state labor laws (which, in California, include AB 1228), overtime, wage inflation, the frequency and severity of workers’ compensation claims, health care costs, and the performance of our restaurants.

Factors that influence labor costs include minimum wage and payroll tax legislation, state labor laws (which, in California, includes AB 1228), overtime, wage inflation, the frequency and severity of workers’ compensation claims, health care costs, and the performance of our restaurants.

Occupancy Costs and Other Operating Expenses

Occupancy costs include rent, common area maintenance (“CAM”), and real estate taxes.

Other restaurant operating expenses include the costs of utilities, advertising, credit card processing fees, restaurant supplies, repairs and maintenance, and other restaurant operating costs.

Other restaurant operating expenses include the costs of utilities, advertising, credit card processing fees, delivery service provider fees, restaurant supplies, repairs and maintenance, and other restaurant operating costs.

Gain on Recovery of Insurance Proceeds, Net

4 unchanged sentences

Franchise Expenses

Franchise expenses are primarily comprised of rent expenses incurred on properties leased by us and then sublet to franchisees, and expenses incurred in support of franchisee information technology systems.

Additionally, franchise expenses also include all expenses of the advertising fund representing the franchised restaurants portion of advertising expenses.

Franchise expenses are primarily comprised of rent expenses incurred on properties leased by us and then sublet to franchisees, expenses incurred in support of franchisee information technology systems, and the franchisee’s portion of advertising expenses.

Depreciation and Amortization

Depreciation and amortization primarily consist of the depreciation of property and equipment, including leasehold improvements and equipment.

Depreciation and amortization primarily consists of the depreciation of property and equipment, including leasehold improvements and equipment.

Loss on Disposal of Assets

2 unchanged sentences

We review long-lived assets such as property, equipment, and intangibles on a unit-by-unit basis for impairment when events or circumstances indicate the carrying value of the assets may not be recoverable.

We determine if there is impairment at the restaurant level by comparing undiscounted future cash flows from the related property and equipment assets to their respective carrying values and record an impairment charge when appropriate.

We determine if there is impairment at the restaurant level by comparing undiscounted future cash flows from the related long-lived assets to their respective carrying values and record an impairment charge when appropriate.

In determining future cash flows, significant estimates are made by us with respect to future operating results of each restaurant over its remaining lease term, including sales trends, labor rates, commodity costs and other operating cost assumptions.

If assets are determined to be impaired, the impairment charge is measured by calculating the amount by which the assets’ carrying amount exceeds its fair value.

If assets are determined to be impaired, the impairment charge is measured by calculating the amount by which the asset’s carrying amount exceeds its fair value.

This process of assessing fair values requires the use of estimates and assumptions, including our ability to sell or reuse the related assets and market conditions, which are subject to a high degree of judgment.

2 unchanged sentences

The remaining value of the ROU asset is amortized on a straight-line basis, with the expense recognized in closed-store reserve expense, in addition to property tax and CAM charges for closed restaurants.

(Gain) loss on Disposition of Restaurants

(Gain) loss on disposal of restaurants includes the (gain) loss on the sale of restaurants to franchisees, or other third parties, and includes the difference between carrying value and sales price of leasehold improvements, equipment and other assets included in the sale.

Loss (gain) on Disposition of Restaurants

Loss (gain) on disposition of restaurants includes the loss (gain) on the sale of restaurants to franchisees, or other third parties, and includes the difference between carrying value and sales price of leasehold improvements, equipment and other assets included in the sale.

Interest Expense, Net

Interest expense, net, consists primarily of interest on our outstanding revolving debt.

Debt issuance costs are amortized on a straight-line basis over the life of the related debt.

Interest expense, net, consists primarily of interest on our outstanding debt.

Debt issuance costs are amortized at cost over the life of the related debt.

Provision for Income Taxes

Provision for income taxes consists of federal and state tax expense on our income, and changes to our deferred tax asset and deferred tax liability.

Provision for income taxes consists of federal and state taxes on our income.

Results of Operations

Fiscal Year 2024 Compared to Fiscal Year 2023

Our operating results for the fiscal years ended December 27, 2023 and December 28, 2022, in absolute terms and expressed as a percentage of total revenue, with the exception of cost of operations and company restaurant expenses, which are expressed as a percentage of company-operated restaurant revenue, are compared below:

Our operating results for the fiscal years ended December 25, 2024 and December 27, 2023, are in absolute terms and expressed as a percentage of total revenue, with the exception of cost of operations and company restaurant expenses, which are expressed as a percentage of company-operated restaurant revenue, are compared in the table below:

Increase / (Decrease)

15 unchanged sentences

Gain on recovery of insurance proceeds, property, equipment and expenses

Gain on disposition of restaurants

Loss (gain) on disposition of restaurants

Impairment and closed-store reserves

2 unchanged sentences

Interest expense, net

Income tax receivable agreement expense (income)

Income tax receivable agreement (income) expenses

Income before provision for income taxes

3 unchanged sentences

Company-Operated Restaurant Revenue

In fiscal 2023, company-operated restaurant revenue decreased $4.8 million, or 1.2%.

The decrease in company-operated restaurant sales was primarily due to $10.5 million decrease in revenue from the 21 company-operated restaurants sold by the Company to existing franchisees and the closure of two restaurants, in each case, during or subsequent to the first quarter of 2022.

This company-operated restaurant sales decrease was partially offset by an increase in company-operated comparable restaurant revenue of $1.2 million, or 0.3%.

The company-operated comparable restaurant sales increase consisted of an approximately 2.3% increase in average check size due to increases in menu prices, partially offset by a 2.0% decrease in transactions.

In addition, company-operated restaurant revenue was favorably impacted by $4.3 million of additional sales from the opening of six restaurants during or subsequent to the first quarter of 2022.

In fiscal 2024, company-operated restaurant revenue decreased $2.2 million, or 0.5%, from the prior year.

The decrease in company-operated restaurant sales was primarily due to $16.1 million decrease in revenue from the 19 company-operated restaurants sold by us to existing franchisees during or subsequent to the first quarter of 2023, which was partially offset by an increase in company-operated comparable restaurant revenue of $10.8 million, or 2.8%, as well as $2.4 million of additional sales from the opening of four restaurants during or subsequent to the first quarter of 2023.

The company-operated comparable restaurant revenue increase consisted of an approximately 7.9% increase in average check size due to increases in menu prices, partially offset by a 4.7% decrease in transactions.

Franchise Revenue

In fiscal 2023, franchise revenue increased $2.8 million, or 7.3%.

This increase was primarily due to revenue generated from 21 company-operated restaurants sold by the Company to existing franchisees and the opening of 12 restaurants, in each case, during or subsequent to the first quarter of 2022.

This franchise revenue increase was partially offset by the franchise comparable restaurant sales decrea se of 0.7%.

In fiscal 2024, franchise revenue increased $4.6 million, or 11.1% from the prior year.

