El Pollo Loco (LOCO) Q4 2025 Earnings Transcript

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Date
Thursday, March 12, 2026, at 4:30 p.m. ET
Call Participants
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Chief Executive Officer — Elizabeth Goodwin Williams
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Chief Financial Officer — Ira M. Fils
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Full Conference Call Transcript
Ira M. Fils: Thank you, operator, and good afternoon. By now, everyone should have access to our Fourth Quarter 2025 earnings, which can be found at elpolloloco.com in the Investor Relations section. Before we begin our formal remarks, I need to remind everyone that our discussions today will include forward-looking statements, including statements related to our growth opportunities, strategic and operational initiatives, expectations regarding sales and margins, potential changes to our product platforms, capital expenditure plans, the ability of our franchisees to drive growth, expectations regarding commodity and wage inflation, remodel plans, and our 2026 guidance, among others. These forward-looking statements are not guarantees of future performance, and therefore, you should not put undue reliance on them.
These statements are also subject to numerous risks and uncertainties that could cause actual results to differ materially from what we currently expect. We refer you to our recent SEC filings, including our Form 10-K, for a more detailed discussion of the risks that could impact our future operating results and financial condition. We expect to file our 10-K for 2025 tomorrow and encourage you to review that document at your earliest convenience. During today's call, we will discuss non-GAAP measures, which we use for financial and operational decision-making and as a means to evaluate period-to-period comparisons, and which we believe can be useful to investors in evaluating our performance.
The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP, and reconciliations to comparable GAAP measures are available in our earnings release, which is available in the Investor Relations section of our website. With respect to the adjusted EBITDA outlook we will be providing on today's call, please note we have not provided a reconciliation to the most directly comparable forward GAAP financial measure because, without unreasonable efforts, we are unable to predict with reasonable certainty the amount of or timing of non-GAAP adjustments that are used to calculate income from operations and company-operated restaurant revenue on a forward-looking basis.
I would now like to turn it over to our CEO, Elizabeth Goodwin Williams.
Elizabeth Goodwin Williams: Thank you, Ira, and good afternoon, everyone. I am pleased to report strong fourth quarter results that cap off a transformative second year in our brand turnaround journey. In Q4, we delivered a positive quarter of same-store sales growth, including stable traffic, despite the ongoing macroeconomic challenges that persisted across the industry. This top-line momentum, combined with our team's relentless focus on operational excellence, also enabled us to achieve better-than-expected restaurant-level margins. Before we move on, let me quickly recap what we accomplished in 2025. Building on the foundations we established in 2024, we made strategic investments and executed with discipline across our five pillars, achieving meaningful results that we believe position us for accelerated growth in 2026 and beyond.
What began as a transformation effort has now evolved into sustained momentum that validates our long-term growth strategy for El Pollo Loco Holdings, Inc. During the year, we successfully expanded our restaurant-level contribution margins, again demonstrating our ability to drive profitability even while investing in customer value and traffic-driving initiatives. We accomplished this through a methodical approach to cost savings and enhanced labor productivity, including leveraging technology and industry best practices. We are also encouraged by the operational transformation that took hold in 2025, allowing our team members to focus more on guest-serving activities.
In addition, we made substantial progress improving our unit economics by successfully reducing our new build cost with our iconic prototype design, and driving even higher cash-on-cash return by utilizing second-generation sites where available. As we look ahead, our priorities for 2026 are clear: to drive sustainable traffic growth across our system while maintaining the margin discipline and unit economic improvements we have accomplished over the past two years, and to thoughtfully grow El Pollo Loco Holdings, Inc. across the country. We will achieve this by continuing to execute against our five-pillar strategy. Ultimately, we believe our focused approach will accelerate our growth trajectory and further strengthen El Pollo Loco Holdings, Inc.'s position as the nation's favorite fire-grilled chicken restaurant.
With that, let me provide you details on our pillars.
