Item 2. Management’s Discussion and Analysis
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Cautionary Statement Concerning Forward-Looking Statements
This report contains forward-looking statements that are subject to risks and uncertainties. All statements other than statements of historical fact included in this report are forward-looking statements. Forward-looking statements discuss our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business. You can identify forward-looking statements because they do not relate strictly to historical or current facts. These statements may include words such as “aim,” “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “outlook,” “potential,” “project,” “projection,” “plan,” “intend,” “seek,” “may,” “could,” “would,” “will,” “should,” “can,” “can have,” “likely,” the negatives thereof and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events. They appear in a number of places throughout this report and include statements regarding our intentions, beliefs or current expectations concerning, among other things, our results of operations, financial condition, liquidity, prospects, growth, trends, strategies and the industry in which we operate. All forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those that we expected.
While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and it is impossible for us to anticipate all factors that could affect our actual results. All forward-looking statements are expressly qualified in their entirety by these cautionary statements. You should evaluate all forward-looking statements made in this report in the context of the factors that could cause outcomes to differ materially from our expectations. These factors include, but are not limited to:
● our ability to open new restaurants in new and existing markets, including difficulty in finding sites and in negotiating acceptable leases;
● our ability to compete successfully with other quick-service and fast casual restaurants;
● global economic or other business conditions that may affect the desire or ability of our customers to purchase our products such as inflationary pressures, high unemployment levels, increases in gas prices, and declines in median income growth, consumer confidence and consumer discretionary spending, among other conditions;
● our ability to attract, develop, assimilate and retain employees;
● our vulnerability to changes in political and economic conditions and consumer preferences;
● our vulnerability to conditions in the greater Los Angeles area and to natural disasters given the geographic concentration and real estate intensive nature of our business;
● the possibility that we may continue to incur significant impairment of certain of our assets, in particular in our new markets;
● changes in food and supply costs, especially for chicken, labor, construction and utilities;
● the impacts of the uncertainty regarding pandemics, epidemics or infectious disease outbreaks (such as the COVID-19 pandemic) on our company, our employees, our customers, our partners, our industry and the economy as a whole, as well as our franchisees’ ability to operate their individual restaurants without disruption;
● social media and negative publicity, whether or not valid, and our ability to respond to and effectively manage the accelerated impact of social media;
● our ability to continue to expand our digital business, delivery orders and catering;
● concerns about food safety and quality and about food-borne illness;
● dependence on frequent and timely deliveries of food and supplies;
● our ability to service our level of indebtedness;
● uncertainty related to the success of our marketing programs, new menu items, advertising campaigns and restaurant designs and remodels;
● changes in trade policies, tariff and import regulations by the United States and other countries from which we source some of our produce, packaging, and other items;
● our limited control over our franchisees and potential deterioration of our relations with existing or potential franchisees;
● potential exposure to unexpected costs and losses from our self-insurance programs;
● potential obligations under long-term and non-cancelable leases, and our ability to renew leases at the end of their terms;
● our ability to achieve our social and environmental sustainability goals;
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● the impact of any failure of our information technology system or any breach of our network security;
● the impact of any security breaches on our ability to protect our customers’ payment method data or personal information;
● our ability to enforce and maintain our trademarks and protect our other proprietary intellectual property;
● adverse changes in the economic environment, including inflation and increased labor and supply costs, which may affect our franchisees, with adverse consequences to us;
● the impact of federal, state and local labors laws governing our relationships with our employees, including minimum wage laws, minimum standards for fast food workers or other similar laws;
● risks related to government regulation and litigation, including employment and labor laws;
● the impact of any liabilities arising from environmental laws;
● fluctuations in our quarterly operating results due to seasonality and other factors;
● any future offerings of debt or equity securities that may impact the market price of our common stock;
● the possibility that Delaware law, our organizational documents, and our existing and future debt agreements may impede or discourage a takeover;
● the impact of shareholder activism on our expenses, business and stock price; and
● other risks set forth in our filings with the SEC from time to time, including under Item 1A, Risk Factors in our Annual Report on Form 10-K for the year ended December 25, 2024, which filings are available online at www.sec.gov .
We caution you that the important factors referenced above may not contain all of the factors that are important to you. In addition, we cannot assure you that we will realize the results or developments we expect or anticipate or, even if substantially realized, that they will result in the consequences we anticipate or affect us or our operations in the ways that we expect. The forward-looking statements included in this report are made only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as required by law. If we do update one or more forward-looking statements, no inference should be made that we will make additional updates with respect to those or other forward-looking statements. We qualify all of our forward-looking statements by these cautionary statements.
Overview
El Pollo Loco is a differentiated and growing restaurant concept that specializes in fire-grilling citrus-marinated chicken and operates in the limited service restaurant (“LSR”) segment. We strive to make and serve food that is both high quality and flavorful. Our distinctive menu features our signature product, citrus-marinated fire-grilled chicken, served in a variety of Mexican-inspired entrees, such as burritos and tostadas, healthier options, such as salads, and chicken meals, all available in a variety of sizes to feed individuals and larger groups. Our entrees include favorites such as our Guacamole Chicken Burrito, Double Chicken Tostada, Crunchy Chicken Taco, and the Original Pollo Bowl®. Our famous Creamy Cilantro dressing and salsas are prepared fresh daily, allowing our customers to create their favorite flavor profiles to enhance their culinary experience. Our distinctive menu of quality, flavorful food that is affordable 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. In 2025, El Pollo Loco launched a brand refresh, inclusive of a new advertising campaign, restaurant design, new products, and an emphasis on hospitality in our restaurants. All these elements reinforce our position in the market of “Quality Chicken, Fast & Easy.”