This increase was primarily due to a franchise comparable restaurant sales increase of 3.5%, four franchise-operated restaurant openings and 19 company-operated restaurants sold by us to our existing franchisees in each case, during or subsequent to the first quarter of 2023.

Franchise Advertising Fee Revenue

Franchise advertising fee revenue increased $0.7 million, or 2.5% from the comparable period in the prior year.

Franchise advertising fee revenue increased $2.0 million, or 6.7% from the prior year.

As advertising fee revenue is a percentage of franchisees’ revenue, the year-to-date fluctuation was due to the increases and decreases noted in franchise revenue above.

Food and Paper Costs

Food and paper costs decreased $9.5 million, or 8.1%, in fiscal 2023.

The decrease in food and paper costs resulted primarily from lower transactions including restaurant locations sold to franchisees during the current or prior year, partially offset by commodity inflation.

Food and paper costs as a percentage of company-operated restaurant revenue were 27.2% in fiscal 2023, down from 29.2% in fiscal 2022 primarily due to an increase in pricing, partially offset by commodity inflation.

Food and paper costs decreased $7.5 million, or 7.0%, in fiscal 2024 from the prior year.

The decrease in food and paper costs was primarily due to a decrease in transactions, as well as restaurant locations sold to franchisees during the current or prior year, partially offset by commodity inflation.

Food and paper costs as a percentage of company-operated restaurant revenue were 25.4% in fiscal 2024, down from 27.2% in fiscal 2023, primarily due to an increase in menu pricing and lower discounting, partially offset by commodity inflation.

Labor and Related Expenses

Labor and related expenses decreased $3.5 million, or 2.7%, in fiscal 2023.

The decrease was primarily due to a $4.0 million decrease related to the 2.0% decrease in year-over-year sales transactions, a $2.9 million decrease in overtime pay due to improvements in operational execution and a $1.8 million decrease related to COVID-19 sick pay.

The decrease in labor and related expenses for the year was partially offset by a $4.1 million increase primarily related to higher wage rates from minimum wage increases in California during fiscal 2023 and 2022 and other labor wage increases as a result of competitive pressure and a $1.9 million increase in labor related costs due to due to open restaurant management staffing positions in fiscal 2022 being filled during fiscal 2023.

Labor and related expenses as a percentage of company-operated restaurant revenue were 31.9% in fiscal 2023, down from 32.4% in fiscal 2022 primarily due to the increase in pricing, and overtime and sick pay decreases, partially offset by the cost increases highlighted above.

Labor and related expenses decreased $0.1 million, or 0.1%, in fiscal 2024 as compared to 2023.

The decrease was due primarily to a $5.8 million reduction in labor related costs resulting from the 19 company-operated restaurants sold by us to our existing franchisees during or subsequent to the first quarter of 2023 and as well as $6.6 million reduction related to improved labor efficiencies.

The decrease in labor and related expenses for the year was partially offset by a $12.3 million increase due to higher wage rates during fiscal 2024 and 2023 primarily as a result of legislative increases in the California state minimum wage, which became effective April 1, 2024.

Labor and related expenses as a percentage of company-operated restaurant revenue were 32.1% in fiscal 2024, up from 31.9% in fiscal 2023 primarily due to the higher wage rates, partially offset by the increase in menu pricing and improved labor efficiencies.

Occupancy and Other Operating Expenses

Occupancy and other operating expenses decreased $2.1 million, or 2.1%, in fiscal 2024.

The decrease was primarily due to a $0.8 million decrease in utilities and a $0.3 million decrease in market place delivery fees.

The decrease in occupancy and other operating expenses was partially offset by a $1.0 million increase in occupancy cost.

Occupancy and other operating expenses as a percentage of company-operated restaurant revenue were 25.4% in fiscal 2023, up from 25.2% in fiscal 2022 primarily due to the cost increases highlighted above .

Gain on Recovery of Insurance Proceeds, Lost Profits

During fiscal 2023 and fiscal 2022, two of our restaurants incurred damage resulting from a fire.

In fiscal 2023, we incurred costs directly related to the fire of less than $0.1 million.

We recognized gains of $0.2 million, related to the reimbursement of property and equipment and expenses incurred and $0.3 million related to the reimbursement of lost profits.

The decrease was primarily due to a $4.9 million decrease in utilities, repairs and maintenance costs and other operating expense primarily driven by the sale of 19 company-operated locations during or subsequent to the first quarter of 2023 to existing franchisees, partially offset by a $2.2 million increase in other operating expenses and the four new company restaurant openings.

Occupancy and other operating expenses as a percentage of company-operated restaurant revenue were 25.1% in fiscal 2024, down from 25.4% in fiscal 2023 primarily due to higher menu prices and the cost decreases highlighted above .

Gain on Recovery of Insurance Proceeds, Lost Profits and Gain on Recovery of Insurance Proceeds Property, Equipment and Expenses

During fiscal 2023 and fiscal 2022, two of the Company’s restaurants incurred damage resulting from a fire.

In fiscal 2023, the Company incurred costs directly related to the fire of less than $0.1 million.

In fiscal 2023, the Company recognized gains of $0.2 million, related to the reimbursement of property and equipment and expenses incurred and $0.3 million related to the reimbursement of lost profits and in fiscal 2024, the Company recognized gains of less than $0.1 million related to the reimbursement of property and equipment and expenses.

The gain on recovery of insurance proceeds and reimbursement of lost profits, net of the related costs, is included in the accompanying consolidated statements of income, for the year ended December 27, 2023, as a reduction of Company restaurant expenses.

We received from the insurance company cash of $0.5 million, net of the insurance deductible, during fiscal 2023.

The Company received from the insurance company cash of $0.5 million, net of the insurance deductible, during fiscal 2023.

General and Administrative Expenses

General and administrative expenses increased $4.2 million, or 10.1%, in fiscal 2024.

The increase was due primarily to a $1.4 million increase in labor related costs, primarily related to an increase in estimated management bonus expense, a $1.1 million increase in restructuring costs related to certain positions in the organization, and a $0.6 million increase in

executive transition costs.

The increase was due primarily to a $3.6 million increase in labor related costs, primarily related to an increase in estimated management bonus expense and a $0.6 million increase in other general and administrative expenses.

General and administrative expenses as a percentage of total revenue were 9.8% in fiscal 2024, up from 9.0% in fiscal 2023.

1 unchanged sentence

Franchise Expenses

Franchise expenses increased $2.2 million, or 6.2%, in fiscal 2023.

Franchise expenses increased $3.9 million, or 10.2%, in fiscal 2024 from the prior year.

The increase was primarily due to an increase in advertising expenses, primarily resulting from higher franchise revenue, higher franchise services expense and higher rent expense for locations sub-leased to franchisees that have a portion of the rent based on a percentage of revenue generated.

Gain on Disposition of Restaurants

Loss (Gain) on Disposition of Restaurants

During fiscal 2024, we completed the sale of one company-operated restaurant within California to an existing franchisee due to an expiring lease term on April 30, 2024.

