What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2026-03-13 compared with 2025-03-07 · 184 added, 234 removed, 862 unchanged (33% of the section changed)

19 unchanged sentences

We have audited the accompanying consolidated balance sheets of El Pollo Loco Holdings, Inc .

(the “Company”) as of December 25, 2024 and December 27, 2023, the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended December 25, 202 4 , and the related notes (collectively referred to as the “consolidated financial statements”).

(the “Company”) as of December 31, 2025 and December 25, 2024, the related consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 202 5 , and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2025 and December 25, 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America.

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The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Impairment of Restaurant Property and Equipment

As discussed in Notes 2 and 4 to the consolidated financial statements, the Company reviews its long-lived assets related to restaurants held and used in the business, including property and equipment, for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable.

The net balance of property and equipment was $86.1 million as of December 25, 2024.

For certain restaurants, indicators of impairment of the related property and equipment were present.

As such, for these restaurants, management compared the projected undiscounted cash flows to the carrying value to determine whether an impairment loss should be measured.

We identified the Company’s estimation of undiscounted future cash flows for certain restaurants to determine the recoverability of the carrying value of restaurant property and equipment as a critical audit matter.

Auditing certain assumptions used in the estimation of the undiscounted future cash flows, including future revenue transaction growth rates, menu pricing changes, and restaurant operating margins, involved especially challenging and subjective auditor judgments due to the nature and extent of audit effort required to addresses these matters.

Estimation of workers’ compensation liabilities

As discussed in Note 2 to the consolidated financial statements, the Company accrued $10.3 million of workers’ compensation reserves in accrued insurance as of December 31, 2025.

The Company maintains a reserve for estimated claims both reported and incurred but not reported.

Significant assumptions in the estimate included loss development factors, expected loss rates, and weighting of methods.

We identified the evaluation of certain methods and assumptions used in the estimation of the underlying workers’ compensation reserves as a critical audit matter.

Specifically, the estimation was subject to inherent uncertainty and required especially subjective auditor judgment, including the involvement of actuarial professionals with specialized skills and knowledge to evaluate certain methods and assumptions including loss development factors, and expected loss rates.

The primary procedures we performed to address this critical audit matter included:

● Evaluating the reasonableness of management’s assumption over the future revenue transaction growth rates for certain restaurants by comparing them to historical financial information for both company-owned and franchised restaurants and industry data .

● Evaluating the reasonableness of management’s assumption over the menu pricing changes for certain restaurants by comparing them to historical financial information for company-owned restaurants and industry data.

● Evaluating the reasonableness of management’s assumption over the restaurant operating margins for certain restaurants by comparing them to historical financial information for those company-owned restaurants and industry data.

● Testing the design and operating effectiveness of internal controls over the Company’s workers’ compensation reserves.

● Utilizing actuarial professionals with specialized skills and knowledge to assist with assessing the reasonableness of certain methods and assumptions used, including loss development factors and expected loss rates by:

o Developing an independent reasonable range for the workers’ compensation reserves using an alternative combination of methods and assumptions based on the Company’s historical data.

/s/ BDO USA, P.C.

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Accrued interest

Current portion of income tax receivable agreement payable

Other accrued expenses and current liabilities

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Changes in derivative instruments

Unrealized net gains arising during the period from interest rate swap

Reclassifications of loss into net income

Income tax benefit (expenses)

Other comprehensive (loss) income, net of taxes

Income tax benefit

Other comprehensive (loss), net of taxes

Comprehensive income

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Shares repurchased for employee tax withholdings

Repurchase of common stock

( 6,030,850 )

Repurchase of common stock - excise tax

Forfeiture of common stock related to restricted shares

Other comprehensive loss, net of income tax

Common stock cash dividends ($ 1.50 per share)

Balance, December 27, 2023

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Repurchase of common stock

( 2,069,931 )

Repurchase of common stock - excise tax

Forfeiture of common stock related to restricted shares

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Minimum tax withholdings related to net share settlements

Common stock dividends paid

Proceeds from issuance of common stock upon exercise of stock options, net of expenses

Payment of obligations under finance leases

Deferred financing costs for revolver loan

Repurchases of common stock

Net cash flows used in financing activities

Decrease in cash and cash equivalents

Increase/(Decrease) in cash and cash equivalents

Cash and cash equivalents, beginning of period

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Cash paid during the period for interest

Cash paid during the period for income taxes

Cash paid during the period for income taxes, net

Unpaid purchases of property and equipment

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(“EPL”), which develops, franchises, licenses and operates quick-service restaurants under the name El Pollo Loco ®.

The restaurants, which are located principally in California but also in Arizona, Nevada, Texas, Colorado, Utah and Louisiana, specialize in fire-grilling citrus-marinated chicken in a wide variety of contemporary Mexican and LA-inspired entrees, including specialty chicken burritos, chicken quesadillas, chicken tostada salads, chicken tortilla soup, variations on the Company’s Pollo Bowl®, Pollo Salads and Pollo Fit entrees.

The restaurants, which are located principally in California but also in Arizona, Nevada, Texas, Colorado, Utah Louisiana, New Mexico and Washington, specialize in fire-grilling citrus-marinated chicken in a wide variety of contemporary Mexican and LA-inspired entrees, including specialty chicken burritos, chicken quesadillas, chicken tostada salads, chicken tortilla soup, variations on the Company’s Pollo Bowl®, Pollo Salads and Pollo Fit entrees.

At December 31, 2025, the Company-operated 175 ( 132 in the greater Los Angeles area) and franchised 328 ( 148 in the greater Los Angeles area) El Pollo Loco restaurants.

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The Company operates in one operating segment.

All significant revenues relate to retail sales of food and beverages through either company or franchised restaurants.

All significant revenues relate to retail sales of food and beverages through either company-operated or franchised-operated restaurants.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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In a 53-week fiscal year, the first, second and third quarters each include 13 weeks of operations and the fourth quarter includes 14 weeks of operations.

Approximately every six or seven years a 53-week fiscal year occurs.

Fiscal 2024, 2023 and 2022 were 52-week fiscal years.

Approximately every five or six years a 53-week fiscal year occurs.

