Q2 2026 El Pollo Loco Holdings Inc Earnings Call

August 6, 2026

Speaker #1: Good day, ladies and gentlemen. Thank you for standing by. Welcome to the El Pollo Loco second quarter 2026 earnings conference call. At this time, all participants have been placed in listen-only mode, and there will be an opportunity to ask questions following the presentation.

Operator 2: Good day, ladies and gentlemen. Thank you for standing by. Welcome to the El Pollo Loco Second Quarter 2026 Earnings Conference Call. This time, all participants have been placed in listen-only mode, and there will be an opportunity to ask questions following the presentation. Please note that this conference is being recorded today, August 6, 2026. Now, I'd like to turn the conference over to Ira Fils, the company's Chief Financial Officer.

Operator: Good e, ladies and gentlemen. Thank you for standing by. Welcome to the El Pollo Loco Second Quarter 2026 Earnings Conference Call. This time, all participants have been placed in listen-only mode, and there will be an opportunity to ask questions following the presentation. Please note that this conference is being recorded today, August 6, 2026. Now, I'd like to turn the conference over to Ira Fils, the company's Chief Financial Officer.

Speaker #1: Please note that this conference is being recorded today, August 6, 2026. And now I'd like to turn the conference over to Ira Fils, the company's Chief Financial Officer.

Speaker #2: Thank you, operator, and good afternoon. By now, everyone should have access to our second quarter, 2026 earnings release, which can be found at www.elpolloloco.com in the investor relations section.

Ira Fils: Thank you, operator, and good afternoon. By now, everyone should have access to our Q2 2026 earnings release, which can be found at www.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 new products and 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.

Speaker #2: 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 new products and 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.

Speaker #2: 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.

Speaker #2: For a more detailed discussion of the risks that could impact our future operating results and financial condition, we refer you to our recent SEC filings, including our Form 10-K for the year ended December 31, 2025, as well as our Form 10-Q for the second quarter of 2026, which we expect to file tomorrow.

Ira Fils: For a more detailed discussion of the risks that could impact our future operating results and financial condition, we refer you to our recent SEC filings, including our Form 10-K for the year ended December 31, 2025, as well as our Form 10-Q for the Q2 of 2026, which we expect to file tomorrow and encourage you to review at your earliest convenience. During today's call, we will discuss non-GAAP measures, which we use for financial and operating 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.

Speaker #2: And encourage you to review at your earliest convenience. During today's call, we will discuss non-GAAP measures which we use for financial and operating decision-making and as a means to evaluate period-to-period useful to investors in evaluating our performance.

Speaker #2: 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.

Speaker #2: With respect to the adjusted EBITDA outlook, we will be providing on today's call. Please note that we have not provided a reconciliation to the most directly comparable forward-looking GAAP financial measure because, without unreasonable efforts, we are unable to predict what a reasonable certainty the amount of or timing of non-GAAP adjustments that are used to calculate income from operations and company operated revenue on a forward-looking basis.

Ira Fils: With respect to the adjusted EBITDA outlook we will be providing on today's call, please note that we have not provided a reconciliation to the most directly comparable forward-looking 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 revenue on a forward-looking basis. Now, I would like to turn it over to our CEO, Liz Williams.

Speaker #2: Now, I would like to turn it over to our CEO, Liz.

Speaker #1: Volumes

Speaker #2: Thank you , IRA . And afternoon , everyone . We are pleased with our second quarter results of system wide . Same store sales growth of 3.9% and restaurant level margin of 19.5% , which demonstrates the sustainability of the improvements we've made over the past two years .

Liz Williams: Thank you, Ira, and good afternoon, everyone. We are pleased with our Q2 results of systemwide same-store sales growth of 3.9% and restaurant level margin of 19.5%, which demonstrate the sustainability of the improvements we've made over the past two years. What's more encouraging is that we achieved this performance through a combination of sales layers and operational improvements, which gives us confidence in the long-term sustainability of our growth. More specifically, our top-line performance this quarter was driven by a combination of our strategic pillars, notably with strong brand activation and menu innovation, a targeted focus on providing value through our digital channels and operational excellence. With that, let me walk you through our progress across our strategic pillars. Let's start with brand activations, which continues to be anchored by menu innovation.

Speaker #2: What's more encouraging we achieved this performance through a combination of sales layers and operational improvements , which gives us confidence in the long term sustainability of our growth .

Speaker #2: More specifically , our top line performance this quarter was driven by a combination of our strategic pillars , notably with strong brand activation and menu innovation , a targeted focus on providing value through our digital channels and operational excellence .