Market Trends and Uncertainties
On September 28, 2023, Governor Newsom signed AB 1228 into law in California, which repealed and replaced the Fast Food Accountability and Standards Recovery Act (“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 experienced an increase in our labor and regulatory compliance costs in fiscal 2024 and the first half of 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 for the remainder of 2025, and we may not be able to offset cost increases in the future.
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Additionally, we are impacted by macroeconomic challenges, such as inflationary pressures and changes in trade policies, that have in the past affected, and may continue in the future, to 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 into the remainder of fiscal 2025 and we may not be able to offset cost increases in the future.
There is ongoing uncertainty regarding increased tariff duties on goods imported into the United States, which if imposed, may have an adverse effect on our Company. Certain of the produce, packaging materials, and other items procured by our Company are sourced from outside the United States, including from Canada, Mexico and Asia. Current and proposed tariff rates range widely, depending on the country of origin. Certain goods from Canada and Mexico that are compliant with the United States-Mexico-Canada Agreement (USMCA) are, and may continue to be, exempt from new tariffs. While we continue to evaluate the potential impacts of increased tariff rates, as well as our ability to mitigate any such related impacts, we anticipate that the imposition of tariffs on goods we import into the United States will adversely impact our revenue and cost of goods sold in the United States. Any new or increased import duties, tariffs, or taxes, or other changes in U.S. trade or tax policy could result in further increases to our food and supplies costs that would adversely impact our financial results.
Seasonality
Seasonal factors, including weather and the timing of holidays cause our revenue to fluctuate from quarter to quarter. 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. As a result of seasonality, our quarterly and annual results of operations and key performance indicators, such as company-operated restaurant revenue and comparable restaurant sales, may fluctuate.
Growth Strategies and Outlook
As of June 25, 2025, we had 499 locations in seven states. In fiscal 2024, we opened two new company-operated restaurants in Nevada, and our franchisees opened two new restaurants, one in California and one in Texas. Additionally, we completed the sale of one restaurant within California to existing franchisees during fiscal 2024. For the twenty-six weeks ended June 25, 2025, our franchisees opened one new restaurant in Arizona and two new restaurants in California, and they closed two restaurants in California. Additionally, during the twenty-six weeks ended June 25, 2025, we completed the acquisition of one restaurant in California from an existing franchisee. We plan to continue to expand our business, drive restaurant sales growth, and enhance our competitive positioning, by executing the following five key strategies:
● Brand That Wins;
● Hospitality Mindset;
● Digital First;
● Winning Unit Economics; and
● Drive Unit Growth Again with National Expansion.
To increase comparable restaurant sales, we plan to increase customer frequency, attract new customers, and improve per-person spend. The success of these growth plans is not guaranteed.
Highlights and Trends
Revenue Overview
For the thirteen and twenty-six weeks ended June 25, 2025, our total revenue was $125.8 million and $245.0 million, respectively. For the thirteen weeks ended June 25, 2025, our company-operated restaurant revenue was $104.3 million
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and $202.7 million, respectively, and our franchise and franchise advertising fee revenue was $21.5 million and $42.3 million, respectively.
Comparable Restaurant Sales
For the thirteen and twenty-six weeks ended June 25, 2025, system-wide comparable restaurant sales decreased by 0.3% and 0.4%, respectively, from the comparable period in the prior year. For company-operated restaurants, comparable restaurant sales for the thirteen and twenty-six weeks ended June 25, 2025 increased by 1.2% and 0.9%, respectively. For company-operated restaurants, the quarter’s change in comparable restaurant sales consisted of a 1.5% increase in average check size, partially offset by a 0.3% decrease in transactions, and the year-to-date change in comparable restaurant sales consisted of a 3.0% increase in average check size, partially offset by a 2.0% decrease in transactions . For franchised restaurants, comparable restaurant sales decreased by 1.1% and 1.2% for the thirteen and twenty-six weeks ended June 25, 2025, respectively. Refer to “Comparable Restaurant Sales” definition in the section titled “Key Performance Indicators” below.
Restaurant Development
Our restaurant counts at the beginning and end of each of the last three fiscal years and the twenty-six weeks ended June 25, 2025, were as follows:
Twenty-Six Weeks Ended
Fiscal Year Ended
June 25, 2025
2024
2023
2022
Company-operated restaurant activity (1) :
Beginning of period
173
172
188
189
Openings
—
2
2
4
Restaurant sale to Company
1
—
—
—
Restaurant sale to franchisee
—
(1)
(18)
(3)
Closures
—
—
—
(2)
Restaurants at end of period
174
173
172
188
Franchised restaurant activity:
Beginning of period
325
323
302
291
Openings
3
2
3
9
Restaurant sale to Company
(1)
—
—
—
Restaurant sale to franchisee
—
1
18
3
Closures
(2)
(1)
—
(1)
Restaurants at end of period
325
325
323
302
System-wide restaurant activity:
Beginning of period
498
495
490
480
Openings
3
4
5
13
Closures
(2)
(1)
—
(3)
Restaurants at end of period
499
498
495
490
(1) Our restaurant count above includes 499 domestic restaurants and excludes the eight licensed restaurants in the Philippines, as well as the two previously licensed restaurants in the Philippines that were closed during the twenty-six weeks ended June 25, 2025.