Fiscal 2025 was a 53-week year.

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

Certain prior year amounts in the accompanying consolidated financial statements have been reclassified to conform with the current year presentation.

Principles of Consolidation

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The need for an allowance for credit losses is reviewed on a specific identification basis and takes into consideration past due balances and the financial strength of the obligor.

Inventories consist principally of food, beverages and supplies and are valued at the lower of average cost or net realizable value.

Inventories consist principally of food, beverages, packaging and supplies and are valued at the lower of average cost or net realizable value.

Property and Equipment, Net

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These costs are included in property and amortized over the shorter of the life of the related buildings and leasehold improvements or the lease term.

Costs related to abandoned sites and other site selection costs that cannot be identified with specific restaurants are charged to general and administrative expenses in the accompanying consolidated statements of income, and there were none for the year ended December 25, 2024, $ 0.2 million for the year ended December 27, 2023, and less than $ 0.1 million for the year ended December 28, 2022.

Costs related to abandoned sites and other site selection costs that cannot be identified with specific restaurants are charged to general and administrative expenses in the accompanying consolidated statements of income, and there was $ 0.1 million for the year ended December 31, 2025, none for the year ended December 25, 2024, and $ 0.2 million for the year ended December 27, 2023.

The Company capitalized internal costs related to site selection and construction activities of $ 0.6 million, $ 0.6 million and $ 1.8 million for the years ended December 31, 2025, December 25, 2024 and December 27, 2023, respectively.

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The Company determined that triggering events occurred for certain stores during the year ended December 31, 2025 that required an impairment review of the Company’s property and equipment and ROU assets.

Based on the results of this analysis, the Company recorded non-cash impairment charges of $ 0.1 million primarily related to the property and equipment assets of two restaurants in Nevada for the year ended December 25, 2024.

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

In fiscal 2022, the Company recorded a non-cash impairment charge of $ 0.5 million primarily related to the carrying value of the ROU assets of one restaurant in California that closed in 2021.

Given the inherent uncertainty in projecting results for newer restaurants in newer markets, the Company is 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.

Based on the results of this analysis, the Company did not record impairment charges for the year ended December 31, 2025.

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

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

Given the inherent uncertainty in projecting results for newer restaurants in newer markets, the Company is monitoring the recoverability of the carrying value of the assets of several

EL POLLO LOCO HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

Closed-Store Reserves

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Additionally, any property tax and common area maintenance (“CAM”) payments relating to closed restaurants are also included within closed-store reserves expense.

During fiscal 2024, 2023 and 2022, the Company recognized $ 0.1 million, $ 0.2 million and $ 0.3 million, respectively, of closed-store reserves expense related to the amortization of ROU assets, property taxes and CAM payments for its closed locations.

During fiscal 2025, 2024 and 2023, the Company recognized less than $ 0.1 million, $ 0.1 million and $ 0.2 million, respectively, of closed-store reserves expense related to the amortization of ROU assets, property taxes and CAM payments for its closed locations.

Goodwill and Indefinite-Lived Intangible Assets

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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.

The Company did no t record any decrement to goodwill related to the disposition of restaurants in fiscal 2024, 2023 and 2022.

The Company did no t record any decrement to goodwill related to the disposition of restaurants in fiscal 2025, 2024 or 2023.

The Company performs an annual impairment test for goodwill during the fourth fiscal quarter of each year, or more frequently if impairment indicators arise.

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The excess of the carrying amount of an intangible asset over its fair value is recognized as an impairment loss.

The assumptions used in the estimate of fair value are generally consistent with the past performance of the Company’s reporting segment and are also consistent with the projections and assumptions that are used in current operating plans.

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

EL POLLO LOCO HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

The Company determined that there were no indicators of potential impairment of its goodwill and indefinite-lived intangible assets during fiscal 2025.

Accordingly, the Company did no t record any impairment to its goodwill or indefinite-lived intangible assets during the year ended December 25, 2024.

Accordingly, the Company did no t record any impairment to its goodwill or indefinite-lived intangible assets during the year ended December 31, 2025, December 25, 2024 and December 27, 2023.

Deferred Financing Costs

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Included in other assets are deferred financing costs (net of accumulated amortization), related to the Company’s revolving credit facility, of $ 0.3 million and $ 0.5 million as of December 31, 2025 and December 25, 2024, respectively.

Amortization expense for deferred financing costs was approximately $ 0.2 million for both of the years ended December 25, 2024 and December 27, 2023, and $ 0.3 million for the year ended December 28, 2022, and is reflected as a component of interest expense in the accompanying consolidated statements of income.

Amortization expense for deferred financing costs was approximately $ 0.2 million for all of the years ended December 31, 2025, December 25, 2024, and December 27, 2023, and is reflected as a component of interest expense in the accompanying consolidated statements of income.

Insurance Reserves

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These amounts are included in labor and related expenses and general and administrative expenses on the accompanying consolidated statements of income.

Included in accrued insurance is $ 10.3 million and $ 10.1 million of workers’ compensation reserves at December 31, 2025 and December 25, 2024, respectively.

The Company utilizes an actuary to estimate its workers’ compensation reserves and significant assumptions in the estimate included loss development factors, expected loss rates, and weighting of methods.

Restaurant Revenue

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The Company expects the loyalty points to be redeemed and recognized over a one-year period.

EL POLLO LOCO HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company sells gift cards to its customers in the restaurants and through selected third parties.

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The Company recognizes income from gift cards when redeemed by the customer.

Unredeemed gift card balances are deferred and recorded as other accrued expenses on the accompanying consolidated balance sheets.

EL POLLO LOCO HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Unredeemed gift card balances are deferred and recorded as other accrued expenses and current liabilities on the accompanying consolidated balance sheets.

Franchise Revenue

Franchise revenue consists of franchise royalties, initial franchise fees, license fees due from franchisees, sublease income and IT support services.

Franchise revenue consists of franchise royalties, initial and renewal franchise fees, license fees due from franchisees, sublease income, IT support services and IT pass through fees related to IT hardware or software.

Rental income for subleases to franchisees are outside of the scope of the revenue standard and are within the scope of lease guidance.