Speaker #2: With that , let me walk you through our progress across our strategic pillars . Let's start with brand not Wins , which continues to be anchored by menu innovation First , our loco tenders , which launched at the end of the first quarter , brought new guests to the brand .

Liz Williams: First, our Loco Tenders, which launched at the end of Q1, brought new guests to the brand, many of whom who had not considered El Pollo Loco before, and they broadened our appeal beyond our core Fire-Grilled Chicken loyalists. Notably, our tenders generated significant buzz and excitement. From social media conversation to word of mouth, this craveable product done with our own twist, put El Pollo Loco back in the conversation in a way that we haven't seen in years. Our high-quality Mexican seasoned Loco Tenders paired with our new Pollo Loco Sauce drove trial across income and age cohorts, but notably with a new, younger consumer. They were additive to check and popular in snacking and late evening day parts. As these were always planned as an LTO, we are taking the learnings and already thinking of ways to bring them back in the future.

Speaker #2: Many of whom who had not considered El Pollo Loco before . And they broadened our appeal beyond our core fire grilled chicken loyalists Notably , our tenders generated significant buzz and excitement from social media conversation to word of mouth .

Speaker #2: This craveable product , done with our own twist , put El Pollo Loco back in the conversation in a way that we hadn't seen in years .

Speaker #2: Our high quality , Mexican seasoned loco tenders paired with our new Pollo Loco sauce , drove trial across income and age cohorts . But notably with a new , younger consumer They were additive to check , and popular in snacking and late evening dayparts these were always planned as an LTO .

Speaker #2: We are taking the learnings and already thinking of ways to bring them back in the future We believe we've only scratched the surface of what is possible with loco tenders following tenders in late June .

Liz Williams: We believe we've only scratched the surface of what is possible with Loco Tenders. Following Tenders, in late June, we introduced loaded quesadillas available in two flavors, queso with our creamy cilantro sauce and street corn with our creamy chipotle sauce, both with our citrus-marinated fire-grilled chopped chicken breast wrapped in a warm flour tortilla and grilled to order. We designed these for portability and value, giving guests a satisfying eat they can enjoy on the go at a price of less than $10 a la carte or $10.99 for a combo meal, which includes chips, salsa, and a drink. We also gave our Loco Rewards members early exclusive access ahead of the general launch. The early guest response has been strong, and we believe loaded quesadillas strengthens our lineup within handheld and on-the-go occasions.

Speaker #2: We introduced loaded quesadillas available in two flavors queso , with our creamy cilantro sauce and street corn with our creamy chipotle sauce , both with our citrus marinated fire grilled chopped chicken breast wrapped in a warm flour tortilla and grilled to order .

Speaker #2: We designed these for portability and value , giving guests a satisfying eat they can enjoy on the go at a price of less than $10 a la carte or $10.99 for a combo meal , which includes chips , salsa and a drink .

Speaker #2: We also gave our local rewards members early exclusive access ahead of the general launch The early guest response has been strong and we believe loaded quesadillas strengthens our lineup with handheld and on the go occasions We also introduced a new coffee platform to the menu this quarter with our chowder Coffee lineup featuring our signature Horchata Iced coffee and cold foam .

Liz Williams: We also introduced a new coffee platform to the menu this quarter with our Horchata coffee lineup, featuring our signature Horchata iced coffee and cold foam. We designed our new beverages to capture an afternoon pick-me-up occasion, which we believe is a meaningful and underserved day part for our brand. Alongside items like our tenders and quesadillas, we see this as part of a broader snacking occasion that brings guests into our restaurant outside of traditional mealtime, and also helps in building check. We are just getting started with beverages and look forward to even more innovation in the upcoming quarters. As we head into H2 of the year, we are encouraged by the strength of our innovation pipeline. Two new double chicken burrito bowls will be coming this fall, as well as a new pumpkin spice churro and caramel apple ChataCoffee.

Speaker #2: We designed our new beverages to capture an afternoon pick me up occasion , which we believe is a meaningful and underserved daypart for our brand .

Speaker #2: Alongside items like our tenders and quesadillas . We see this as part of a broader snacking occasion that brings guests into our restaurant .

Speaker #2: Outside of traditional meal times , and also helps in building truck . We are just getting started with beverages and look forward to even more innovation in the upcoming quarters .

Speaker #2: As we head into the second half of the year, we are encouraged by the strength of our innovation pipeline. Two new double chicken burrito bowls will be coming this fall, as well as a new pumpkin spice churro and caramel apple Chata coffee. We also continue to test new salads, wraps, and sandwiches as we prepare for 2027.