This sale resulted in cash proceeds of $0.1 million and a net loss on sale of restaurant of less than $0.1 million for the fiscal year ended December 25, 2024.

This restaurant is included in the total number of franchised El Pollo Loco restaurants.

During fiscal 2023, we completed the sale of 18 restaurants within California, Utah and Texas to existing franchisees.

5 unchanged sentences

Since the date of their sale, these restaurants are now included in the total number of franchised El Pollo Loco restaurants.

During fiscal 2022, we completed the sale of three company-operated restaurants within the Orange County area to an existing franchisee.

We determined that these restaurant dispositions represent multiple element arrangements, and as a result, the cash consideration received was allocated to the separate elements based on their relative standalone selling price.

Cash proceeds included upfront consideration for the sale of the restaurants and franchise fees.

The cash consideration per restaurant related to franchise fees is consistent with the amounts stated in the related franchise agreements, which are charged for separate standalone arrangements.

We initially defer and subsequently recognize the franchise fees over the term of the franchise agreement.

This sale resulted in cash proceeds of $1.0 million and a net gain on sale of restaurants of $0.8 million for the fiscal year ended December 28, 2022.

These restaurants are included in the total number of franchised El Pollo Loco restaurants.

Impairment and Closed-Store Reserves

During fiscal 2023, we recorded a $1.5 million non-cash impairment charge primarily related to the property and equipment assets of one restaurant in Nevada and the carrying value o f the ROU assets of one restaurant in California.

During fiscal 2022, we recorded a $0.5 million non-cash impairment charge primarily related to the carrying value o f the ROU assets of one restaurant in California that closed in 2021 and the property and equipment assets of two restaurants in California.

During fiscal 2024, we recorded a $0.1 million non-cash impairment charge primarily related to the property and equipment assets of two restaurants in Nevada.

During fiscal 2024, we recognized $0.1 million of closed-store reserve expense related to the amortization of ROU assets, property taxes and CAM payments for our closed locations compared to $0.2 million during fiscal 2023 .

4 unchanged sentences

The TRA calls for us to pay to our pre-IPO stockholders 85% of the savings in cash that we realize in our taxes as a result of utilizing our net operating losses and other tax attributes attributable to preceding periods.

In fiscal 2023 and fiscal 2022 we recognized income tax receivable agreement expense of $0.1 million and income of $0.4 million, respectively.

In fiscal 2023 and 2022, we paid $0.3 million and $0.4 million, respectively, to our pre-IPO stockholders under the TRA.

In fiscal 2024 we recorded less than $0.1 million in income tax receivable agreement income.

In fiscal 2023, we paid $0.3 million to our pre-IPO stockholders under the TRA and we recorded income tax receivable agreement expense of $0.1 million.

On May 29, 2024, we terminated most of the obligations under the TRA, with respect to any payments or obligations owed to the FS Equity Partners V, L.P.

and FS Affiliates V, L.P.

(together, the “Sellers”) thereunder in exchange for a payment to the Sellers of $0.4 million.

As of December 25, 2024, there was no remaining obligations owed on our consolidated balance sheets.

Provision for Income Taxes

In fiscal 2024, we recorded an income tax expense of $9.6 million, compared to income tax expense of $9.3 million in fiscal 2023, reflecting an estimated effective tax rate of 27.2% and 26.7%, respectively.

The difference between the 21.0% statutory rate and our effective tax rate of 27.2% for the year ended December 25, 2024 is primarily a result of state taxes, the impact of non-tax deductible executive compensation expense, a tax shortfall related to equity compensation deductible for tax as compared to the cumulative amount recorded as stock-based compensation expense, partially offset by a Work Opportunity Tax Credit benefit .

The difference between the 21.0% statutory rate and our effective tax rate of 26.7% for the year ended December 27, 2023 is primarily a result of windfall tax benefit related to stock options exercised, state taxes, a Work Opportunity Tax Credit benefit and the corresponding valuation allowance release in connection with the California Enterprise Zone credits expiration .

The difference between the 21.0% statutory rate and our effective tax rate of 28.0% for the year ended December 28, 2022 is primarily a result of state taxes, the change in valuation allowance against certain state credits, a tax shortfall related to equity compensation and non-deductible executive compensation, partially offset by a Work Opportunity Tax Credit benefit.

Fiscal Year 2023 Compared to Fiscal Year 2022

3 unchanged sentences

These key measures include company-operated restaurant revenue, system-wide sales, comparable restaurant sales, company-operated average unit volumes (“AUV”), restaurant contribution, restaurant contribution margin, new restaurant openings, EBITDA, and Adjusted EBITDA.

In fiscal 2023, our restaurants generated company-operated restaurant revenue of $398.4 million and system-wide sales of $1,050.2 million, and system comparable sales decline of 0.3%, consisting of company-operated restaurant comparable sales growth of 0.3% and franchised comparable sales decline of 0.7%.

The company-operated comparable sales increase consisted of a 2.3% increase in average check size due to increases in menu prices and partially offset by a 2.0% decrease in transactions.

In fiscal 2024, our restaurants generated company-operated restaurant revenue of $396.3 million and system-wide sales of $1,095.7 million, and system-wide comparable restaurant sales growth of 3.2%, consisting of company-operated restaurant comparable restaurant sales growth of 2.8% and franchised comparable restaurant sales growth of 3.5%.

The company-operated comparable restaurant sales increase consisted of a 7.9% increase in average check size due to increases in menu prices and partially offset by a 4.7% decrease in the number of transactions.

In fiscal 2024, for company-operated restaurants, our annual AUV was $2.3 million, restaurant contribution margin was 17.4%, and Adjusted EBITDA was $62.7 million.

2 unchanged sentences

Company-operated restaurant revenue in any period is directly influenced by the number of operating weeks in such period, the number of open restaurants, and comparable restaurant sales.

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

Seasonal factors and the timing of holidays cause our revenue to fluctuate from period to period.

Our revenue per restaurant is typically lower in the first and fourth quarters due to reduced January and December transactions and higher in the second and third quarters.

5 unchanged sentences

Accordingly, system-wide sales should not be considered in isolation or as a substitute for our results as reported under GAAP.

Management believes that the presentation of system-wide sales provides useful information to investors because it is a measure that is widely used in the restaurant industry, including by our management, to evaluate brand scale and market penetration.

The following table reconciles system-wide sales to company-operated restaurant revenue and total revenue:

(Dollar amounts in thousands)

Management believes that system-wide sales is an important figure for investors, because it is widely used in the restaurant industry, including by our management, to evaluate brand scale and market penetration.

System-wide sales does not include the 10 licensed stores in the Philippines.

The following table reconciles system-wide sales to company-operated restaurant revenue and total revenue (in thousands):

Company-operated restaurant revenue

26 unchanged sentences

Restaurant contribution is defined as company-operated restaurant revenue less company restaurant expenses which includes food and paper cost, labor and related expenses and occupancy and other operating expenses, where applicable.