Restaurant Remodeling
During the twenty-six weeks ended June 25, 2025, we completed a total of 20 company-operated restaurant and franchise remodels. Considering our efforts to finalize our new prototype design, we currently expect to complete 55-65 company-operated restaurant and franchise remodels for the remainder of fiscal 2025. The cost of our restaurant remodels varies depending on the scope of the work required, but on average the investment is approximately $0.4 million per restaurant.
Loco Rewards
Our Loco Rewards loyalty program offers rewards that incentivize customers to visit our restaurants more often each month. Customers earn points for each dollar spent, and points can be redeemed for multiple redemption options. If
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a customer does not earn or use points within a one-year period, their account is deactivated and all points expire. When a customer is part of the rewards program, the obligation to provide future discounts related to points earned is considered a separate performance obligation, to which a portion of the transaction price is allocated. The performance obligation related to loyalty points is deemed to have been satisfied, and the amount deferred in the balance sheet is recognized as revenue, when the points are transferred to a reward and redeemed, the reward or points have expired, or the likelihood of redemption is remote. A portion of the transaction price is allocated to loyalty points on a pro-rata basis, based on stand-alone selling price, as determined by menu pricing and loyalty point’s terms.
In addition, customers can earn additional points and free entrées for a variety of engagement activities. 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 June 25, 2025 and December 25, 2024, the revenue allocated to loyalty points that had not been redeemed was $1.0 million and $0.8 million, respectively, which is reflected in our accompanying condensed consolidated balance sheets within other accrued expenses and current liabilities. We had over 4.5 million loyalty program members as of June 25, 2025.
Critical Accounting Policies and Use of Estimates
The preparation of our condensed consolidated financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”) requires us to make estimates and judgments that affect our reported amounts of assets, liabilities, revenue, and expenses, and related disclosures of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under current circumstances in making judgments about the carrying value of assets and liabilities that are not readily available from other sources. We evaluate our estimates on an on-going basis. Actual results may differ from these estimates under different assumptions or conditions.
Accounting policies are an integral part of our condensed consolidated financial statements. A thorough understanding of these accounting policies is essential when reviewing our reported results of operations and our financial position. Management believes that our critical accounting policies and estimates involve the most difficult management judgments, due to the sensitivity of the methods and assumptions used. For a summary of our critical accounting policies and a discussion of our use of estimates, see “Critical Accounting Policies and Estimates” in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 25, 2024.
There have been no material changes to our critical accounting policies or uses of estimates since our Annual Report on Form 10-K for the year ended December 25, 2024.
Key Financial Definitions
Revenue
Our revenue is derived from three primary sources: 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 11, “Revenue from Contracts with Customers” in the Notes to Condensed Consolidated Financial Statements above for further details regarding our revenue recognition policy.
Food and Paper Costs
Food and paper costs include the direct costs associated with food, beverage and packaging of our menu items. 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.
Labor and Related Expenses
Labor and related expenses include wages, payroll taxes, workers’ compensation expense, benefits, and bonuses paid to our restaurant management teams. 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
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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, delivery service provide fees, restaurant supplies, repairs and maintenance, and other restaurant operating costs.
General and Administrative Expenses
General and administrative expenses are comprised of expenses associated with corporate and administrative functions that support the development and operations of our restaurants, including compensation and benefits, travel expenses, stock compensation costs, legal and professional fees, and other related corporate costs. Also included are pre-opening costs, and expenses above the restaurant level, including salaries for field management, such as area and regional managers, and franchise field operational support.
Franchise 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 consists of the depreciation of property and equipment, including leasehold improvements and equipment.
Loss on Disposal of Assets
Loss on disposal of assets includes the loss on disposal of assets related to retirements and replacement or write-off of leasehold improvements or equipment.
Impairment and Closed-Store Reserves
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 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 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. If these assumptions change in the future, we may be required to record impairment charges for these assets and these charges could be material.
When we close a restaurant, we will evaluate the right of use (“ROU”) asset for impairment, based on anticipated sublease recoveries. 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.
Interest Expense, Net
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.
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Provision for Income Taxes
Provision for income taxes consists of federal and state taxes on our income.
Comparison of Results of Operations
Our operating results for the thirteen and twenty-six weeks ended June 25, 2025 and June 26, 2024 are expressed as percentages of total revenue, with the exception of cost of operations and company restaurant expenses, which are expressed as percentages of company-operated restaurant revenue, and are compared in the tables below.
Thirteen Weeks Ended
June 25, 2025
June 26, 2024
Increase / (Decrease)
($,000)
(%)
($,000)
(%)
($,000)
(%)
Statements of Income Data
Company-operated restaurant revenue
$
104,318
82.9
$
102,307
83.7
$
2,011
2.0
Franchise revenue
13,372
10.6
11,651
9.5
1,721
14.8
Franchise advertising fee revenue
8,144
6.5
8,218
6.8
(74)
(0.9)
Total revenue
125,834
100.0
122,176
100.0
3,658
3.0
Cost of operations (1)
Food and paper costs
25,496
24.5
25,731
25.2
(235)
(0.9)
Labor and related expenses
32,155
30.8
32,868
32.1
(713)
(2.2)
Occupancy and other operating expenses
26,741
25.6
24,656
24.1
2,085
8.5
Company restaurant expenses (1)
84,392
80.9
83,255
81.4
1,137
1.4
General and administrative expenses
13,532
10.8
11,787
9.6
1,745
14.8
Franchise expenses
12,627
10.0
10,871
8.9
1,756
16.2
Depreciation and amortization
3,929
3.1
3,870
3.2
59
1.5
Loss on disposal of assets
43
0.0
63
0.1
(20)
(31.7)
Loss on disposition of restaurants
—
—
7
0.0
(7)
(100.0)
Impairment and closed-store reserves
6
0.0
5
0.0
1
20.0
Total expenses
114,529
91.0
109,858
89.9
4,671
4.3
Income from operations
11,305
9.0
12,318
10.1
(1,013)
(8.2)
Interest expense, net of interest income
1,207
1.0
1,527
1.2
(320)
(21.0)
Income before provision for income taxes
10,098
8.0
10,791
8.9
(693)
(6.4)
Provision for income taxes
2,991
2.4
3,158
2.6
(167)
(5.3)
Net income
$
7,107
5.6
$
7,633
6.3
$
(526)
(6.9)
(1) Percentages for line items relating to cost of operations and company restaurant expenses are calculated with company-operated restaurant revenue as the denominator. All other percentages use total revenue.