Liz Williams: We also continue to test new salads, wraps, and sandwiches as we prepare for 2027. In short, we remain committed to keeping our menu craveable, relevant, and fresh, giving guests new reasons to visit. Our Let's Get Loco campaign continues to build momentum and has found new ways to put our new menu items in front of our guests, often by showing up where our brand hasn't historically been invited. In late June, around National Go Skateboarding Day, we launched our Quesadillas for Kickflips activation, featuring Olympic skateboarder Paige Heyn. This content resonated well beyond our usual audience, drawing praise from across the skateboarding world, including from the editor-in-chief of Thrasher magazine, one of the most recognized voices in that community.

Speaker #2: In short , we remain committed to keeping our menu craveable relevant and fresh , giving guests new reasons to visit our Let's Get Loco campaign continues to build momentum and has found new ways to put our new menu items in front of our guests , often by showing up where our brand hasn't historically been invited In late June , around National Go Skateboarding Day , we launched our quesadillas for Kickflips activation , featuring Olympic skateboarder Paige Haynes This content resonated well beyond our usual audience , drawing praise from across the skateboarding world , including from the editor in chief of Thrasher Magazine , one of the most recognized voices in that community .

Speaker #2: We followed that with our hold it Like it's Hot campaign , which put our new coffee loaded quesadillas and black beans into real , everyday moments to highlight how portable and delicious these products are We continue to expand our presence with brand partnerships , working with brands like Igloo , SoundCloud , and Tapatio all throughout the quarter .

Liz Williams: We followed that with our Hold It Like It's Hot campaign, which put our new ChataCoffee, loaded quesadillas, and black beans into real, everyday moments to highlight how portable and delicious these products are. We continue to expand our presence with brand partnerships, working with brands like Igloo, Fan Cloud, and Tapatio all throughout the quarter, as we were showing up in live sports. From our media presence during the World Cup games to free food giveaways for at-home watch parties, we were there. We believe this combination of timely, culturally relevant marketing and strong menu innovation is exactly the kind of engine that builds lasting brand loyalty, and something that we will continue to lean into as we carry the momentum through the rest of the year. Turning to our loyalty and digital business, which continues to contribute to our top-line performance.

Speaker #2: As we were showing up in live sports from our media presence during the World Cup games to free food giveaways for at home watch parties We were there .

Speaker #2: We believe this combination of timely , culturally relevant marketing and strong menu innovation is exactly the kind of engine that builds lasting brand loyalty and something that we will continue to lean into as we carry the momentum through the rest of the year Turning to our loyalty and digital business , which continues to contribute to our top line performance , digital sales , including our app , web and kiosk channels , represented approximately 28% of system sales and were up 13% year over year , and our local rewards members continued to be an important growth driver for the brand .

Liz Williams: Digital sales, including our app, web, and kiosk channels, represented approximately 28% of system sales and were up 13% year-over-year. Our Loco Rewards members continue to be an important growth driver for the brand. These members visited approximately three times more annually than non-loyalty members. We use a strategic approach with our loyalty offers based on segmentation and purchase behavior. These targeted offers deployed throughout the quarter, together with more frequent communications, drove not only frequency growth but also check growth among our loyalty members, outpacing non-loyalty guests by more than double. As a reminder, we center our loyalty program around three things: giving members everyday value, tailoring offers based on purchase behavior, and giving our most loyal guests access to exclusive experiences.

Speaker #2: These members visited approximately three times more annually than non loyalty members . We use a strategic approach with our loyalty offers based on segmentation and purchase behavior These targeted offers deployed throughout the quarter , together with more frequent communications , drove not only frequency growth , but also check growth among our loyalty members , outpacing non loyalty guests by more than double .

Speaker #2: As a reminder , we center our loyalty program around three things , giving members everyday value . Tailoring offers based on purchase behavior and giving our most loyal guests access to exclusive experiences , starting with everyday value .

Liz Williams: Starting with everyday value, our weekly Loco Friday Drops, providing great offers and value each Friday on some of our best menu items, and our Sunday Spread, an abundant value on family chicken meals, have continued to be consistent performers for the program. These all-member deals, combined with our segmented offers based upon purchase history, have both contributed to the frequency and check growth. In addition to these deals, our exclusive giveaways, early access to menu items, and prizes have created engagement in our loyalty program. As we look ahead, in early Q3, we launched Loco Days, a summer-themed promotion featuring exclusive prizes, deals, and a grand prize VIP experience at the iHeartRadio Music Festival. Early engagement in the promotion has exceeded expectations and we look forward to future growth of our loyalty program.