Restaurant contribution therefore excludes franchise revenue, franchise advertising fee revenue and franchise expenses as well as certain other costs, such as general and administrative expenses, franchise expenses, depreciation and amortization, impairment and closed-store reserve, loss on disposal of assets and other costs that are considered corporate-level expenses and are not considered normal operating costs of our restaurants.

Accordingly, restaurant contribution is not indicative of overall Company results and does not accrue directly to the benefit of shareholders because of the exclusion of certain corporate-level expenses.

Restaurant contribution therefore excludes franchise revenue, franchise advertising fee revenue and franchise expenses as well as certain other costs, such as general and administrative expenses, franchise expenses, depreciation and amortization, asset impairment and closed-store reserve, loss on disposal of assets and other costs that are considered corporate-level expenses and are not considered normal operating costs of our restaurants.

Accordingly, restaurant contribution is not indicative of overall Company results and does not accrue directly to the benefit of stockholders because of the exclusion of certain corporate-level expenses.

Restaurant contribution margin is defined as restaurant contribution as a percentage of net company-operated restaurant revenue.

Restaurant contribution and restaurant contribution margin are supplemental measures of operating performance of our restaurants, and our calculations thereof may not be comparable to those reported by other companies.

Restaurant contribution and restaurant contribution margin have limitations as analytical tools, and you should not consider them in isolation or as substitutes for analysis of our results as reported under GAAP.

Management uses restaurant contribution and restaurant contribution margin as key metrics to evaluate the profitability of incremental sales at our restaurants, to evaluate our restaurant performance across periods, and to evaluate our restaurant financial performance compared with

our competitors.

Restaurant contribution and restaurant contribution margin have limitations as analytical tools, and you should not consider them in

isolation, or superior to, or as substitutes for the analysis of our results as reported under GAAP.

Management believes that restaurant contribution and restaurant contribution margin are important tools for investors, because they are widely-used metrics within the restaurant industry to evaluate restaurant-level productivity, efficiency, and performance.

12 unchanged sentences

Impairment and closed-store reserves

(Gain) loss on disposition of restaurants

Loss (gain) on disposition of restaurants

Restaurant contribution

14 unchanged sentences

EBITDA represents net income (loss) before interest expense, provision (benefit) for income taxes, depreciation, and amortization.

Adjusted EBITDA represents net income (loss) before interest expense, provision (benefit) for income taxes, depreciation, amortization, and items that we do not consider representative of our on-going operating performance, as identified in the reconciliation table below.

Adjusted EBITDA represents net income (loss) before interest expense, provision (benefit) for income taxes, depreciation, amortization, and other items that we do not consider representative of on-going operating performance, as identified in the reconciliation table below.

EBITDA and Adjusted EBITDA as presented in this Annual Report are supplemental measures of our performance that are neither required by, nor presented in accordance with, GAAP.

EBITDA and Adjusted EBITDA are not measurements of our financial performance under GAAP and should not be considered as alternatives to net income, operating income, or any other performance measures derived in accordance with GAAP, or as alternatives to cash flow

from operating activities as a measure of our liquidity.

In addition, in evaluating EBITDA and Adjusted EBITDA, you should be aware that in the future we will incur expenses or charges such as those added back to calculate EBITDA and Adjusted EBITDA.

1 unchanged sentence

EBITDA and Adjusted EBITDA have limitations as analytical tools, and you should not consider them in isolation, or as substitutes for analysis of our results as reported under GAAP.

Some of these limitations are (i) they do not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments, (ii) they do not reflect changes in, or cash requirements for, our working capital needs, (iii) they do not reflect interest expense, or the cash requirements necessary to service interest or principal payments, on our debt, (iv) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA and Adjusted EBITDA do not reflect any cash requirements for such replacements, (v) they do not adjust for all non-cash income or expense items that are reflected in our statements of cash flows, (vi) they do not reflect the impact of earnings or charges resulting from matters we consider not to be indicative of our on-going operations, and (vii) other companies in our industry may calculate these measures differently than we do, limiting their usefulness as comparative measures.

Some of these limitations are (i) they do not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments, (ii) they do not reflect changes in, or cash requirements for, our working capital needs, (iii) they do not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our debt, (iv) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA and Adjusted EBITDA do not reflect any cash requirements for such replacements, (v) they do not adjust for all non-cash income or expense items that are reflected in our statements of cash flows, (vi) they do not reflect the impact of earnings or charges resulting from matters we consider not to be indicative of our on-going operations, and (vii) other companies in our industry may calculate these measures differently than we do, limiting their usefulness as comparative measures.

We compensate for these limitations by providing specific information regarding the GAAP amounts excluded from such non-GAAP financial measures.

We further compensate for the limitations in our use of non-GAAP financial measures by presenting comparable GAAP measures more prominently.

Management believes that EBITDA and Adjusted EBITDA facilitate operating performance comparisons from period to period by isolating the effects of some items that vary from period to period without any correlation to core operating performance or that vary widely among similar companies.

We believe that EBITDA and Adjusted EBITDA facilitate operating performance comparisons from period to period by isolating the effects of some items that vary from period to period without any correlation to core operating performance or that vary widely among similar companies.

These potential differences may be caused by variations in capital structures (affecting interest expense), tax positions (such as the impact on periods or companies of changes in effective tax rates or net operating losses) and the age and book depreciation of facilities and equipment (affecting relative depreciation expense).

We also present EBITDA and Adjusted EBITDA because (i) management believes that these measures are frequently used by securities analysts, investors and other interested parties to evaluate companies in our industry, (ii) management believes that investors will find these measures useful in assessing our ability to service or incur indebtedness, and (iii) we use EBITDA and Adjusted EBITDA internally as benchmarks to compare our performance to that of our competitors.

We also present EBITDA and Adjusted EBITDA because (i) we believe that these measures are frequently used by securities analysts, investors and other interested parties to evaluate companies in our industry, (ii) management believes that investors will find these measures useful in assessing our ability to service or incur indebtedness, and (iii) we use EBITDA and Adjusted EBITDA internally for a number of benchmarks, including to compare our performance to that of our competitors.

The following table sets forth reconciliations of our net income to EBITDA and Adjusted EBITDA:

7 unchanged sentences

Impairment and closed-store reserves (c)

(Gain) loss on disposition of restaurants (d)

Income tax receivable agreement expense (income) (e)

Securities class action legal expense (f)

Special dividend (g)

Legal settlements (h)

Special legal expenses (i)

Shareholder advisory fees (j)

Gain on recovery of insurance proceeds (k)

Executive transition costs (l)

Severance (m)

Pre-opening costs (n)

Loss (gain) on disposition of restaurants (d)

Legal settlements (e)

Income tax receivable agreement (income) expenses (f)

Securities class action legal expense (g)

Special other expenses (h)

Shareholder advisory fees (i)

Gain on recovery of insurance proceeds (j)

Executive transition costs (k)

Restructuring charges (l)

Pre-opening costs (m)

Adjusted EBITDA

2 unchanged sentences

During fiscal 2023, we recorded non-cash impairment charges of $1.5 million, primarily related to the property and equipment assets of one restaurant in Nevada and the carrying value o f the ROU assets of one restaurant in California.