Twenty-Six Weeks Ended
June 25, 2025
June 26, 2024
Increase / (Decrease)
($,000)
(%)
($,000)
(%)
($,000)
(%)
Statements of Income Data
Company-operated restaurant revenue
$
202,683
82.7
$
199,460
83.7
$
3,223
1.6
Franchise revenue
26,555
10.8
22,999
9.7
3,556
15.5
Franchise advertising fee revenue
15,773
6.5
15,870
6.6
(97)
(0.6)
Total revenue
245,011
100.0
238,329
100.0
6,682
2.8
Cost of operations (1)
Food and paper costs
50,235
24.8
51,350
25.7
(1,115)
(2.2)
Labor and related expenses
64,334
31.7
63,448
31.8
886
1.4
Occupancy and other operating expenses
52,414
25.9
48,521
24.3
3,893
8.0
Company restaurant expenses (1)
166,983
82.4
163,319
81.8
3,664
2.2
General and administrative expenses
24,795
10.1
23,712
9.9
1,083
4.6
Franchise expenses
25,069
10.2
21,473
9.0
3,596
16.7
Depreciation and amortization
7,816
3.2
7,721
3.2
95
1.2
Loss on disposal of assets
54
0.0
104
0.0
(50)
(48.1)
Gain on recovery of insurance proceeds, net
—
—
(41)
(0.0)
41
(100.0)
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Loss on disposition of restaurants
—
—
7
0.0
(7)
(100.0)
Impairment and closed-store reserves
17
0.0
37
0.0
(20)
(54.1)
Total expenses
224,734
91.7
216,332
90.8
8,402
3.9
Income from operations
20,277
8.3
21,997
9.2
(1,720)
(7.8)
Interest expense, net of interest income
2,383
1.0
3,091
1.3
(708)
(22.9)
Income before provision for income taxes
17,894
7.3
18,906
7.9
(1,012)
(5.4)
Provision for income taxes
5,306
2.2
5,361
2.2
(55)
(1.0)
Net income
$
12,588
5.1
$
13,545
5.7
$
(957)
(7.1)
(1) Percentages for line items relating to cost of operations and company restaurant expenses are calculated with company-operated restaurant revenue as the denominator. All other percentages use total revenue.
Company-Operated Restaurant Revenue
For the quarter ended June 25, 2025, company-operated restaurant revenue increased $2.0 million, or 2.0%, from the comparable period in the prior year. The increase in company-operated restaurant revenue was mainly due to an increase in company-operated comparable restaurant revenue of $1.2 million, or 1.2%, as well as $0.9 million of additional sales from the opening of two restaurants during or after the second quarter of 2024. The company-operated comparable restaurant sales increase consisted of a 1.5% increase in average check size due to increases in menu prices, partially offset by a 0.3% decrease in transactions.
Year-to-date, company-operated restaurant revenue increased $3.2 million, or 1.6%, from the comparable period in the prior year. The increase in company-operated restaurant revenue was mainly due to an increase in company-operated comparable restaurant revenue of $1.8 million, or 0.9%, as well as $1.8 million of additional sales from the opening of two restaurants during or after the first quarter of 2024. The company-operated comparable restaurant sales increase consisted of a 3.0% increase in average check size due to increases in menu prices, partially offset by a 2.0% decrease in transactions. This company-operated restaurant revenue increase was partially offset by a $0.2 million decrease related to the one company-operated restaurant sold by us to our existing franchisee during or subsequent to the first quarter of 2024 .
Franchise Revenue
For the quarter ended June 25, 2025, franchise revenue increased $1.7 million, or 14.8%, from the comparable period in the prior year. This increase was primarily due to the $1.6 million in franchisee IT pass through revenue related to the franchisee rollout of the new Point of Sale (POS) system which is offset by a corresponding increase in franchise expenses. In addition, the increase in franchise revenue was due to the five franchise-operated restaurant openings during or subsequent to the second quarter of 2024. The increase in franchise revenue was partially offset by a franchise comparable restaurant sales decrease of 1.1% .
Year-to-date, franchise revenue increased $3.6 million, or 15.5%, from the comparable period in the prior year. This increase was primarily due to the $3.4 million in franchisee IT pass through revenue related to the franchisee rollout of the new POS system which is offset by a corresponding increase in franchise expenses. In addition, the increase in franchise revenue was due to the five franchise-operated restaurant openings during or subsequent to the first quarter of 2024. The increase in franchise revenue was partially offset by a franchise comparable restaurant sales decrease of 1.2% .