1 unchanged sentence

For franchise and development agreement fees, the initial franchise services, or exclusivity of the development agreements, are not distinct from the continuing rights or services offered during the term of the franchise agreement and are, therefore, treated as a single performance obligation.

As such, initial franchise and development fees received, and subsequent renewal fees, are recognized over the franchise or renewal term, which is typically twenty years .

As such, initial franchise and development fees received, and subsequent renewal fees, are recognized over the franchise or renewal term, which is typically 20 years .

As of December 31, 2025, the Company had executed development agreements that represent commitments to open 88 franchised restaurants at various dates through 2035.

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The Company purchases hardware, such as scanners, printers, cash registers, kiosks and tablets, from third-party vendors, which it then sells to franchisees.

As the Company is considered the principal in this relationship, payment received for the hardware is considered revenue, and is received upon transfer of the goods from the Company to the franchisee.

As the Company is considered the principal in this relationship, payment received for the hardware is considered revenue, and is received upon transfer of the goods from the Company to the

EL POLLO LOCO HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2025, there were no performance obligations, related to hardware services that were unsatisfied or partially satisfied.

1 unchanged sentence

The Company presents advertising contributions received from franchisees as franchise advertising fee revenue and records all expenses of the advertising fund within franchise expenses.

EL POLLO LOCO HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Advertising Costs

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Preopening costs incurred in connection with the opening of new restaurants are expensed as incurred.

For each of the years ended December 25, 2024, December 27, 2023, and December 28, 2022, preopening costs, which are included in general and administrative expenses on the accompanying consolidated statements of income were $ 0.3 million.

For each of the years ended December 31, 2025, December 25, 2024, and December 27, 2023, preopening costs, which are included in general and administrative expenses on the accompanying consolidated statements of income were $ 0.1 million, $0.3 million, and $0.3 million.

The Company’s operations utilize property, facilities, equipment and vehicles.

Buildings and facilities leased from others are primarily for restaurants and support facilities.

Restaurants are operated under lease arrangements that generally provide for a fixed base rent and, in some instances, contingent rent based on a percentage of gross operating profit or net revenues more than a defined amount.

Restaurants are operated under lease arrangements that generally provide for a fixed base rent and, in some instances, contingent rent based on a percentage of gross sales or net revenues more than a defined amount.

Initial terms of land and restaurant building leases generally have terms of 20 years , exclusive of options to renew.

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These are amortized through the operating lease asset as reductions of expense over the lease term.

EL POLLO LOCO HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Operating and finance lease liabilities that are based on an index or rate are calculated using the prevailing index or rate at lease commencement.

3 unchanged sentences

The Company subleases facilities to certain franchisees and other non-related parties which are recorded on a straight-line basis.

EL POLLO LOCO HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Gain on Recovery of Insurance Proceeds, Lost Profits, Net 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 incurred costs directly related to a 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.

2 unchanged sentences

Loss (Gain) on Disposition of Restaurants

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

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

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

The Company did not sell any restaurants to its franchisees during fiscal 2025.

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

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

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

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During 2023, these sales resulted in cash proceeds of $ 7.7 million and a net gain on sale of restaurant of $ 5.0 million.

The Orange County 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.

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

6 unchanged sentences

For any derivative instruments not designated as hedging instruments, the gain or loss will be recognized in earnings immediately.

The provision for income taxes, income taxes payable and deferred income taxes is determined using the asset and liability method.

Deferred tax assets and liabilities are determined based on temporary differences between the financial carrying amounts and the tax bases of assets and liabilities using enacted tax rates in effect in the years in which the temporary differences are expected to reverse.

On a periodic basis, the Company assesses the probability that its net deferred tax assets, if any, will be recovered.

If, after evaluating all of the positive and negative evidence, a conclusion is made that it is more likely than not that some portion or all of the net deferred tax assets will not be recovered, a valuation allowance is provided by charging to tax expense a reserve for the portion of deferred tax assets which are not expected to be realized.

The provision for income taxes, accrued income taxes payable and deferred income taxes is determined using the asset and liability method.

Deferred tax assets and liabilities are determined based on temporary differences between the

EL POLLO LOCO HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

financial carrying amounts and the tax bases of assets and liabilities using enacted tax rates in effect in the years in which the temporary differences are expected to reverse.

On a periodic basis, the Company assesses the probability that its net deferred tax assets, if any, will be recovered.

The Company reviews its filing positions for all open tax years in all U.S.

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On July 30, 2014, the Company entered into the income tax receivable agreement (the “TRA”), which calls for the Company to pay to its pre-IPO stockholders 85 % of the savings in cash that the Company realizes in its income taxes as a result of utilizing its net operating losses (“NOLs”) 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 the Company total expected TRA payments.

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

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

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(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 the Company’s consolidated balance sheets.

Additionally, the Company assessed its eligibility for the business relief provision under the CARES Act known as the Employee Retention Credit (“ERC”), a refundable payroll tax credit for 50% of qualified wages paid during 2020.

The American Rescue Plan passed into law on March 11, 2021 extended the ERC through September 30, 2021, and the credit was increased to 70% of qualified wages paid from January 1, 2021 through September 30, 2021.

During fiscal 2022, the Company received $ 3.1 million in ERC and the remaining $ 0.3 million was received and recorded during fiscal 2023.

As of December 31, 2025 and December 25, 2024, there were no remaining obligations owed on the Company’s consolidated balance sheets.

Fair Value Measurements

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In other words, they are not measured at fair value on an ongoing basis but are subject to fair value adjustments only in certain circumstances (for example, when there is evidence of impairment).

For the year ended December 25, 2024, the Company recorded non-cash impairment charges $ 0.1 million for certain property and equipment, which were measured at fair value on a nonrecurring basis.

For the year ended December 31, 2025, the Company did no t record any non-cash impairment charges for property and equipment, which were measured at fair value on a nonrecurring basis.

For the year ended December 25, 2024, the

EL POLLO LOCO HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following non-financial assets were measured at fair value, on a nonrecurring basis, as of and for the year ended December 27, 2023 reflecting certain property and equipment and ROU assets for which an impairment loss was recognized during the corresponding periods, as discussed above under "Impairment of Property and Equipment and ROU Assets" (in thousands):

Impairment Losses

Certain property and equipment, net

Certain ROU assets, net

Company recorded non-cash impairment charges of $ 0.1 million for certain property and equipment, which were measured at fair value on a nonrecurring basis.