Speaker #2: Our weekly Loco Friday drops providing great offers and value . Each Friday on some of our best menu items and our Sunday spread and abundant value on family chicken meals have continued to be consistent performers for the program These all member deals , combined with our segmented offers based upon purchase history , have both contributed to the frequency and check growth In addition to these deals , our exclusive giveaways , early access to menu items , and prizes have created engagement in our loyalty program .

Speaker #2: As we look ahead in early Q3 , we launched Loco Days , a summer themed promotion featuring exclusive prizes , deals and a grand prize VIP experience at the I Music Festival .

Speaker #2: Early engagement in the promotion has exceeded expectations and we look forward to future growth of our loyalty program Finally , our off premise digital business , inclusive of delivery , continues to gain strength as we have launched segmented deals targeting new customers at the snack and late evening day parts for lunch , we have expanded our roster of third party partners focused on groups and catering services .

Liz Williams: Our off-premise digital business, inclusive of delivery, continues to gain strength as we have launched segmented deals targeting new customers at the snack and late evening day parts. For lunch, we have expanded our roster of third-party partners focused on groups and catering services. In total, our off-premise digital business represents almost 17% of sales and has increased 12% year-over-year. While we are pleased with the growth, we believe there is still significant opportunity to grow this channel. At the intersection of digital and operational excellence is technology. We continue to make great progress in modernizing our capabilities. From in-restaurant training to analyzing consumer feedback to a more effective help desk for our restaurant general managers, our use of technology and AI tools is improving our insights and capabilities.

Speaker #2: In total , our off premise digital business represents almost 17% of sales and has increased 12% year over year . While we're pleased with the growth , we believe there is still significant opportunity to grow this channel at the intersection of digital and operational excellence is technology .

Speaker #2: We continue to make great progress in modernizing capabilities from In-restaurant training to analyzing consumer feedback , to a more effective help desk for our restaurant , general managers Our use of technology and AI tools is improving our insights and capabilities in just a few months , we have made great strides in our capabilities with the addition of Vadim Perisher , who joined us earlier this year as our chief Technology Officer .

Liz Williams: In just a few months, we have made great strides in our capabilities with the addition of Vadim Parisher, who joined us earlier this year as our Chief Technology Officer. His leadership in digital data and technology is unlocking opportunity and insights across the business, and we look forward to sharing more about our technology advancements in future calls. Moving on to operational excellence and our hospitality mindset. I'm pleased with the continued progress we made this quarter in improving guest experience and overall customer satisfaction. System satisfaction scores continue to move in the right direction on a year-over-year basis, and we saw improvement across the board from order accuracy to speed of service to overall friendliness. This kind of consistent incremental progress is exactly what we set out to build, and it reflects the discipline our teams have in driving operational excellence every day.

Speaker #2: His leadership in digital data and technology is unlocking opportunity and insights across the business , and we look forward to sharing more about our technology advancements and future costs Moving on to operational excellence in our hospitality mindset , I'm pleased with the continued progress we made this quarter in improving guest experience and overall customer satisfaction systems satisfaction scores continue to move in the right direction on a year over year basis , and we saw improvement across the board from order accuracy to speed of service to overall friendliness This kind of consistent , incremental progress is exactly what we set out to build , and it reflects the discipline our teams have in driving operational excellence .

Speaker #2: Every day . As we look forward to national expansion with new restaurant openings , we will continue to build our operational people capability .

Liz Williams: As we look forward to national expansion with new restaurant openings, we will continue to build our operational people capability as this is the single most critical item in ensuring consistency and execution across our restaurants. We know there is room to have even more of a consistent guest experience that builds long-term loyalty, and we are focused on the investment in people, tools, training, and technology to get us there. Shifting to financial metrics, we are proud to have coupled our sales momentum with winning unit economics. In Q2, we delivered another solid restaurant level margin of 19.5%, comfortably within our 18% to 20% long-term target range. We are pleased with this result, especially in light of the significant cost pressure in produce during the quarter. Even with this headwind, our underlying cost discipline continues, which speaks to the margin focus we've built over the past several years.

Speaker #2: As this is the single most critical item in ensuring consistency and execution across our restaurants We know there is room to have even more of a consistent guest experience that builds long term loyalty , and we are focused on the investment in people , tools , training and technology to get us there Shifting to financial metrics , we are proud to have coupled our sales momentum with winning unit economics in Q2 .

Speaker #2: We delivered another solid restaurant level margin of 19.5% , comfortably within our 18 to 20% long term target range . We are pleased with this result , especially in light of the significant cost pressure in produce during the quarter .

Speaker #2: Even with this headwind , our underlying cost discipline continues , which speaks to the margin focus we've built over the past several years .