Franchise Advertising Fee Revenue
For the quarter ended June 25, 2025, franchise advertising fee revenue decreased less than $0.1 million, or 0.9%, from the comparable period in the prior year. Year-to-date, franchise advertising fee revenue decreased $0.1 million, or 0.6%, from the comparable period in the prior year. As advertising fee revenue is a percentage of franchisees’ revenue, the fluctuations for the quarter were due to the increases and decreases noted in franchise revenue above.
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Food and Paper Costs
For the quarter ended June 25, 2025, food and paper costs decreased $0.2 million, or 0.9%, from the comparable period in the prior year. Year-to-date, food and paper costs decreased $1.1 million, or 2.2%, from the comparable period in the prior year.
The decrease in food and paper costs for both the quarter and year-to-date periods was primarily due to a lower number of transactions combined with cost-management initiatives and commodity deflation. For the quarter, food and paper costs as a percentage of company-operated restaurant revenue were 24.5%, down from 25.2% in the comparable period of the prior year. Year-to-date, food and paper costs as a percentage of company-operated restaurant revenue were 24.8%, down from 25.7% in the comparable period of the prior year. The percentage decrease for both the quarter and year-to-date periods was primarily due to menu price increases and the cost decreases highlighted above.
Labor and Related Expenses
For the quarter ended June 25, 2025, labor and related expenses decreased $0.7 million, or 2.2%, from the comparable period in the prior year. The decrease in labor and related expenses for the quarter was primarily due to a $1.0 million reduction in costs related to improved labor efficiencies as part of our cost-management initiatives, partially offset by a $0.3 million increase in other labor-related expenses primarily related to higher wage rates. Year-to-date, labor and related expenses increased $0.9 million, or 1.4%, from the comparable period in the prior year. The increase for the year-to-date period was due primarily to a $3.0 million increase due to higher wage rates during fiscal 2025 as a result of legislative increases in the California state minimum wage, which became effective April 1, 2024, as well as a $0.4 million increase in other labor-related expenses. The increase in labor and related expenses for the year was partially offset by $2.5 million reduction in costs related to the improved labor efficiencies discussed above.
For the quarter ended June 25, 2025, labor and related expenses as a percentage of company-operated restaurant revenue were 30.8%, down from 32.1% in the comparable period in the prior year. Year-to-date labor and related expenses as a percentage of company-operated restaurant revenue were 31.7%, down from 31.8% in the comparable period in the prior year primarily. The percentage change for both the quarter and year-to-date periods was driven by higher menu prices and the improved labor efficiencies , partially offset by the higher wage rates and higher labor-related costs.
Occupancy and Other Operating Expenses
For the quarter ended June 25, 2025, occupancy and other operating expenses increased $2.1 million, or 8.5%, from the comparable period in the prior year. The increase was primarily due to increases of $0.4 million in occupancy, $0.4 million in utilities, $0.4 million in marketplace delivery fees, $0.2 million in software maintenance, $0.2 million in repairs and maintenance, and $0.5 million in other operating expenses.
Year-to-date, occupancy and other operating expenses increased $3.9 million, or 8.0%, from the comparable period in the prior year primarily due to increases of $0.7 million in occupancy, $0.8 million in utilities, $0.7 million in marketplace delivery fees, $0.5 million in software maintenance, $0.3 million in repairs and maintenance, $0.2 million in credit card charges and $0.7 million in other operating expenses.
For the quarter ended June 25, 2025, occupancy and other operating expenses as a percentage of company-operated restaurant revenue were 25.6%, up from 24.1% in the comparable period in the prior year. Year-to-date, occupancy and other operating expenses as a percentage of company-operated restaurant revenue were 25.9%, up from 24.3% in the comparable period of the prior year. Both the quarter and year-to-date period increases resulted from the cost increases highlighted above.
General and Administrative Expenses
For the quarter ended June 25, 2025, general and administrative expenses increased $1.7 million, or 14.8%, from the comparable period in the prior year. The increase for the quarter was primarily due to a $0.8 million increase in stock compensation expenses, a $0.8 million increase in legal and professional fee costs related to shareholder activism and related matters and a $0.7 million increase in restructuring and executive transition costs. The general and administrative expenses increase was partially offset by a $0.6 million decrease in other general and administrative expenses.
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Year-to-date, general and administrative expenses increased $1.1 million, or 4.6%, from the comparable period in the prior year. The increase for the year-to-date period was due primarily to a $1.4 million increase in legal and professional fee costs related to shareholder activism and related matters, and $0.9 million increase in stock compensation expenses. The general and administrative expenses increase was partially offset by a $0.5 million decrease in restructuring and executive transition costs, a $0.6 million received from a legal settlement, net of legal expenses and $0.1 million decrease in other general and administrative expenses.
For the quarter ended June 25, 2025, general and administrative expenses as a percentage of total revenue were 10.8%, up from 9.6% in the comparable period of the prior year . Year-to-date, general and administrative expenses as a percentage of total revenue were 10.1%, up from 9.9% in the comparable period of the prior year. The percentage increase for both the quarter and year-to-date periods is primarily due to the cost increases discussed above.
Franchise Expenses
For the quarter ended June 25, 2025, franchise expenses increased $1.8 million, or 16.2%, from the comparable period in the prior year . Year-to-date, franchise expenses increased $3.6 million, or 16.7%, from the comparable period in the prior year. The increase for both quarterly and year-to-date periods was due to the $1.6 million and $3.4 million in IT pass-through expenses, respectively, primarily resulting from franchisees rolling out the new POS system.