The following non-financial assets were measured at fair value, on a nonrecurring basis, as of and for the year ended December 27, 2023 for which an impairment loss was recognized during the corresponding periods, as discussed above under "Impairment of Property and Equipment and ROU Assets" (in thousands):

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The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and certain accrued expenses approximate fair value due to their short-term maturities.

The recorded value of the prior years’ TRA approximates fair value, based on borrowing rates currently available to the Company for debts with similar terms and remaining maturities (Level 3 measurement).

Stock-Based Compensation

Stock-based compensation expense is recognized using a fair-value based method for costs related to all share-based payments including stock options, restricted stock and performance-based stock units issued under the Company’s employee stock plans.

The fair value of stock option awards is estimated on the date of grant using an option pricing model, which require the input of subjective assumptions.

The fair value of stock option awards is estimated on the date of grant using an option pricing model, which requires the input of subjective assumptions.

The Company is required to use judgment in estimating the amount of stock-based awards that are expected to be forfeited.

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Recently Issued Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2023-07, “Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosure.” The ASU updates reportable segment disclosure requirements, primarily through requiring enhanced disclosures about significant segment expenses and information used to assess segment performance.

These disclosures are required quarterly.

The ASU is effective for fiscal years beginning after December 15, 2023 and interim periods beginning after December 15, 2024, with early adoption permitted.

It is required to be adopted retrospectively for all prior periods presented in the financial statements.

The Company adopted this standard during the year ended December 25, 2024.

See Note 17 below for the Company's updated segment disclosures.

EL POLLO LOCO HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In December 2023, the FASB issued ASU No.

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2023-09, “Income Taxes (Topic 740):

Improvements to Income Tax Disclosures.” The ASU includes amendments requiring enhanced income tax disclosures, primarily related to standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction.

The guidance is effective for fiscal years beginning after December 15, 2024, with early adoption permitted, and should be applied prospectively with the option of retrospective application.

The Company is currently evaluating the impact of adopting this ASU on its disclosures.

The Company has adopted this standard during the year ended December 31, 2025 on a retrospective basis.

See Note 10, Income Taxes , below for the Company’s updated disclosure.

In November 2024, the FASB issued ASU No.

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The Company is currently evaluating the impact of adopting this ASU on its disclosures.

EL POLLO LOCO HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In December 2025, the FASB issued ASU No.

2025-11, “Interim Reporting (Topic 270) Narrow-Scope Improvements”.

The ASU clarifies interim disclosure requirements and the applicability of Topic 270.

The amendments in this update result in a comprehensive list of interim disclosures that are required by GAAP.

The ASU is effective for interim periods within annual periods beginning after December 15, 2027, with early adoption permitted.

The ASU can be adopted either prospectively or retrospectively.

The Company is currently evaluating the impact of adopting this ASU on its disclosures.

The Company reviewed all other recently issued accounting pronouncements and concluded that they were either not applicable or not expected to have a significant impact to the consolidated financial statements.

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Depreciation and amortization expense was $ 16.0 million, $ 15.7 million and $ 15.2 million for the years ended December 31, 2025, December 25, 2024, and December 27, 2023, respectively.

Based on the Company’s review of its property and equipment assets for impairment, the Company recorded non-cash impairment charges of $ 0.1 million, $ 1.5 million and $ 0.4 million for the years ended December 25, 2024, December 27, 2023, and December 28, 2022, respectively.

Based on the Company’s review of its property and equipment assets for impairment, the Company did not record any non-cash impairment charges for the year ended December 31, 2025 and recorded $ 0.1 million and $ 1.5 million for the years ended December 25, 2024 and December 27, 2023, respectively.

See “Impairment of Property and Equipment and ROU Assets” in Note 2 “Summary of Significant Accounting Policies” for additional information.

EL POLLO LOCO HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

TRADEMARKS AND OTHER INTANGIBLE ASSETS

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December 31, 2025

December 25, 2024

1 unchanged sentence

Trademarks, net

EL POLLO LOCO HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Nature of leases

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however, the Company currently has one facility and 24 equipment leases that are classified as finance leases.

Additionally, a number of the Company’s leases have payments, which increase at pre-determined dates based on the change in the consumer price index.

For all leases, the Company also reimburses the landlord for non-lease components, or items that are not considered components of a contract, such as CAM, property tax and insurance costs.

For all leases, the Company also reimburses the landlord for non-lease components, or items that are not considered components of a contract, such as common area maintenance, property tax and insurance costs.

While the Company determined not to separate lease and non-lease components, these payments are based on actual costs, making them variable consideration and excluding them from the calculations of the ROU asset and lease liability.

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Furthermore, there are no residual value guarantees and no restrictions imposed by the lease.

During the year ended December 25, 2024 and December 27, 2023, the Company reassessed the lease terms on 28 and 36 restaurants, respectively, due to certain triggering events, such as the addition of significant leasehold improvements with useful lives that extend past the current lease expiration, the decision to terminate a lease, or the decision to renew.

During the year ended December 31, 2025 and December 25, 2024, the Company reassessed the lease terms on 19 and 28 restaurants, respectively, due to certain triggering events, such as the addition of significant leasehold improvements with useful lives that extend past the current lease expiration, the decision to terminate a lease, or the decision to renew or extend a lease or exercise a lease option.

As a result of the reassessment, an additional $ 11.3 million and $ 20.5 million, respectively, of ROU asset and lease liabilities were recognized for the year ended December 31, 2025 and December 25, 2024, and will be amortized over the new lease term.

For the year ended December 31, 2025, the Company had five lease commencements resulting in $ 6.2 million.

For the year ended December 25, 2024, the Company had no lease commencements.

There were no reassessments that impacted the original lease classification during the year ended December 31, 2025 or December 25, 2024 .

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The Company does not have any related party leases.

During fiscal 2025 and fiscal 2024, the Company did no t record any non-cash impairment charges.