During fiscal 2024, we recorded non-cash impairment charges of $0.1 million, primarily related to the property and equipment assets of two restaurants in Nevada.

D uring fiscal 2024, we recognized $0.1 million of closed-store reserve expense, primarily related to the amortization of ROU assets, property taxes and CAM payments for our closed locations.

In fiscal 2022, we recorded non-cash impairment charges of $0.5 million for the year ended December 28, 2022, primarily related to the carrying value of the ROU assets of one restaurant in California that closed in 2021 and the property and equipment assets of two restaurants in California.

In fiscal 2023, we recorded non-cash impairment charges of $1.5 million for the year ended December 27, 2023, primarily related to the property and equipment assets of one restaurant in Nevada and the carrying value o f the ROU assets of one restaurant in California.

During fiscal 2023, we recognized $0.2 million of closed-store reserve expense, primarily related to the amortization of ROU assets, property taxes and CAM payments for our closed locations.

In fiscal 2021, we recorded non-cash impairment charges of $0.7 million for the year ended December 29, 2021, primarily related to the carrying value of one restaurant in Texas that closed in 2019, the ROU assets of one restaurant in California closed in 2021, and the property and equipment assets of three restaurants in California.

During fiscal 2022, we recognized $0.3 million of closed-store reserve expense, primarily related to the amortization of ROU assets, property taxes and CAM payments for our closed locations.

(d) During fiscal 2023, we completed the sale of 18 company-operated restaurants within California, Utah and Texas to existing franchisees.

(d) During fiscal 2024, we completed the sale of one restaurant within California to an existing franchisee due to an expiring lease term on April 30, 2024.

This sale resulted in cash proceeds of $0.1 million and a net loss on sale of restaurant of less than $0.1 million for the year-ended December 25, 2024.

During fiscal 2023, we completed the sale of 18 company-operated restaurants within California, Utah and Texas to existing franchisees.

These sales during 2023 resulted in cash proceeds of $7.7 million and a net gain on sale of restaurants of $5.0 million for the year ended December 27, 2023.

1 unchanged sentence

This sale during 2022 resulted in cash proceeds of $1.0 million and a net gain on sale of restaurants of $0.8 million for the year ended December 28, 2022.

During fis cal 2021, we completed the sale of our eight restaurants within Sacramento area to an

existing franchisee.

This sale resulted in cash proceeds of $4.6 million during the year ended December 29, 2021 and a net loss on sale of restaurants of $1.5 million for the year ended December 29, 2021.

(e) On July 30, 2014, we entered into the TRA.

(e) Includes $0.5 million received from legal settlements, net of legal expenses.

(f) On July 30, 2014, we entered into the TRA.

This agreement calls for us to pay to our pre-IPO stockholders 85% of the savings in cash that we realize in our taxes as a result of utilizing our net operating losses and other tax attributes attributable to preceding periods.

For the years ended December 25, 2024, December 27, 2023 and December 28, 2022, income tax receivable agreement (income) expense consisted of the amortization of interest expense and changes in estimates for actual tax returns filed, related to our total expected TRA payments.

(f) Consists of costs related to the defense of securities lawsuits.

During the year ended December 29, 2021, we received $0.5 million in insurance proceeds, net of legal expenses, related to the derivative complaint.

See Note 13 “ Commitments and Contingencies—Legal Matters” in the accompanying “Notes to Consolidated Financial Statements” in this Annual Report.

(g) During fiscal 2023 and fiscal 2022, we encountered costs related to a special dividend declaration.

On October 11, 2022, the Board of Directors declared a special dividend of $1.50 per share on our common stock.

T he special dividend was paid on November 9, 2022, to stockholders of record, including holders of restricted stock, at the close of business on October 24, 2022.

(h) Includes $0.5 million received from legal settlements, net of legal expenses.

(i) Consists of legal costs related to the share distribution that occurred on March 28, 2023.

Refer to Note 14, “Related Party Transactions” for further details on the share distribution.

(j) Consists of advisory fees pertaining to a Shareholder Rights Agreement adopted in connection with a shareholder’s accumulation of a significant amount of shares of our common stock.

On May 29, 2024, we terminated most of the obligations under the TRA, with respect to any payments or obligations owed to the Sellers thereunder in exchange for a payment to the Sellers of $0.4 million.

As of December 25, 2024, there was no remaining obligations owed on our consolidated balance sheets.

(g) Consists of costs related to the defense of securities lawsuits.

(h) Consists of (1) $0.2 million in legal costs related to the share distribution by Trimaran Group of substantially all shares of our common stock held by Trimaran Group to its investors, members and limited partners, which occurred on March 28, 2023, and (2) $0.1 million and $0.4 million, respectively, in costs related to a special dividend declaration which was paid on November 9, 2022, to stockholders of record, including holders of restricted stock for fiscal 2023 and 2022.

(i) Consists of advisory fees pertaining to a Shareholder Rights Agreement adopted in connection with a shareholder’s accumulation of a significant amount of shares of our common stock.

Refer to Note 16, “Shareholder Rights Agreement” for further details on the Shareholder Rights Agreement.

(k) During fiscal 2023 and fiscal 2022, two of our restaurants incurred damage resulting from a fire.

(j) During fiscal 2022, one of our restaurants incurred damage resulting from a fire.

In fiscal 2023, we incurred costs directly related to the fire of less than $0.1 million.

We recognized gains of $0.2 million, related to the reimbursement of property and equipment and expenses incurred and $0.3 million related to the reimbursement of lost profits.

The gain on recovery of insurance proceeds and reimbursement of lost profits, net of the related costs is included in the accompanying consolidated statements of income, for fiscal 2023, as a reduction of company restaurant expenses.

We received from the insurance company cash of $0.5 million, net of the insurance deductible, during fiscal 2023.

(l) Includes costs associated with the transition of our CEO, such as severance, executive recruiting costs and stock-based compensation costs associated with the transition of our former CEO.

(m) On April 13, 2023 the Company made the decision to eliminate and restructure certain positions in the organization, which resulted in one-time costs of approximately $1.1 million.

(n) Pre-opening costs are a component of general and administrative expenses, and consist of costs directly associated with the opening of new restaurants and incurred prior to opening, including management labor costs, staff labor costs during training, food and supplies used during training, marketing costs, and other related pre-opening costs.

We received $0.5 million in cash, net of the insurance deductible, from the insurance company during fiscal 2023, for which we recognized gains of $0.2 million, related to the reimbursement of property and equipment and expenses incurred and $0.3 million related to the reimbursement of lost profits.