Loss on Disposition of Restaurants
During the thirteen and twenty-six weeks ended June 26, 2024, we completed the sale of one restaurant within California to an existing franchisee due to an expiring lease term on April 30, 2024. We determined that the restaurant dispositions represent multiple element arrangements, and as a result, the cash consideration received was allocated to the separate elements based on its relative standalone selling price. Cash proceeds included upfront consideration for the sale of the restaurant 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 $0.1 million and a net loss on sale of restaurant of less than $0.1 million for the thirteen and twenty-six weeks ended June 26, 2024. Since the date of their sale, this restaurant is now included in the total number of franchised El Pollo Loco restaurants.
Impairment and Closed-Store Reserves
During the thirteen and twenty-six weeks ended June 25, 2025 and June 26, 2024, we did not record any non-cash impairment charges. Given the inherent uncertainty in projecting results for newer restaurants in newer markets, we are monitoring the recoverability of the carrying value of the assets of several restaurants on an ongoing basis. For these restaurants, if expected performance is not realized, an impairment charge may be recognized in future periods, and such charge could be material.
When a restaurant is closed, we will evaluate the ROU asset for impairment, based on anticipated sublease recoveries. The remaining value of the ROU asset is amortized on a straight-line basis, with the expense recognized in closed-store reserve expense. Additionally, any property tax and CAM payments relating to closed restaurants are included within closed-store expense. During both the thirteen and twenty-six weeks ended June 25, 2025 and June 26, 2024, we recognized less than $0.1 million of closed-store reserve expense related to the amortization of ROU assets, property taxes and CAM payments for our closed locations.
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Interest Expense, Net
For the quarter ended June 25, 2025, interest expense, net, decreased $0.3 million from t he comparable period in the prior year . For the year-to-date period, interest expense, net, decreased $0.7 million from the comparable period in the prior year. Both the quarter and year-to-date period decrease in interest expense was primarily related to the lower interest rates in the fiscal 2025 and lower outstanding balances on our 2022 Revolver (as defined below) versus t he comparable periods in the prior year .
Income Tax Receivable Agreement
On May 29, 2024, we terminated most of the obligations under the Tax Receivable Agreement (“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 $398,896. As of June 25, 2025, there was no remaining obligation owed on our condensed consolidated balance sheets.
Provision for Income Taxes
For the quarter ended June 25, 2025, we recorded an income tax provision of $3.0 million, reflecting an estimated effective tax rate of 29.6%. For the quarter ended June 26, 2024, we recorded an income tax provision of $3.2 million, reflecting an estimated effective tax rate of approximately 29.3%.
For the year-to-date period ended June 25, 2025, we recorded an income tax provision of $5.3 million, reflecting an estimated effective tax rate of approximately 29.7%. For the year-to-date period ended June 26, 2024, we recorded an income tax provision of $5.4 million, reflecting an estimated effective tax rate of approximately 28.4%.
The difference between the 21.0% statutory rate and our effective tax rate of 29.7% for the year-to-date period ended June 25, 2025 is primarily a result of state taxes and the impact of non-tax deductible executive compensation expense, and the impact of lower stock compensation expense related to vesting of restricted stock awards deductible for tax as compared to the cumulative amount recorded as stock-based compensation expense, partially offset by a Work Opportunity Tax Credit benefit .
Key Performance Indicators
To evaluate the performance of our business, we utilize a variety of financial and performance measures. These key measures include company-operated restaurant revenue, system-wide sales, comparable restaurant sales, restaurant contribution, restaurant contribution margin, new restaurant openings, EBITDA, and Adjusted EBITDA.
System-Wide Sales
System-wide sales are neither required by, nor presented in accordance with GAAP. System-wide sales are the sum of company-operated restaurant revenue and sales from franchised restaurants. Our total revenue in our condensed consolidated statements of income is limited to company-operated restaurant revenue and franchise revenue from our franchisees. Accordingly, system-wide sales should not be considered in isolation or as a substitute for our results as reported under GAAP. Management believes that system-wide sales are an important figure for investors, because they are widely used in the restaurant industry, including by our management, to evaluate brand scale and market penetration. System-wide sales do not include the 8 licensed stores in the Philippines. The total number of currently licensed stores reflects the closure of two licensed restaurants during the twenty-six weeks ended June 25, 2025.
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The following table reconciles system-wide sales to company-operated restaurant revenue and total revenue (in thousands):
Thirteen Weeks Ended
Twenty-Six Weeks Ended
June 25, 2025
June 26, 2024
June 25, 2025
June 26, 2024
Company-operated restaurant revenue
$
104,318
$
102,307
$
202,683
$
199,460
Franchise revenue
13,372
11,651
26,555
22,999
Franchise advertising fee revenue
8,144
8,218
15,773
15,870
Total Revenue
125,834
122,176
245,011
238,329
Franchise revenue
(13,372)
(11,651)
(26,555)
(22,999)
Franchise advertising fee revenue
(8,144)
(8,218)
(15,773)
(15,870)
Sales from franchised restaurants
182,720
183,300
353,808
354,036
System-wide sales (1)
$
287,038
$
285,607
$
556,491
$
553,496
(1) System-wide sales do not include the eight licensed stores in the Philippines.
Company-Operated Restaurant Revenue
Company-operated restaurant revenue consists of sales of food and beverages in company-operated restaurants net of promotional allowances, employee meals, and other discounts. 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.