During fiscal 2023, the Company determined that the carrying value of ROU assets at one restaurant was not recoverable.

As a result, the Company recorded a less than $ 0.1 million non-cash impairment charge for the year ended December 27, 2023 related to one restaurant in California.

EL POLLO LOCO HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

During fiscal 2024, the Company did no t record any non-cash impairment charges.

During fiscal 2023, the Company determined that the carrying value of an ROU assets at one restaurant was not recoverable.

As a result, the Company recorded a less than $ 0.1 million non-cash impairment charge for the year ended December 27, 2023 related to one restaurant in California.

During fiscal 2022, the Company determined that the carrying value of ROU assets at one restaurant were not recoverable.

As a result, the Company recorded a less than $ 0.1 million non-cash impairment charge for the year ended December 28, 2022 related to one restaurant closed in California.

Leases of equipment primarily consist of restaurant equipment, copiers and vehicles.

9 unchanged sentences

As the Company has adopted the practical expedient not to separate lease and non-lease components, no significant assumptions or judgments were necessary in allocating consideration between these components, for all classes of underlying assets.

EL POLLO LOCO HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table presents the Company’s total lease cost, disaggregated by underlying asset (in thousands):

The following table presents the Company’s total lease cost, net, disaggregated by underlying asset (in thousands):

December 31, 2025

9 unchanged sentences

Sublease income

Total lease cost

The following table presents the Company’s total lease cost on the consolidated statement of income (in thousands):

Total lease cost, net

The following table presents the Company’s total lease cost on the consolidated statements of income (in thousands):

December 31, 2025

3 unchanged sentences

Lease cost – General & administrative

EL POLLO LOCO HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Lease cost – Depreciation and amortization

1 unchanged sentence

Lease cost – Closed-store reserve

Total lease cost

EL POLLO LOCO HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Total lease cost, net

The Company had the following cash and non-cash activities associated with its leases (dollar amounts in thousands):

29 unchanged sentences

Noncurrent portion

Short-Term Leases

The Company has multiple short-term leases, which have terms of less than 12 months, and thus were excluded from the recognition requirements of Topic 842.

The Company has recognized these lease payments in its consolidated statement of income on a straight-line basis over the lease term and variable lease payments in the period in which the obligation for those payments is incurred.

EL POLLO LOCO HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Short-Term Leases

The Company has multiple short-term leases, which have terms of less than 12 months, and thus were excluded from the recognition requirements of Topic 842.

The Company has recognized these lease payments in its consolidated statements of income on a straight-line basis over the lease term and variable lease payments in the period in which the obligation for those payments is incurred.

The Company is a lessor for certain property, facilities and equipment owned by the Company and leased to others, principally franchisees, under non-cancelable leases with initial terms ranging from 3 to 20 years .

These lease agreements generally provide for a fixed base rent and, in some instances, contingent rent based on a percentage of gross operating profit or net revenues.

These lease agreements generally provide for a fixed base rent and, in some instances, contingent rent based on a percentage of gross sales or net revenues.

All leases are considered operating leases.

8 unchanged sentences

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 subject to certain customary exceptions.

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 past or present officers, directors, or employees (or their estates) of the Company 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.

3 unchanged sentences

Borrowings under the 2022 Revolver may be repaid and reborrowed.

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 during fiscal 2025, the interest rate range was 5.3 %

EL POLLO LOCO HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

1 unchanged sentence

For the years ended December 31, 2025, December 25, 2024 and December 27, 2023, the Company had interest expense of $ 3.9 million, $ 5.4 million and $ 4.4 million, respectively, under the 2022 Revolver.

EL POLLO LOCO HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The 2022 Credit Agreement contains certain financial covenants.

7 unchanged sentences

There are no required principal payments prior to maturity for the 2022 Revolver.

Interest Rate Swap

During the year ended December 25, 2019, the Company entered into a variable-to-fixed interest rate swap agreement with a notional amount of $ 40.0 million that matures in June 2023.

The objective of the interest rate swap was to reduce the Company’s exposure to interest rate risk for a portion of its variable-rate interest payments on its borrowings under the previous credit agreement.

The interest rate swap was designated as a cash flow hedge, as the changes in the future cash flows of the swap were expected to offset changes in expected future interest payments on the related variable-rate debt, in accordance with Accounting Standards Codification (“ASC”) 815 “Derivatives and Hedging.”

In connection with the Company’s entry into the 2022 Credit Agreement, on July 28, 2022, the Company terminated the interest rate swap, which was previously used to hedge interest rate risk.

Prior to the interest rate swap termination, the swap was a highly effective cash flow hedge.

In settlement of this swap, the Company received approximately $ 0.6 million and derecognized the corresponding interest rate swap asset.

The remaining amount in AOCI related to the hedging relationship was reclassified into earnings when the hedged forecasted transaction was reported in earnings.

The following table summarizes the effect of the Company’s cash flow hedge accounting on the consolidated statements of income (in thousands):

December 27, 2023

December 28, 2022

Interest expense on hedged portion of debt

Interest income on interest rate swap

Interest (income) expenses on debt and derivatives, net

The following table summarizes the effect of the Company’s cash flow hedge accounting on AOCI for the years ended December 27, 2023 and December 28, 2022 (in thousands):

Gain Reclassified from

Net Gain Recognized in OCI

AOCI into Interest Income

December 27, 2023

December 28, 2022

December 27, 2023

December 28, 2022

Interest rate swap

EL POLLO LOCO HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

OTHER ACCRUED EXPENSES AND CURRENT LIABILITIES

16 unchanged sentences

The provision for income taxes is based on the following components (in thousands):

For the Years Ended

Current income taxes:

Total current

Deferred income taxes:

Total deferred

Tax provision for income taxes

The provision for income taxes differs from the amount computed by applying the federal income tax rate of 21.0 % for fiscal 2024, 2023 and 2022 as follows:

EL POLLO LOCO HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended

Statutory federal income tax rate applied to earnings before income taxes and extraordinary items

State income tax expense (net of federal benefit)

Change in valuation allowance

State credit expiration

TRA expense (income)

Current tax expense

State and local

Total current tax expense

Deferred tax expense (benefit)

State and local

Total deferred tax expense (benefit)

Total income tax expense

State and local

Total income tax expense

The table below provides the updated requirements of ASU No.