Speaker #2: We will continue to manage the levers within our control closely , including labor , productivity , waste reduction and disciplined menu pricing . And we are watching our key commodities as we move through the back half of the year .

Liz Williams: We will continue to manage the levers within our control closely, including labor productivity, waste reduction, and disciplined menu pricing, and we are watching our key commodities as we move through the back half of the year. As we said last quarter, we will also balance the goals of driving year-over-year margin expansion with the need for value offers and investment in innovation, technology, and unit growth. We believe we can do all of these and be in the healthy margin range. Let me now touch on our new unit growth pillar. First, we were pleased to welcome Tara Hinkle in late June to the El Pollo Loco family as our new Chief Development Officer. Tara joined us with extensive industry experience and expertise that spans development operations, market planning, franchise recruiting, and finance, with experience from brands like Taco Bell, Starbucks, and The Coffee Bean & Tea Leaf.

Speaker #2: As we said last quarter , we will also balance the goals of driving year over year margin expansion with the need for value offers and investment in innovation , technology and unit growth .

Speaker #2: We believe we can do all of these and be in the healthy margin range Let me now touch on our new unit growth pillar First , we were pleased to welcome Tara Hinkle in late June to the El Pollo Loco family as our new Chief Development Officer Tara joined us with extensive industry experience and expertise that spans development , operations , market planning , franchise recruiting , and finance .

Speaker #2: With experience from brands like Taco Bell, Starbucks, and Coffee Bean & Tea Leaf, we remain confident in our goal of opening 18 to 20 new restaurants system-wide this year.

Liz Williams: We remain confident in our goal of opening 18 to 20 new restaurants system-wide this year, nearly double our 2025 pace. Our new restaurants continue to open with strength, which reinforces our confidence in the appeal for Fire-Grilled Chicken and the El Pollo Loco brand as we continue our nationwide expansion. A good proof point of this progress came at the end of June when our franchise partner opened our first restaurant in Idaho, making the entry into our 10th state. The Idaho restaurant is run by an experienced franchise group with more than 25 years in the El Pollo Loco system, and we already have a second location scheduled to open later this fall, with three to four more planned in the market as it develops. Less than two years ago, El Pollo Loco operated in just seven states.

Speaker #2: Nearly double our 2025 pace . Our new restaurants continue to open with strength , which reinforces our confidence in the appeal for fire grilled chicken and the El Pollo Loco brand .

Speaker #2: As we continue our nationwide expansion A good proof point of this progress came at the end of June , when our franchise partner opened our first restaurant in Idaho , making the entry into our 10th state .

Speaker #2: The Idaho restaurant is run by an experienced franchise group with more than 25 years in the El Pollo Loco system , and we already have a second location scheduled to open later this fall , with 3 to 4 more planned in the market as it develops Less than two years ago , El Pollo Loco operated in just seven states .

Speaker #2: Since then , we've added Washington , New Mexico , and now Idaho . Three new states in under 24 months . As we look forward , the vast majority of our openings will continue to be outside of California .

Liz Williams: Since then, we've added Washington, New Mexico, and now Idaho, three new states in under 24 months. As we look forward, the vast majority of our openings will continue to be outside of California. Our new unit growth continues to benefit from the second-generation sites, where we are achieving lower development costs than the typical ground-up builds. Together with our value engineering initiative, we remain focused on overall new unit economics. As we look forward to becoming a national brand, we are encouraged by the discussions and the level of interest with prospective franchise partners. Over the past couple of months, we've hosted discovery days at our restaurant support center with new franchise groups representing opportunities across the country. These visits have been positive, and we are in discussions on various development agreements.

Speaker #2: Our new unit growth continues to benefit from the second generation sites where we are achieving lower development costs than the typical ground up builds .

Speaker #2: Together with our value engineering initiatives, we remain focused on overall new unit economics as we look forward to becoming a national brand.

Speaker #2: We are encouraged by the discussions and the level of interest with prospective franchise partners over the past couple of months , we've hosted Discovery Days at our restaurant , support center with new franchise groups representing opportunities across the country .

Speaker #2: These visits have been positive and we are in discussions on various development agreements . We expect to have more details to share on future calls and remain confident that our development pipeline is building nicely and supports our continued expansion across the country On the restaurant refresh initiative , we remain pleased with our results .