In fiscal 2024, the Company recognized gains of less than $0.1 million related to the reimbursement of property and equipment and expenses.

The gain on recovery of insurance proceeds for the reimbursement of property and equipment and expenses and the reimbursement of lost profits, net of the related costs is included in the accompanying consolidated statements of income, for the year ended December 27, 2023, as a reduction of company restaurant expenses.

(k) Includes costs associated with the transition of our former CEO, such as severance, executive recruiting costs and stock-based compensation costs.

(l) On March 8, 2024, we made the decision to eliminate and restructure certain positions in the organization, which resulted in costs of approximately $0.6 million.

On April 13, 2023 we made the decision to eliminate and restructure certain positions in the organization, which resulted in costs of approximately $1.1 million.

(m) Pre-opening costs are a component of general and administrative expenses, and consist of costs directly associated with the opening of new restaurants and incurred prior to opening, including management labor costs, staff labor costs during training, food and supplies used during training, marketing costs, and other related pre-opening costs.

These are generally incurred over the three to five months prior to opening.

6 unchanged sentences

Our restaurants do not require significant inventories or receivables.

We believe that these sources of liquidity and capital are sufficient to finance our

continued operations, including planned capital expenditures, for at least the next 12 months and beyond from the issuance of the consolidated financial statements.

We believe that these sources of liquidity and capital are sufficient to finance our continued operations, including planned capital expenditures, for at least the next 12 months and beyond from the issuance of the consolidated financial statements.

However, depending on macroeconomic conditions, our financial performance and liquidity could be further impacted and could impact our ability to meet certain financial covenants required in our 2022 Credit Agreement (as defined in Note 7 “Long-Term Debt”) , specifically the lease-adjusted coverage ratio and fixed-charge coverage ratio.

1 unchanged sentence

(Amounts in thousands)

Net cash (used in) provided by

Net cash provided by (used in)

Operating activities

1 unchanged sentence

Financing activities

Net (decrease) increase in cash

Net decrease in cash

Operating Activities

1 unchanged sentence

This increase was due primarily to an increase in profitability and favorable working capital fluctuations during fiscal 2024.

In fiscal 2022, net cash provided by operating activities decreased by $13.6 million compared to fiscal 2021.

This decrease was due primarily to lower profitability and unfavorable working capital fluctuations during fiscal 2022.

In fiscal 2023, net cash provided by operating activities increased by $2.1 million compared to fiscal 2022.

This increase was due primarily to an increase in profitability and favorable working capital fluctuations during fiscal 2023.

Investing Activities

In fiscal 2023, net cash used in investing activities decreased by $5.5 million compared to fiscal 2022.

This decrease was due primarily to cash proceeds of $7.7 million received during fiscal 2023 related to the sale of nine company-operated restaurants within Texas to an existing franchisee, eight company-operated restaurants within California to existing franchisees and one company-operated restaurant in Utah to another existing franchisee.

In fiscal 2024, net cash used in investing activities increased by $5.5 million compared to fiscal 2023.

This increase was due primarily to opening four new company-operated restaurants during fiscal 2022 compared to opening two new company-operated restaurants during fiscal 2021.

This was partially offset by cash proceeds of $1.0 million received during fiscal 2022 related to the sale of three restaurants within the Orange County area to an existing franchisee compared to cash proceeds of $4.6 million received during fiscal 2021 related to the sale of eight restaurants within the Sacramento area to an existing franchisee.

This change was primarily due to the cash proceeds of $7.7 million received during the year ended December 27, 2023 related to the sale of 18 company-operated restaurants to existing franchisees .

In fisc al 2023, net cash used in investing activities decreased by $5.5 milli on compared to fiscal 2022.

This decrease was primarily due to cash proceeds of $7.7 million received during fiscal 2023 related to the sale of 18 company-operated restaurants to existing franchisees .

Financing Activities

In fiscal 2023, net cash used in financing activities increased by $11.3 million compared to fiscal 2022.

The increase was due primarily to repurchases of common stock of $59.2 million during fiscal 2023.

This increase was partially offset by $18.0 million in net borrowings on the 2022 Revolver during fiscal 2023 compared to the net pay downs of $26.0 million on the 2022 Revolver during fiscal 2022.

In fiscal 2024, net cash used in financing activities decreased by $7.8 million compared to fiscal 2023.

The decrease was primarily due to repurchases of shares of our common stock of $20.6 million during the year ended December 25, 2024 compared to repurchases of shares of our common stock of $59.2 million during the year ended December 27, 2023.

The change was offset by an $13.0 million in net pay downs on the 2022 Revolver during the year ended December 25, 2024 compared to an $18.0 million in net borrowings during the year ended December 27, 2023.

In fiscal 2023, net cash used in financing activities increased by $11.3 million compared to fiscal 2022.

This change was due primarily to a special dividend payout of $56.0 million during fiscal 2022 partially offset by net borrowings on the 2022 Revolver of $26.0 million, compared to net pay downs of $22.8 million in fiscal 2021.

Additionally, this change was due to a $1.7 million cash inflow related to option exercises during the year ended December 28, 2022, compared to a $0.9 million cash inflow during the year ended December 29, 2021.

This change was due primarily to repurchases of common stock of $59.2 million during fiscal 2023.

This increase was partially offset by $18.0 million in net borrowings of the 2022 Revolver during fiscal 2023 compared to the net pay downs of $26.0 million on the 2022 Revolver during fiscal 2022.

Debt and Other Obligations

The Company, as a guarantor, is a party to a credit agreement (the “2022 Credit Agreement”) among EPL, as borrower, Intermediate, as a guarantor, Bank of America, N.A., as administrative agent, swingline lender, and letter of credit issuer, the lenders party thereto, and the other parties thereto, which provides for a $150.0 million five-year senior secured revolving credit facility (the “2022 Revolver”).

We, as a guarantor, are a party to a credit agreement (the “2022 Credit Agreement”) among our wholly-owned subsidiary, El Pollo Loco, Inc.

(“EPL”), as borrower, and our direct subsidiary.

EPL Intermediate, Inc.

(“Intermediate”), as a guarantor, Bank of America, N.A., as administrative agent, swingline lender, and letter of credit issuer, the lenders party thereto, and the other parties thereto, which provides for a $150.0 million five-year senior secured revolving credit facility (the “2022 Revolver”).

The 2022 Revolver, which is available pursuant to the 2022 Credit Agreement, includes a sub limit of $15.0 million for letters of credit and a sub limit of $15.0 million for swingline loans.

The 2022 Revolver and 2022 Credit Agreement will mature on July 27, 2027.

The obligations under the 2022 Credit Agreement and related loan documents are guaranteed by Holdings and Intermediate.

The obligations of Holdings, EPL and Intermediate under the 2022 Credit Agreement and related loan documents are secured by a first priority lien on substantially all of their respective assets.

The special dividend announced by the Company’s Board of Directors on October 11, 2022 was permitted under the terms of 2022 Revolver pursuant to both subclause (iii)(d) and (iii)(e) of the following sentence.