2023-09, Improvements to Income Tax Disclosures for fiscal 2025, 2024 and 2023.

The provision for income taxes differs from the amount computed by applying the federal income tax rate of 21.0 % for fiscal 2025, 2024 and 2023 as follows (amounts in thousands):

federal statutory tax rate

State and local income taxes, net of federal income tax effect (1) (2)

Nontaxable or nondeductible items

Stock option exercises

Nondeductible stock compensation expense

162(m) nondeductible executive compensation

Changes in unrecognized tax benefits

Other adjustments

Deferred tax liability true up

Effective tax rate

(1) State taxes in California made up the majority (greater than 50 percent) of the tax effect in this category.

(2) During fiscal 2023, the ten-year carryover period for California Enterprise Zone credits expired, and the Company released the corresponding valuation allowance.

For the Fiscal Years Ended

Income Taxes Paid (Net of Refunds Received)

December 31, 2025

December 25, 2024

December 27, 2023

EL POLLO LOCO HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2025, the Company had no federal and less than $ 0.1 million state NOL carryforwards.

4 unchanged sentences

The Company has evaluated the available evidence supporting the realization of its gross deferred tax assets.

After evaluating all of the positive and negative evidence, including the Company’s continued income from operations, the Company concluded that it is more likely than not that its deferred tax assets except for certain state credits will be realized.

As of December 25, 2024, the Company had no valuation allowance.

During fiscal 2023, the Company released the corresponding valuation allowance since the ten-year carryover period for California Enterprise Zone credits expired at the end of fiscal 2023.

In fiscal 2022, the Company recorded a valuation allowance of approximately $ 0.5 million, against its deferred tax asset resulting from certain tax credits that may not be realizable prior to the time the credits expire.

On July 30, 2014, the Company entered into the TRA.

The TRA calls for the Company to pay its pre-IPO stockholders 85 % of the cash savings that the Company realizes in its taxes as a result of utilizing its NOLs and other tax attributes attributable to preceding periods.

The TRA charge expense (benefit) is a permanent add-back to the Company’s taxable income.

In fiscal 2024, 2023 and 2022, TRA resulted in less than $ 0.1 million of income, $ 0.1 million of expense and $ 0.4 million of income, respectively, in each case as a result of the amortization of interest expense related to the total expected TRA payments and changes in estimates for actual tax returns filed and future forecasted taxable income .

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

Further, on May 29, 2024, the Company 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 the Company’s consolidated balance sheets.

EL POLLO LOCO HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company’s deferred tax assets and liabilities as of December 25, 2024 and December 27, 2023 are summarized below.

As of December 31, 2025 and December 25, 2024, the Company had no valuation allowance.

The Company’s deferred tax assets and liabilities as of December 31, 2025 and December 25, 2024 are summarized below (in thousands).

Deferred assets:

1 unchanged sentence

Accrued vacation

Accrued legal

Accrued workers’ compensation

8 unchanged sentences

The net deferred tax asset/(liability) amounts above as of December 31, 2025 and December 25, 2024 have been classified in the accompanying consolidated balance sheets as noncurrent assets/(liabilities) and are as follows (in thousands):

Assets (Liabilities) - state

Assets - state

Liabilities - federal

1 unchanged sentence

Consequently, no interest or penalties have been accrued by the Company.

The Company believes that no significant changes to the amount of unrecognized tax benefits will occur within the next twelve months.

The Company is subject to taxation in the United States and in various state jurisdictions.

EL POLLO LOCO HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company is no longer subject to U.S.

4 unchanged sentences

The Company’s matching contribution immediately fully vests.

The Company’s contributions to the plan were $ 0.8 million for the years ended December 25, 2024, December 27, 2023 and December 28, 2022.

EL POLLO LOCO HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company’s contributions to the plan were $ 0.9 million for the year ended December 31, 2025 and $ 0.8 million for both the years ended December 25, 2024 and December 27, 2023.

STOCK-BASED COMPENSATION

Pursuant to the 2018 Omnibus Equity Incentive Plan the Company grants stock options (“options”), restricted stock units, performance-based stock units and restricted stock.

The Company has authorized 5,652,240 shares of common stock for issuance in connection with stock awards.

On May 28, 2024, the Company’s stockholders approved amending the Equity Incentive Plan, formerly the 2018 Omnibus Equity Incentive Plan, under which the new aggregate share limit was increased by 1,250,000 shares.

On May 29, 2025, the Company’s stockholders approved an amendment to the Incentive Plan, under which the new aggregate share limit was increased by 1,250,000 shares for a total of 4,500,000 shares.

As of December 31, 2025, 525,898 shares were available for grant.

During the years ended December 31, 2025, December 25, 2024 and December 27, 2023, the Company recognized stock-based compensation expense of $ 5.4 million, $ 3.9 million and $ 3.0 million, respectively.

These expenses were included in general and administrative expenses consistent with the salary expense for the related optionees in the accompanying consolidated statements of income.

These expenses were included in general and administrative expenses consistent with the salary expense for the related grantees in the accompanying consolidated statements of income.

Stock Options

4 unchanged sentences

In fiscal 2025, the Company granted 525,493 options, with an exercise price equal to the fair market value of the common stock on the date of grant.

The options granted in fiscal 2024 had a four year vesting period.

The options granted in fiscal 2025 had a three year vesting period.

Stock options generally expire ten years from the date of grant.

16 unchanged sentences

Exercisable at December 31, 2025

The intrinsic value of options exercised, calculated as the difference between the market value on the date of exercise and the exercise price, was $ 0.3 million, $ 0.9 million and $ 0.8 million for fiscal years 2024, 2023 and 2022, respectively.

The Company measures and recognizes compensation expense for the estimated fair value of stock options for employees and non-employee directors and similar awards based on the grant-date fair value of the award.

For options that are based on a service requirement, the cost is recognized on a straight-line basis over the requisite service period, usually the vesting period.

For options that were based on performance requirements, costs were recognized over periods to which the performance criteria related.