Comparable Restaurant Sales
Comparable restaurant sales reflect year-over-year sales changes for comparable company-operated, franchised, and system-wide restaurants. A restaurant enters our comparable restaurant base the first full week after it has operated for fifteen months. Comparable restaurant sales exclude restaurants closed during the applicable period. At June 25, 2025 and June 26, 2024, there were 485 and 482 comparable restaurants, 171 and 168 company-operated restaurants, and 314 and 314 franchised restaurants, respectively. Comparable restaurant sales indicate the performance of existing restaurants, since new restaurants are excluded. Comparable restaurant sales growth can be generated by an increase in the number of meals sold and/or by increases in the average check amount, resulting from a shift in menu mix and/or higher prices resulting from new products or price increases. Because other companies may calculate this measure differently than we do, comparable restaurant sales as presented herein may not be comparable to similarly titled measures reported by other companies. Management believes that comparable restaurant sales is a valuable metric for investors to evaluate the performance of our store base, excluding the impact of new stores and closed stores.
Restaurant Contribution and Restaurant Contribution Margin
Restaurant contribution and restaurant contribution margin are neither required by, nor presented in accordance with, GAAP. 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, 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 superior to, or as substitutes for the 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. Management believes that restaurant contribution and restaurant contribution margin are important tools for investors, because they are widely-used metrics within the restaurant industry
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to evaluate restaurant-level productivity, efficiency, and performance. Management further believes restaurant level operating margin is useful to investors to highlight trends in our core business that may not otherwise be apparent to investors when relying solely on GAAP financial measures.
A reconciliation of restaurant contribution and restaurant contribution margin to company-operated restaurant revenue is provided below:
Thirteen Weeks Ended
Twenty-Six Weeks Ended
(Dollar amounts in thousands)
June 25, 2025
June 26, 2024
June 25, 2025
June 26, 2024
Restaurant contribution:
Income from operations
$
11,305
$
12,318
$
20,277
$
21,997
Add (less):
General and administrative expenses
13,532
11,787
24,795
23,712
Franchise expenses
12,627
10,871
25,069
21,473
Depreciation and amortization
3,929
3,870
7,816
7,721
Loss on disposal of assets
43
63
54
104
Gain on recovery of insurance proceeds, net
—
—
—
(41)
Franchise revenue
(13,372)
(11,651)
(26,555)
(22,999)
Franchise advertising fee revenue
(8,144)
(8,218)
(15,773)
(15,870)
Impairment and closed-store reserves
6
5
17
37
Loss on disposition of restaurants
—
7
—
7
Restaurant contribution
$
19,926
$
19,052
$
35,700
$
36,141
Company-operated restaurant revenue:
Total revenue
$
125,834
$
122,176
$
245,011
$
238,329
Less:
Franchise revenue
(13,372)
(11,651)
(26,555)
(22,999)
Franchise advertising fee revenue
(8,144)
(8,218)
(15,773)
(15,870)
Company-operated restaurant revenue
$
104,318
$
102,307
$
202,683
$
199,460
Restaurant contribution margin (%)
19.1
%
18.6
%
17.6
%
18.1
%
New Restaurant Openings
The number of restaurant openings reflects the number of new restaurants opened by us and our franchisees during a particular reporting period. Before a new restaurant opens, we and our franchisees incur pre-opening costs, as described below. New restaurants often open with an initial start-up period of higher-than-normal sales volumes, which subsequently decrease to stabilized levels. New restaurants typically experience normal inefficiencies in the form of higher food and paper, labor, and other direct operating expenses and, as a result, restaurant contribution margins are generally lower during the start-up period of operation. The average start-up period after which our new restaurants’ revenue and expenses normalize is approximately fourteen weeks. When we enter new markets, we may be exposed to start-up times and restaurant contribution margins that are longer and lower than reflected in our average historical experience.
EBITDA and Adjusted EBITDA
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 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 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
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EBITDA. Our presentation of EBITDA and Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or nonrecurring items.
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 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.
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) we believe that these measures are frequently used by securities analysts, investors and other interested parties to evaluate companies in our industry, (ii) we believe 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 our EBITDA and Adjusted EBITDA:
Thirteen Weeks Ended
Twenty-Six Weeks Ended
(Amounts in thousands)
June 25, 2025
June 26, 2024
June 25, 2025
June 26, 2024
Net income
$
7,107
$
7,633
$
12,588
$
13,545
Non-GAAP adjustments:
Provision for income taxes
2,991
3,158
5,306
5,361
Interest expense, net of interest income
1,207
1,527
2,383
3,091
Depreciation and amortization
3,929
3,870
7,816
7,721
EBITDA
$
15,234
$
16,188
$
28,093
$
29,718
Stock-based compensation expense (a)
1,700
897
2,747
1,817
Loss on disposal of assets (b)
43
63
54
104
Impairment and closed-store reserves (c)
6
5
17
37
Loss on disposition of restaurants (d)
—
7
—
7
Legal settlements (e)
—
—
(619)
—
Special legal and professional fees expense (f)
780
—
1,395
—
Gain on recovery of insurance proceeds, net (g)
—
—
—
(41)
Restructuring and executive transition costs (h)
710
—
710
1,194
Pre-opening costs (i)
—
58
1
81
Adjusted EBITDA
$
18,473
$
17,218
$
32,398
$
32,917
(a) Includes non-cash, stock-based compensation.
(b) Loss on disposal of assets includes the loss or gain on disposal of assets related to retirements and replacement or write-off of leasehold improvements or equipment.