Under the 2022 Revolver, Holdings is restricted from making certain payments such as cash dividends, except that it may, inter alia, (i) pay up to $1.0 million per year to repurchase or redeem qualified equity interests of Holdings held by our past or present officers, directors, or employees (or their estates) upon death, disability, or termination of employment, (ii) pay under its TRA, and (iii) so long as no default or event of default has occurred and is continuing, (a) make non-cash repurchases of equity interests in connection with the exercise of stock options by directors, officers and management, provided that those equity interests represent a portion of the consideration of the exercise price of those stock options, (b) pay up to $0.5 million in any 12 month consecutive period to redeem, repurchase or otherwise acquire equity interests of any subsidiary that is not a wholly-owned subsidiary from any holder of equity interest in such subsidiary, (c) pay up to $2.5 million per year pursuant to stock option plans, employment agreements, or incentive plans, (d) make up to $5.0 million in other restricted payments per year, and (e) make other restricted payments, subject to its compliance, on a pro forma basis, with (x) a lease-adjusted consolidated leverage ratio not to exceed 4.25 times and (y) the financial covenants applicable to the 2022 Revolver.

The obligations under the 2022 Credit Agreement and related

loan documents are guaranteed by us.

The obligations of our company, EPL and Intermediate under the 2022 Credit Agreement and related loan documents are secured by a first priority lien on substantially all of their respective assets.

Under the 2022 Revolver, we are restricted from making certain payments such as cash dividends or share repurchases, except that we may, inter alia, (i) pay up to $1.0 million per year to repurchase or redeem our qualified equity interests held by our past or present officers, directors, or employees (or their estates) upon death, disability, or termination of employment, (ii) pay under the TRA, and (iii) so long as no default or event of default has occurred and is continuing, (a) make non-cash repurchases of equity interests in connection with the exercise of stock options by directors, officers and management, provided that those equity interests represent a portion of the consideration of the exercise price of those stock options, (b) pay up to $0.5 million in any 12-month consecutive period to redeem, repurchase or otherwise acquire equity interests of any subsidiary that is not a wholly-owned subsidiary from any holder of equity interest in such subsidiary, (c) pay up to $2.5 million per year pursuant to stock option plans, employment agreements, or incentive plans, (d) make up to $5.0 million in other restricted payments per year, and (e) make other restricted payments, subject to our compliance, on a pro forma basis, with (x) a lease-adjusted consolidated leverage ratio not to exceed 4.25 times and (y) the financial covenants applicable to the 2022 Revolver.

Borrowings under the 2022 Credit Agreement (other than any swingline loans) bear interest, at the borrower’s option, at rates based upon either the secured overnight financing rate (“SOFR”) or a base rate, plus, for each rate, a margin determined in accordance with a lease-adjusted consolidated leverage ratio-based pricing grid.

3 unchanged sentences

For borrowings under the 2022 Revolver during fiscal 2024, the interest rate range was 5.7% to 7.0%.

For borrowings under the 2022 Revolver and 2018 Revolver during fiscal 2022, the interest rate range was 1.4% to 6.0%.

For borrowings under the 2022 Revolver during fiscal 2023, the interest rate range was 5.7% to 7.0%.

The interest rate under the 2022 Revolver was 5.7% at December 25, 2024 and 7.0% under the 2022 Revolver at December 27, 2023.

3 unchanged sentences

The amount available under the revolving line of credit was $68.7 million at December 25, 2024.

During the year ended December 28, 2022, we refinanced and terminated our credit agreement (the “2018 Credit Agreement”) among EPL, as borrower, the Company and Intermediate, as guarantors, Bank of America, N.A., as administrative agent, swingline lender, and letter of credit issuer, the lenders party thereto, and the other parties thereto, which provided for a $150.0 million five-year senior secured revolving credit facility (the “2018 Revolver”) and entered into the 2022 Credit Agreement.

See Note 7, “Long-Term Debt” in the accompanying “Notes to Consolidated Financial Statements” in this Annual Report for additional information.

3 unchanged sentences

The remaining $14.8 million of capital expenditures during 2024 were related to investments in existing restaurants, including new equipment and hardware, technology to optimize efficiencies, remodeling and similar improvements.

In 2024, we expect to incur between $25.0 million and $28.0 million in total capital expenditures, of which we expect $4.0 million to $6.0 million will be related to our construction of new restaurants, and $19.0 million to $21.0 million will be related to investments in existing restaurants, including new

equipment and hardware, technology to optimize efficiencies, remodeling and similar improvements.

Finally, we expect a portion of our incurred capital expenditures in 2024 to be for additional corporate initiatives, including investments in technology for support centers to boost innovation, enhancing the customer experience, and improving operations.

In 2025, we expect to incur between $30.0 million and $34.0 million in total capital expenditures, of which we expect $3.0 million to $5.0 million will be related to our construction of new restaurants, and $27.0 million to $29.0 million will be related to investments in existing restaurants, including new equipment and hardware, technology to optimize efficiencies, remodeling and similar improvements.

Finally, we expect a portion of our incurred capital expenditures in 2025 to be for additional corporate initiatives, including investments in

technology for support centers to boost innovation, enhancing the customer experience, and improving operations.

We expect to fund these capital expenditures primarily with operating cash flows.

5 unchanged sentences

Long-term debt (2)

Income tax receivable agreement (3)

Purchasing commitments—chicken (3)

4 unchanged sentences

Refer to Note 7 “Long-Term Debt” in the accompanying “Notes to Consolidated Financial Statements” in this Annual Report for further details regarding our obligations and the timing of expected payments.

(3) Income Tax Receivable Agreement — Represents payments to our pre-IPO stockholders under the TRA.

Refer to Note 9 “Income Taxes” in the accompanying “Notes to Consolidated Financial Statements” in this Annual Report for further details regarding our obligations and the timing of expected payments.

(3) Purchasing Commitments (Chicken) — Reflects contractual purchase commitments for goods related to restaurant operations.

Refer to Note 14 “Commitments and Contingencies” in the accompanying “Notes to Consolidated Financial Statements” in this Annual Report for further details regarding our obligations.

Share Repurchase Programs

On October 11, 2022, our Board of Directors approved the 2022 Stock Repurchase Plan under which we were authorized to repurchase up to $20.0 million of shares of our common stock through March 28, 2024.

Under the 2022 Stock Repurchase Plan, we were permitted to repurchase our common stock from time to time, in amounts and at prices that we deemed appropriate, subject to market conditions and other considerations.

Pursuant to the 2022 Stock Repurchase Plan, we were authorized to repurchase shares of our common stock using open market purchases, including pursuant to Rule 10b5-1 trading plans, and/or through privately negotiated transactions.

As of September 27, 2023, the program was completed.

Further, on October 31, 2023, our Board of Directors approved another share repurchase program under which we are authorized to repurchase up to $20.0 million of shares of our common stock.