In order to calculate the Company’s stock options’ fair values and the associated compensation costs for share-based awards, the Company utilizes the Black–Scholes option pricing model and has developed estimates of various inputs including forfeiture rate, expected term, expected volatility, and risk-free

EL POLLO LOCO HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

interest rate.

The intrinsic value of options exercised, calculated as the difference between the market value on the date of exercise and the exercise price, was $ 0.2 million, $ 0.3 million and $ 0.9 million for fiscal years 2025, 2024 and 2023, respectively.

The Company measures and recognizes compensation expense for the estimated fair value of stock options for employees based on the grant-date fair value of the award.

For options that are based on a service requirement, the cost is recognized on a straight-line basis over the requisite service period, usually the vesting period.

The forfeiture rate is based on historical rates and reduces the compensation expense recognized.

24 unchanged sentences

In fiscal 2025 and 2024, 408,348 and 472,186 restricted share awards were granted, respectively, at the fair market value on the date of grant.

These grants vest based on continued service over one year for directors and four years for employees.

The grants in fiscal 2025 vest based on continued service over one year for directors and three years for employees and the grants in fiscal 2024 vest based on continued service over one year for directors and four years for employees.

EL POLLO LOCO HOLDINGS, INC.

12 unchanged sentences

As of December 31, 2025, based on the target level of performance, the total unrecognized compensation expense related to unvested performance stock units was $ 1.1 million, which is expected to be recognized over a weighted-average period of 2.05 years .

Changes in performance-based shares for the years ended December 31, 2025 and December 25 2024, are as follows:

Weighted-Average

Unvested shares at December 27, 2023

Forfeited, cancelled, or expired

Unvested shares at December 25, 2024

Forfeited and cancelled

Unvested shares at December 31, 2025

EARNINGS PER SHARE

1 unchanged sentence

Diluted EPS is calculated using the weighted-average number of shares of common stock outstanding and potentially dilutive during the period, using the treasury stock method.

EL POLLO LOCO HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Below are basic and diluted EPS data for the periods indicated, which are in thousands except for per share data.

10 unchanged sentences

Weighted-average shares outstanding—diluted

EL POLLO LOCO HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Share Repurchases

Share Repurchase Program

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

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

Pursuant to the Share Repurchase Program, the Company is 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 the Company to acquire any particular number of shares.

The repurchase program will terminate on March 31, 2025.

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

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

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

Pursuant to the Share Repurchase Program, the Company was 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 did not obligate the Company to acquire any particular number of shares.

The repurchase program was terminated on March 31, 2025.

Further, on December 4, 2023, the Company repurchased 1.5 million shares for a total purchase price of $ 12.6 million under the Stock Repurchase Program.

Following completion of this repurchase, approximately $ 7.4 million of the Company’s common stock remained available for repurchase under the Share Repurchase Program at December 27, 2023.

1 unchanged sentence

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

During the year ended December 31, 2025, prior to the termination of the program on March 31, 2025, the Company repurchased 163,229 shares of its common stock for a total purchase price of $ 1.8 million under the Stock Repurchase Program.

Other Share Repurchases

On August 7, 2023, the Company entered into a Stock Repurchase Agreement with the Sellers, as amended on August 4, 2024, pursuant to which the Company agreed to purchase an aggregate of 2,500,000 shares of the Company’s common stock from the Sellers at a price of $ 10.63 per share, representing the closing price of such shares as listed on Nasdaq on August 7, 2023, for a total purchase price of $ 26.6 million.

EL POLLO LOCO HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

stock from the Sellers at a price of $ 10.63 per share, representing the closing price of such shares as listed on Nasdaq on August 7, 2023, for a total purchase price of $ 26.6 million.

The repurchase was completed in August 2023.

3 unchanged sentences

(“Freeman Spogli”), collectively with the Sellers and certain other funds managed by Freeman Spogli, was the Company’s largest stockholder.

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.

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

COMMITMENTS AND CONTINGENCIES

5 unchanged sentences

The Company has long-term beverage supply agreements with certain major beverage vendors.

Pursuant to the terms of these arrangements, marketing rebates are provided to the Company and its franchisees from the beverage vendors based upon the dollar volume of purchases for system-wide restaurants which will vary according to their demand for beverage

EL POLLO LOCO HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

syrup and fluctuations in the market rates for beverage syrup.

Pursuant to the terms of these arrangements, volume and marketing rebates are provided to the Company and its franchisees from the beverage vendors based upon the dollar volume of purchases for system-wide restaurants which will vary according to their demand for beverage syrup and fluctuations in the market rates for beverage syrup.

These contracts have terms extending through the end of 2032.

3 unchanged sentences

These leases have various terms, the latest of which expires in 2038 .

As of December 25, 2024, the potential amount of undiscounted payments the Company could be required to make in the event of non-payment by the primary lessee was $ 3.5 million.

As of December 31, 2025, the potential amount of undiscounted payments the Company could be required to make in the event of non-payment by the primary lessees was $ 3.6 million.

The present value of these potential payments discounted at the Company’s estimated pre-tax cost of debt at December 31, 2025 was $ 2.9 million.

5 unchanged sentences

These agreements provide for minimum salary levels, possible annual adjustments for cost-of-living changes, and incentive bonuses that are payable under certain business conditions.

EL POLLO LOCO HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Indemnification Agreements

8 unchanged sentences

Franchise and franchise advertising fee revenue

Franchise revenue consists of franchise royalties, initial franchise fees, license fees due from franchisees, IT support services, and rental income for subleases to franchisees.

Franchise revenue consists of franchise royalties, initial and renewal franchise fees, license fees due from franchisees, IT support services, IT pass through fees related to IT hardware or software and rental income for subleases to franchisees.

Franchise advertising fee revenue consists of advertising contributions received from franchisees.

EL POLLO LOCO HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Disaggregated revenue

8 unchanged sentences

December 27, 2023

Revenue recognized - beginning balance

Revenue recognized

Additional contract liability

December 25, 2024

Revenue recognized - beginning balance

Revenue recognized

Additional contract liability

4 unchanged sentences

Revenue is recognized from these agreements as the underlying performance obligation is satisfied, which is over the term of the agreement.