(c) Includes costs related to impairment of property and equipment and ROU assets and closing restaurants. During both the thirteen and twenty-six weeks ended June 25, 2025 and June 26, 2024, we did not record any non-cash impairment charges. During both the thirteen and twenty-six weeks ended June 25, 2025 and June 26, 2024, we
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recognized less than $0.1 million of closed-store reserve expense related to the amortization of ROU assets, property taxes and CAM payments for our closed locations.
(d) During the thirteen and twenty-six weeks ended June 26, 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 thirteen and twenty-six weeks ended June 26, 2024.
(e) Includes $0.6 million received from legal settlement, net of legal expenses.
(f) Consists of legal and professional costs related to shareholder activism and related matters.
(g) During the twenty-six weeks ended June 26, 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 lost profits, net of the related costs, is included in the accompanying condensed consolidated statements of income, for the twenty-six weeks ended June 26, 2024, as a reduction of company restaurant expenses.
(h) Consists of costs associated with the transition of certain executive officers, such as severance and stock-based compensations costs and costs associated with restructuring certain positions in the organization during the twenty-six weeks ended June 25, 2025 and June 26, 2024, respectively.
(i) 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. Pre-opening costs also include occupancy costs incurred between the date of possession and the opening date for a restaurant.
Liquidity and Capital Resources
Our primary sources of liquidity and capital resources have been cash provided from operations, cash and cash equivalents, and the 2022 Revolver (as defined below) . Our primary requirements for liquidity and capital are new restaurants, existing restaurant capital investments (remodels and maintenance), legal defense costs, lease obligations, interest payments on our debt, working capital and general corporate needs. Our working capital requirements are not significant, since our customers pay for their purchases in cash or by payment card (credit or debit) at the time of sale. Thus, we are able to sell many of our inventory items before we have to pay our suppliers. 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 condensed consolidated financial statements.
The following table presents summary cash flow information for the periods indicated (in thousands):
Twenty-Six Weeks Ended
(Amounts in thousands)
June 25, 2025
June 26, 2024
Net cash provided by (used in)
Operating activities
$
18,872
$
28,117
Investing activities
(8,427)
(10,546)
Financing activities
(3,940)
(14,394)
Net increase in cash
$
6,505
$
3,177
Operating Activities
For the twenty-six weeks ended June 25, 2025, net cash from operating activities decreased by $9.2 million from the comparable period of the prior year. This change was due to unfavorable working capital fluctuations compared to the same period in the prior year.
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Investing Activities
For the twenty-six weeks ended June 25, 2025, net cash used in investing activities decreased by $2.1 million from the comparable period of the prior year. This change was primarily due to a decrease in purchase of property and equipment mostly related to restaurant remodeling during the twenty-six weeks ended June 25, 2025 when compared to the prior year.
Financing Activities
For the twenty-six weeks ended June 25, 2025, net cash used in financing activities changed by $10.5 million from the comparable period of the prior year. The change was primarily due to repurchases of shares of our common stock of $1.8 million during the twenty-six weeks ended June 25, 2025 compared to repurchases of shares of our common stock of $18.2 million during the twenty-six weeks ended June 26, 2024. The change was offset by a $2.0 million in net paydown on the 2022 Revolver during the twenty-six weeks ended June 25, 2025 compared to a $3.0 million net borrowings during the twenty-six weeks ended June 26, 2024.
Debt and Other Obligations
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 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. The base rate is calculated as the highest of (a) the federal funds rate plus 0.50%, (b) the published Bank of America prime rate, or (c) Term SOFR with a term of one-month SOFR plus 1.00%. For Term SOFR loans, the margin is in the range of 1.25% to 2.25%, and for base rate loans the margin is in a range of 0.25% to 1.25%. Borrowings under the 2022 Revolver may be repaid and reborrowed. The interest rate range under the 2022 Revolver was 5.67% to 5.93% and 5.65% to 7.75% for the thirteen and twenty-six weeks ended June 25, 2025 , respectively, and 6.67% to 6.94% and 6.67% to 6.96% for the thirteen and twenty-six weeks ended June 26, 2024, respectively.
The 2022 Credit Agreement contains certain financial covenants. We were in compliance with the financial covenants as of June 25, 2025.
At June 25, 2025, we had $69.0 million in outstanding borrowings under the 2022 Revolver and one letter of credit in the amount of $10.3 million outstanding, and as a result, we had $70.7 million in borrowing availability.
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See Note 5, “Long-term debt” in the “Notes to Condensed Consolidated Financial Statements” for additional information.
Material Cash Requirements
Our material cash requirements as of June 25, 2025 have not changed materially since those disclosed under “Material Cash Requirements” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 25, 2024. Our material cash requirements relate mostly to future (i) debt payments, including expected interest expense, calculated based on current interest rates, (ii) restaurant operating lease payments, (iii) purchasing commitments for chicken, (iv) restaurant finance lease payments, and (v) capital expenditures .
Share Repurchases
Share Repurchase Program
On November 2, 2023, we announced that our Board of Directors approved a share repurchase program (“Share Repurchase Program”) under which we were authorized to repurchase up to $20,000,000 of shares of our common stock. Under the Share Repurchase Program, 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 Share Repurchase Program, we were authorized to effect repurchases using open market purchases, including pursuant to Rule 10b5-1 trading plans, and/or through privately negotiated transactions. The Share Repurchase Program did not obligate us to acquire any particular number of shares. The Share Repurchase Program expired on March 31, 2025.
For the thirteen and twenty-six weeks ended June 25, 2025, we repurchased 3,479 shares and 163,229 of common stock, respectively, under the Share Repurchase Program, using open market purchases, for total consideration of less than approximately $0.1 million and $1.8 million, respectively.
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.