Liz Williams: We expect to have more details to share on future calls and remain confident that our development pipeline is building nicely and supports our continued expansion across the country. On the restaurant refresh initiative, we remain pleased with our results. On average, we continue to see a mid-single-digit sales lift in the locations we've refreshed, consistent with what we've shared on prior calls. We'll continue to be thoughtful about pacing this initiative in a way that supports our teams without disrupting day-to-day operations. In summary, we are proud of our quarterly performance and the work we have done over the last two and a half years in transforming the El Pollo Loco brand. Our menu innovations are driving real trial and repeat, and our marketing and loyalty engines are amplifying that momentum. Our operation scores continue to improve, and we are back to healthy margin expansion and unit growth.

Speaker #2: On average , we continue to see a mid-single digit sales lift in the locations we've refreshed , consistent with what we've shared on prior calls .

Speaker #2: We'll continue to be thoughtful about pacing this initiative in a way that supports our teams . Without disrupting day to day operations In summary , we are proud of our quarterly performance and the work we have done over the last two and a half years .

Speaker #2: In transforming the El Pollo Loco brand Our menu innovations are driving real trial and repeat , and our marketing and loyalty engines are amplifying that momentum .

Speaker #2: Our operation scores continue to improve , and we are back to healthy margin expansion and unit growth . With that , let me turn the call over to IRA for a more detailed discussion of our second quarter financial results

Liz Williams: With that, let me turn the call over to Ira for a more detailed discussion of our Q2 financial results.

Speaker #3: Thank you , Liz , and good afternoon , everyone For the second quarter ended July 1st , 2026 , total revenue was $129.6 million , compared to $125.8 million in the second quarter of 2025 .

Ira Fils: Thank you, Liz, and good afternoon, everyone. For the Q2 ended 1 July 2026, total revenue was $129.6 million compared to $125.8 million in the Q2 2025. Company-operated restaurant revenue increased 3.7% to $108.1 million from $104.3 million in the same period last year. The $3.8 million increase in company-operated restaurant sales was driven by 3% growth in company-operated comparable restaurant sales, as well as sales from the three company restaurants opened since the Q2 2025. The growth in comparable restaurant sales included a 4.2% increase in average check size, partially offset by a 1.1% decrease in transactions. During the Q2, our effective price increase versus 2025 was approximately 3.4%.

Speaker #3: Company operated restaurant revenue increased 3.7% to $108.1 million , from $104.3 million in the same period last year The 3.8 million increase in company operated restaurant sales was driven by 3% growth in company operated comparable restaurant sales , as well as sales from the three company restaurants opened .

Speaker #3: Since the second quarter of 2025 . The growth in comparable restaurant sales included a 4.2% increase in average check size , partially offset by a 1.1% decrease in transactions during the second quarter .

Speaker #3: Our effective price increase versus 2025 was approximately 3.4% . Franchise revenue decreased 3.8% to $12.9 million during the second quarter , driven by a $1.1 million decrease in franchise .

Ira Fils: Franchise revenue decreased 3.8% to $12.9 million during the Q2, driven by a $1.1 million decrease in franchise IT pass-through revenue related to the franchise rollout of our new point-of-sale system completed in 2025. Franchise revenue did benefit from a 4.5% increase in comparable restaurant sales and revenue associated with 11 franchise-operated restaurant openings subsequent to the Q2 2025. The 4.5% increase in comparable franchise store sales consisted of a 5.3% increase in average check size, partially offset by a 0.8% decrease in transactions. For the Q2, system-wide same-store sales were up 3.9%, with system-wide transactions down 0.9%. We are very pleased to report that the positive sales momentum we experienced in Q2 has continued into the Q3.

Speaker #3: It pass through revenue related to the franchise rollout of our new point of sale system , completed in 2025 , franchise revenue did benefit from a 4.5% increase in comparable restaurant sales and revenue associated with 11 franchise operated restaurant openings Subsequent to the second quarter of 2025 , the 4.5% increase in comparable franchise store sales consisted of a 5.3% increase in average check size , partially offset by a 0.8% decrease in transactions for the second quarter .

Speaker #3: System . Same store sales were up 3.9% , with system wide transactions down 0.9% . We are very pleased to report that the positive sales momentum we experienced in Q2 has continued into the third quarter systemwide comparable store sales for the third quarter to date through July 29th , 2026 increased 5.8% , consisting of a 4.4% increase in company operated restaurants and a 6.6% increase in franchise restaurants .

Ira Fils: System-wide comparable store sales for the Q3 to date through 29 July 2026, increased 5.8%, consisting of a 4.4% increase in company-operated restaurants and a 6.6% increase in franchise restaurants. Looking ahead, we believe same-store sales for the Q3 will be in the 3.5% to 4.5% range. Turning to expenses, food and paper costs as a percentage of company restaurant sales increased approximately 90 basis points year over year to 25.4%, primarily due to commodity inflation of 4.1%, primarily produce, combined with increased discounts and menu mix shifts. These increases were partially offset by higher menu pricing. We expect commodity inflation to be in the 2.5% to 3.5% range for the full year 2026.