The repurchase program will terminate on March 31, 2025, may be modified, suspended or discontinued at any time, and does not obligate us to acquire any particular number of shares.

Repurchase Agreements

On August 7, 2023, we entered into a Stock Repurchase Agreement with FS Equity Partners V, L.P.

and FS Affiliates V, L.P.

(together, the “Sellers”), pursuant to which we agreed to purchase an aggregate of 2,500,000 shares of our common stock from the Sellers at a price of $10.63 per share for a total purchase price of $26.6 million.

Share Repurchases

Share Repurchase Program

On November 2, 2023, we announced that the Board approved a share repurchase program (“Share Repurchase Program”) under which we are authorized to repurchase up to $20,000,000 of shares of our common stock.

Under the Share Repurchase Program, we are permitted to repurchase our common stock from time to time, in amounts and at prices that we deemed appropriate, subject to market conditions and other considerations.

Pursuant to the Share Repurchase Program, we are authorized to effect repurchases using open market purchases, including pursuant to Rule 10b5-1 trading plans, and/or through privately negotiated transactions.

The repurchase program does not obligate us to acquire any particular number of shares.

The repurchase program will terminate on March 31, 2025.

Further on December 4, 2023, we repurchased 1.5 million shares of our common stock for a total purchase price of $12.6 million under the Stock Repurchase Agreement with the Sellers.

Following completion of this repurchase, approximately $7.4 million of our common stock remained available for repurchase under the share repurchase program at December 27, 2023.

For the year ended December 25, 2024, we repurchased 535,628 shares of common stock under the Share Repurchase Program, using open market purchases, for total consideration of approximately $5.6 million.

Following completion of these repurchases, approximately $1.8 million of our common stock remained available for repurchase under the Share Repurchase Program at December 25, 2024.

Other Share Repurchases

On August 7, 2023, we entered into a Stock Repurchase Agreement with the Sellers, as amended on August 4, 2024, pursuant to which we agreed to purchase an aggregate of 2,500,000 shares of our common stock from the Sellers at a

price of $10.63 per share for a total purchase price of $26.6 million.

The repurchase was completed in August 2023.

2 unchanged sentences

In addition, John Roth, a director of the Company until his resignation on August 16, 2023, is a general partner of Freeman Spogli and its chief executive officer.

Further, on November 29, 2023, we entered into a second Stock Repurchase Agreement with the Sellers (the “Repurchase Agreement”), pursuant to which we agreed to purchase an aggregate of 1,500,000 shares of our common stock from the Sellers at a price of $8.40 per share, representing the closing price of such shares as listed on Nasdaq on November 29, 2023, for a total purchase price of $12,600,000.

The repurchase was completed on December 4, 2023.

Following completion of this repurchase, approximately $7.4 million of our common stock remained available for repurchase under the share repurchase program at December 27, 2023.

Further, on May 23, 2024, we entered into a new Stock Repurchase Agreement with the Sellers, pursuant to which we agreed to purchase an aggregate of 1,534,303 shares of our common stock from the Sellers at a price of $9.785 per share for a total purchase price of $15.0 million.

The repurchase was completed in May 2024.

Critical Accounting Policies and Estimates

22 unchanged sentences

These assumptions used in our estimates of fair value are generally consistent with past performance and are also consistent with the projections and assumptions that we use in our forward-looking operating plans.

These assumptions

are subject to change as a result of changing economic and competitive conditions.

These assumptions are subject to change as a result of changing economic and competitive conditions.

Changes in these estimates and assumptions could materially affect our determinations of fair value and impairment.

1 unchanged sentence

The amount of goodwill included in the cost basis of the asset sold is determined based on the relative fair value of the portion of the reporting unit disposed of compared to the fair value of the reporting unit retained.

The fair value of the portion of the reporting unit disposed of in a refranchising is determined by reference to the discounted value of the future cash flows expected to be generated by the restaurant and retained by the franchisee, which includes a deduction for the anticipated, future royalties the franchisee will pay us associated with the franchise agreement entered into simultaneously with the refranchising transition.

The fair value of the portion of the

reporting unit disposed of in a refranchising is determined by reference to the discounted value of the future cash flows expected to be generated by the restaurant and retained by the franchisee, which includes a deduction for the anticipated, future royalties the franchisee will pay us associated with the franchise agreement entered into simultaneously with the refranchising transition.

The fair value of the reporting unit retained is based on the price a willing buyer would pay for the reporting unit and includes the value of franchise agreements.

As such, the fair value of the reporting unit retained can include expected cash flows from future royalties from those restaurants currently being refranchised, future royalties from existing franchise businesses and company restaurant operations.

We determined that, in connection with the sale of 18 units, there were indicators of potential impairment of our goodwill and indefinite-lived intangible assets during fiscal 2023.

After completing the impairment analysis, we did not record any decrement to goodwill related to the disposition of restaurants in fiscal 2023, 2022 and 2021.

During fiscal 2024, we determined that there were no indicators of potential impairment of our goodwill and indefinite-lived intangible assets.

Accordingly, we did not record any impairment to our goodwill or indefinite-lived intangible assets in fiscal 2024.

During fiscal 2023, we determined that, in connection with the sale of 18 units, there were indicators of potential impairment of our goodwill and indefinite-lived intangible assets.

After completing the impairment analysis, we did not record any decrement to goodwill related to the disposition of restaurants in fiscal 2023.

During fiscal 2022, we determined that there were no indicators of potential impairment of our goodwill and indefinite-lived intangible assets.

Accordingly, we did not record any impairment to our goodwill or indefinite-lived intangible assets in fiscal 2022.

Property and Equipment and ROU Assets

20 unchanged sentences

We make significant assumptions and judgments related to determination of whether a contract contains a lease and the discount rate used for the lease.

In determining if any of our contracts contain a lease, we make assumptions and judgments related to our ability to direct the use of any assets stated in the contract and the likelihood of renewing any

short-term contracts for a period extending past twelve months.

We also make significant assumptions and judgments in determining an appropriate discount rate for property leases.

These include using a consistent discount rate for a portfolio of leases entered into at varying dates, using the full 20-year term of the lease, excluding any options, and using the total minimum lease payments.

These include using a consistent discount rate for a

portfolio of leases entered into at varying dates, using the full 20-year term of the lease, excluding any options, and using the total minimum lease payments.

We utilize a third-party valuation firm to assist in determining the discount rate, based on the above assumptions.

28 unchanged sentences

However, we anticipate that any such adjustments would not materially impact our financial statements.

In addition, in fiscal 2014, we applied for various tax credits that resulted in $6.7 million of additional deferred tax assets and tax benefits.

As of December 27, 2023, we released the corresponding valuation allowance since the ten-year carryover period for the California Enterprise Zone credit has expired at the end of fiscal 2023.

In fiscal 2023, the Company did not record any additional valuation allowance.

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 7. Management’s Discussion and Analysis