At the heart of a brand that wins is a breakthrough culinary innovation. Together with value, innovation is critical in driving transaction growth, and I am thrilled to share the exciting momentum in our culinary pipeline. Leveraging our unique fire-grilled chicken platform that showcases premium quality at accessible price points, we are able to satisfy our legacy guest preferences while also introducing El Pollo Loco Holdings, Inc. to entirely new consumers across multiple occasions. Over the last eighteen months, we have identified the opportunities to bring more portable and craveable options to our menu.
This is translating to improvements in our core customer feedback scores when asked questions regarding menu variety and “have innovative foods I want to try.” Before I discuss how we capitalize on this opportunity further in 2026, I want to take a moment to celebrate the success of our double chicken street corn and queso crunch burrito bowl that we launched in late September. These bowls were instrumental in driving our fourth quarter performance, exceeding our expectations in both guest response and sales contribution. The popularity of these hearty, value-driven, high-quality offerings was so positive that we made the strategic decision to keep both bowls as permanent menu items.
This success continues to validate our approach to creating a menu that delivers superior value and portability while maintaining the full flavors and premium ingredients that differentiate El Pollo Loco Holdings, Inc. During the quarter, we also launched our $29.99 FAM Feasts, an eight-piece fire-grilled chicken meal with five tortillas, salsas, and churros, providing quality and value for families and groups.
Turning to 2026, we are pleased with the momentum from our Double Pollo Salad that launched in January with fresh options to meet New Year resolutions. Featuring street corn, Mexican Caesar, and bacon ranch options, each salad delivers over 50 grams of protein with a double portion of our signature fire-grilled chicken. Given the consumer appeal of Street Corn and Mexican Caesar salads, both have earned a permanent placement on our menu and continue to resonate well with our guests seeking nutritious and craveable options with fresh ingredients. Building on our solid success, in mid-February, we launched Baja Double Tostadas, reimagining our beloved tostada with bold new flavors and notably a seasonal seafood option.
Our Baja Double Tostadas featuring chicken and shrimp demonstrate our willingness to innovate across a core platform while maintaining our commitment to quality and flavor. While still early, the initial response has been very encouraging, with guests embracing both the limited-time seafood protein and enhanced flavor profile delivered through our lime crema sauce. In addition to new salads and tostadas, we also continue to promote our core fire-grilled chicken on the bone with the return of Mango Habanero Chicken, which was available for a short time, and also the continuation of our $29.99 FAM Feast.
Turning to protein, we are proud of our position as a true protein leader. We further capitalized on the macro trend by launching our version of a protein menu, which is a collection of menu items with more than 20 grams of protein. We did this with a playful nod to the fact that we have been the legitimate place for protein for over fifty years. The February launch culminated with social media content illustrating a drumstick in a protein bar wrapper, messaging that our chicken is the original protein bar, a clever way to connect with today's youthful and protein-focused consumer mindset. The best part of our protein menu is it requires no new operational lift. Rather, it simply showcases what we are known for: high-quality, delicious chicken packed with protein.
As we look toward our future innovation pipeline, we are excited about our upcoming Loco Tenders launch in a few weeks. Our all-white-meat, boldly seasoned tenders feature our signature dipping sauces: Pollo Loco Sauce, Baja Lime, and House Ranch. They also represent our entry into the rapidly growing chicken tender category. Loco Tenders provide a unique El Pollo Loco Holdings, Inc. twist on a classic tender, which we believe will make them a standout and have strong appeal for new and existing customers. We are currently in the final stages preparing for this launch. We are also testing new loaded quesadillas and a crispy grilled chicken sandwich that delivers all the crunch and flavor of a fried sandwich, but it is grilled, not fried. Both entrees are flavorful, portable, and under $10.