Speaker #3: Looking ahead , we believe same store sales for the third quarter will be in the three and a half to 4.5% range . Turning to expenses , food and paper costs as a percentage of company , restaurant sales increased approximately 90 basis points year over year to 25.4% , primarily due to commodity inflation of 4.1% , primarily produce combined with increased discounts and menu mix shifts .

Speaker #3: These increases were partially offset by higher menu pricing . We expect commodity inflation to be in the two and a half to 3.5% range for the full year 2026 .

Speaker #3: Labor and related expenses as a percentage of company , restaurant sales decreased about 90 basis points year over year to 29.9% . As we continue to benefit from improvements in operating efficiencies , along with lower health insurance and worker's compensation costs .

Ira Fils: Labor and related expenses as a percentage of company restaurant sales decreased about 90 basis points year over year to 29.9% as we continue to benefit from improvements in operating efficiencies, along with lower health insurance and workers' compensation costs. In addition, labor as a percentage of sales benefited from leverage on the 3% company-owned comparable store sales increase. Wage inflation during the Q2 was under 1% for all our company-owned locations. For the full year 2026, we expect wage inflation of between 1.5% to 2.5%. Occupancy and other operating expenses as a percentage of company restaurant sales decreased 30 basis points year over year to 25.3%, primarily due to lower liability insurance costs, lower utilities, and lower other controllable expenses, which offset increases from higher delivery and mobile ordering fees and higher repairs and maintenance expense.

Speaker #3: In addition , labor as a percentage of sales benefited from leverage on the 3% company owned comparable store sales decrease . Wage inflation during the second quarter was under 1% for all our company owned locations .

Speaker #3: For the full year 2026 . We expect wage inflation of between one and a half to 2.5% occupancy , and other operating expenses as a percentage of company restaurant sales decreased 30 basis points year over year to 25.3% , primarily due to lower liability insurance costs , lower utilities and lower other controllable expenses , which offset increases from higher delivery and mobile ordering fees and higher repairs and maintenance expense Our restaurant contribution margin for the second quarter improved to 19.5% , compared to 19.1% in the year ago period .

Ira Fils: Our restaurant contribution margin for Q2 improved to 19.5%, compared to 19.1% in the year-ago period. As we continue our path of margin improvement, we expect our restaurant level margin for the full year 2026 to be between 18.25% to 18.75%, an increase from the 17.8% we ran for the full year of 2025. In addition, we expect our restaurant margins in Q3 of 2026 to be between 18% and 18.5%, which is in line with the 18.3% we posted in Q3 of 2025. General and administrative expenses decreased to $7.1 million, compared to $13.5 million in the prior year. The decrease was primarily due to $6.3 million received from a legal settlement, lower shareholder activism-related expenses, and lower restructuring and executive transition-related costs. The decrease was partially offset by higher legal fees, new store pre-opening costs, and other general and administrative expenses.

Speaker #3: As we continue our path of margin improvement, we expect our restaurant margin for the full year 2026 to be between 18.25% and 18.75%, an increase from the 17.8% we ran for the full year 2025.

Speaker #3: In addition, we expect our restaurant margins in the third quarter of 2026 to be between 18% and 18.5%, which is in line with the 18.3% we posted in the third quarter of 2025.

Speaker #3: General and administrative expenses decreased to 7.1 million , compared to 13.5 million in the prior year . The decrease was primarily due to 6.3 million received from a legal settlement , lower shareholder activism related expenses and lower restructuring and executive transition related costs .

Speaker #3: The decrease was partially offset by higher legal fees . New store pre-opening costs and other general and administrative expenses . Excluding the impact of the $6.3 million favorable legal settlement as a percentage of sales and a decreased to 10.3% , or 50 basis points during the second quarter .

Ira Fils: Excluding the impact of the $6.3 million favorable legal settlement as a percentage of sales, G&A decreased to 10.3%, or 50 basis points. During Q2, we recorded a provision for income taxes of $5.2 million, for an effective tax rate of 28.8%. This compares to a provision for income taxes of $3 million and an effective tax rate of 29.6% in the prior year period. We reported GAAP net income of $12.8 million or $0.43 per diluted share in Q2, compared to GAAP net income of $7.1 million or $0.24 per diluted share in the prior year period. Adjusted EBITDA for Q2 of 2026 was $19.1 million, compared to $18.5 million in Q2 of 2025.