For the year ended December 27, 2023, there was an increase to the contract liability balance due to the Company’s completion of the sale of 18 company-operated restaurants within the California, Utah and Texas to an existing franchisee.

This resulted in a net gain on sale of restaurant of $ 5.0 million including an additional contract liability of $ 0.3 million, relating to allocation of the transaction price to various performance obligations under the applicable contracts of the sale .

The following table illustrates the estimated revenue to be recognized in the future related to performance obligations that are unsatisfied as of December 25, 2024 (in thousands):

Franchise revenues:

EL POLLO LOCO HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table illustrates the estimated revenue to be recognized in the future related to performance obligations that are unsatisfied as of December 31, 2025 (in thousands):

Franchise revenues:

Changes in the loyalty rewards program liability included in other accrued expenses and current liabilities on the consolidated balance sheets were as follows (in thousands):

20 unchanged sentences

In connection with the distribution of the Rights, the Company entered into a Rights Agreement (the “Rights Agreement”), dated as of August 8, 2023, between the Company and Equiniti Trust Company, LLC, as rights agent.

Each Right entitles the registered holder to purchase from the Company one one-thousandth of a share of Series A Preferred Stock, par value $ 0.01 per share, of the Company (the “Preferred Shares”) at a price of $ 53.75 per one one-thousandth of a Preferred Share represented by a Right, subject to adjustment.

On August 4, 2024, the Board approved and entered into an Amendment (the “Amendment”) to the Rights Agreement (together with the Agreement, the “Amended Rights Agreement”).

Pursuant to the Amendment, the expiration date of the Rights has been extended until 11:59 p.m., Pacific Time, on the date that the votes of the stockholders of the Company with respect to the Company’s next annual meeting of stockholders in 2025 are certified, unless stockholders approve the further extension of the Amended Rights Agreement beyond that date.

The Rights Agreement was initially adopted in August 2023 (as initially adopted, the “Rights Agreement”) in response to a rapid and significant accumulation of Company stock by Biglari Capital Corp.

(together with its affiliates, “Biglari Capital”).

In adopting the original Rights Agreement, the Board noted that Biglari Capital has a track record of acquiring

Each Right entitled the registered holder to purchase from the Company one one-thousandth of a

EL POLLO LOCO HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

substantial and sometimes controlling interests in public restaurant companies.

Since that time, members of the Board and leadership team have met with Biglari Capital on multiple occasions.

In approving the Amendment to extend the Rights Agreement, the Board considered, among other things, that during a recent meeting, a representative of Biglari Capital stated a desire to make substantial additional share accumulations in the public market if the Board terminated the Rights Agreement or allowed it to expire at the end of its initial term in August 2024.

The Amendment also amends the Rights Agreement to increase the Beneficial Ownership (as defined in the Amended Rights Agreement) triggering threshold for being deemed an Acquiring Person (as defined below), unless one of the enumerated exceptions is applicable, from 12.5 % to 15.0 %.

In all other respects, the terms of the Rights Agreement remain unmodified and in full force and effect.

Under the Amended Rights Agreement, the Rights will generally be exercisable only in the event that a person or group of affiliated or associated persons (such person or group being an “Acquiring Person”), other than certain exempt persons, acquires (or commences a tender offer or exchange offer the consummation of which would result in) beneficial ownership of 15.0 % or more of the outstanding Common Shares.

In such case (with certain limited exceptions), each holder of a Right (other than the Acquiring Person, whose Rights shall become void) will have the right to receive, upon exercise at the then current exercise price of the Right, Common Shares (or, if the Board so elects, cash, securities, or other property) having a value equal to two times (2x) the exercise price of the Right.

Right to Exchange

At any time after any person or group becomes an Acquiring Person, the Board may exchange the Rights at an exchange ratio of one Common Share per Right (subject to adjustment).

Flip-over Event

If, at any time after a person or group becomes an Acquiring Person, (i) the Company engages in a consolidation or merger and, in connection there with all or part of the Common Shares are or will be changed into or exchanged for stock or other securities of any other person or cash or any other property;

or (ii) 50 % or more of the Company’s consolidated assets or earning power are sold, then each holder of a Right will thereafter have the right to receive, upon exercise at the then current exercise price of the Right, that number of shares of common stock of the acquiring company having a market value of two times the exercise price of the Right.

At any time prior to the time any person or group becomes an Acquiring Person, the Board may redeem the Rights at a price of $ 0.001 per Right (the “Redemption Price”).

Immediately upon any redemption of the Rights, the right to exercise the Rights will terminate and the only right of the holders of Rights will be to receive the Redemption Price.

Rights of Holders

Until a Right is exercised, the holder thereof, as such, will have no rights as a stockholder of the Company, including, without limitation, the right to vote or to receive dividends.

share of Series A Preferred Stock, par value $ 0.01 per share, of the Company (the “Preferred Shares”) at a price of $ 53.75 per one one-thousandth of a Preferred Share represented by a Right, subject to adjustment.

On August 4, 2024, the Board approved and entered into an Amendment to the Rights Agreement (together, the “Amended Rights Agreement”).

Pursuant to the Amended Rights Agreement, the expiration date of the Rights was extended to May 30, 2025 11:59 p.m., Pacific Time, the date that the votes of the stockholders of the Company with respect to the Company’s 2025 annual meeting of stockholders were certified.

The Amended Rights Agreement expired and was terminated by its term on May 30, 2025.

SEGMENT REPORTING

1 unchanged sentence

The Company derives revenue from three primary sources:

(1) company-operated restaurant revenue, (2) franchise revenue, which is comprised primarily of franchise royalties and, to a lesser extent, franchise fees and sublease rental

EL POLLO LOCO HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

income, and (3) franchise advertising fee revenue.

(1) company-operated restaurant revenue, (2) franchise revenue, which is comprised primarily of franchise royalties and, to a lesser extent, franchise fees and sublease rental income, and (3) franchise advertising fee revenue.

All significant revenues relate to retail sales of food and beverages through either company-operated or franchised restaurants.

21 unchanged sentences

Income from operations

EL POLLO LOCO HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Interest expenses, net

6 unchanged sentences

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 8. Financial Statements and Supplementary Data