Also in test are beverages with Horchata Iced Coffee, featuring our delicious horchata with notes of cinnamon and vanilla, and Cold Foam Coolers, which are aguas frescas topped with sweet, creamy cold foam. Both beverages are planned to launch later this year. These are just a few of the products across our innovation pipeline, which is the most robust we have delivered in years. To support all of this menu innovation and growth, we have implemented an internal process with several stage gates to ensure our restaurant operations are minimally impacted and that we can deliver the quality that defines El Pollo Loco Holdings, Inc.
Best of all, our ability to foster innovation has been enhanced recently by our new culinary kitchen at the heart of our restaurant support center.
Our menu innovation strategy works hand in hand with our targeted marketing efforts to further amplify the El Pollo Loco Holdings, Inc. brand and drive meaningful guest engagement. By emphasizing our unique heritage of fire-grilling chicken and actually cooking in our restaurants, we believe we have a true competitive advantage in the QSR landscape that few brands can claim. We stand firmly behind our commitment to quality, and while others might think our dedication to fire-grilled chicken is loco, we believe this passion is exactly what sets us apart. We are proud of what our Let’s Get Loco campaign accomplished in 2025.
From a distinct tone and look in our advertising to leveraging our passion to build brand affinity, Let’s Get Loco positions us as an authority in authenticity. Beyond advertising, this came to life through our brand activations like our Loco AI Challenge, which invited fans to create chicken-centric content using AI, or our December Twelve Days of Pollo activation where we introduced fans to our Chicken in the Kitchen, which was our version of Elf on the Shelf. The momentum continued as we kicked off the New Year. We officially declared Monday as Leg and Thigh Day, a fun play on leg day at a gym.
We did this by providing gym goers and Loco Rewards members a free Leg and Thigh Meal for the perfect post-workout meal. These buzz-building moments amplify our brand beyond the menu and create moments for real fandom and loyalty.
In addition to larger brand activations, we have also shifted our local marketing approach to include more grassroots efforts to support our fundraising and catering program. This has been especially beneficial in new and growing markets and will become an increasingly important part of our marketing toolkit as we expand. We are focused on growing reach and frequency across all consumer groups, and while it is still early, the data suggests that we are seeing momentum with the younger consumer, particularly the 25 to 34 age bracket, driven by our brand relaunch and marketing efforts. There is still much work to do, but this is an early indicator our initiatives are gaining traction.
Looking ahead, our integrated marketing and menu innovation strategy will continue to focus on our passion for chicken and our commitment to showcasing quality and affordability across multiple consumer occasions in a relevant way. Whether we are launching new menu innovations, creating memorable brand moments, or taking a local approach in new markets, our marketing will consistently reinforce our differentiator of fire-grilled chicken while meeting the evolving consumer demand for portable, flavorful, and protein-rich options.
Shifting to a hospitality mindset, I want to highlight the immense focus we have placed on operational excellence to drive sustainable traffic growth. In 2025, we recognized an opportunity to invest in driving standards and accountability through third-party measurement and direct customer feedback and benchmarking. The investments we have made are being noticed by customers. Our overall satisfaction, or OSAT, scores are now outpacing the QSR industry, as measured by SMG, and we have shown improvement across all measures from accuracy, quality, friendliness, cleanliness, and speed. While this sequential improvement has continued into the first quarter, I do believe we still have room for improvement which will drive additional future growth.
I want to give special recognition for the improvement we saw in friendliness, which was the largest sequential increase. This was made possible by our team members embracing our opportunity and delivering excellent service each and every day. I want to take a moment to say thank you to our restaurant team members and our franchise partners. We are excited about the opportunity to continue raising the bar. El Pollo Loco Holdings, Inc. is consistently recognized for our exceptional food; we are motivated to earn that same recognition for our operational excellence.
With our focus on operational excellence and fundamentals, we are combining innovative tools and AI applications to further drive team member efficiency and customer experience. Throughout the year, we will continue to deploy tools, systems, and new ways of training that help us deliver a robust culinary calendar while also elevating customer service. I would like to note that these strategic investments in operations and technology will naturally translate to an elevated G&A in the near term, on which I