Speaker #3: We recorded a provision for income taxes of 5.2 million for an effective tax rate of 28.8% . This compares to a provision for income taxes of 3 million and an effective tax rate of 29.6% in the prior year period .

Speaker #3: We reported GAAP net income of 12.8 million , or $0.43 per diluted share , in the second quarter , compared to GAAP net income of 7.1 million , or $0.24 per diluted share , in the prior year period .

Speaker #3: Adjusted EBITDA for the second quarter of 2026 was 19.1 million , compared to 18.5 million in the second quarter of 2025 . Adjusted net income for the second quarter was 8.9 million , or $0.30 per diluted share , compared to adjusted net income of 8.2 million , or $0.28 per diluted share , in the second quarter of last year Please refer to our earnings release for a reconciliation of non-GAAP measures .

Ira Fils: Adjusted net income for Q2 was $8.9 million or $0.30 per diluted share, compared to adjusted net income of $8.2 million or $0.28 per diluted share in Q2 of last year. Please refer to our earnings release for a reconciliation of non-GAAP measures. As Liz mentioned earlier, we are pleased with our increasing pace of new store development as we open five new franchise locations and one new company location in Q2. Since the end of Q2, we have opened an additional two locations, bringing our 2026 year-to-date new store openings to 10, and we remain on track to deliver a total of 18 to 20 new openings in 2026.

Speaker #3: As Liz mentioned earlier, we are pleased with our increasing pace of new store development, as we opened five new franchise locations and one new company location in the second quarter.

Speaker #3: Since the end of the second quarter , we have opened an additional two locations , bringing our 2026 year to date new store openings to ten , and we remain on track to deliver a total of 18 to 20 new openings in 2026 .

Speaker #3: In regard to our remodeling efforts during the second quarter , we completed six franchised restaurant remodels and five company remodels , bringing the remodels completed through the first half of the year to 24 , consisting of 12 franchise remodels and 12 company remodels In terms of liquidity , as of July 1st , 2026 , after a net paydown of $21 million on our revolver during the preceding 26 weeks , we had $30 million of debt outstanding and $13.3 million in cash and cash equivalents Subsequent to the end of the quarter on August 4th , 2026 , we amended our $150 million revolving credit facility .

Ira Fils: In regard to our remodeling efforts, during Q2, we completed six franchise restaurant remodels and five company remodels, bringing the remodels completed for H1 to 24, consisting of 12 franchise remodels and 12 company remodels. In terms of liquidity, as of 1 July 2026, after a net paydown of $21 million on our revolver during the preceding 26 weeks, we had $30 million of debt outstanding and $13.3 million in cash and cash equivalents. Subsequent to the end of the quarter, on 4 August 2026, we amended our $150 million revolving credit facility, extending the term to 4 August 2031. With that, we would like to provide you with the following updated guidance for 2026. We are increasing our system-wide comparable store sales growth guidance to now be between 3.5% and 4.5% for the full year.

Speaker #3: Extending the term to August 4th of 2031 . With that , we would like to provide you with the following updated guidance for 2026 .

Speaker #3: We are increasing our system wide , comparable store sales growth guidance to now be between three and a half and four and a half percent for the full year .

Speaker #3: We are increasing our adjusted EBITDA guidance to be between 68 and 70 million . We are reducing our expected capital spending to be between 33 and 37 million .

Ira Fils: We are increasing our adjusted EBITDA guidance to be between $68 and $70 million. We are reducing our expected capital spending to be between $33 and $37 million. In addition, we now expect depreciation and amortization expenses to be between $18 and $18.5 million for the year. We are maintaining the following guidance. The opening of at least three to four company-operated restaurants and 15 to 16 franchise-operated restaurants. G&A expenses between $52 and $54 million, excluding one-time charges or benefits. Finally, an estimated effective income tax rate of approximately 29% to 29.5% before discrete items. This concludes our prepared remarks. We'd like to thank you again for joining us on the call today, and we are now happy to answer any questions that you may have. Operator, please open the line for questions.

Speaker #3: In addition , we now expect depreciation and amortization expenses to be between 18 and 18.5 million for the year We are maintaining the following guidance .

Speaker #3: The opening of at least 3 to 4 company operated restaurants and 15 to 16 franchise operated restaurants . G&A expenses between 52 and 54 million , excluding one time charges or benefits and finally , an estimated effective income tax rate of approximately 29 to 29.5% .

Speaker #3: Before discrete items This concludes our prepared remarks . We'd like to thank you again for joining us on the call today , and we are now happy to answer any questions that you may have Operator , please open the line for questions

Speaker #4: Thank you If you'd like to ask a question at this time , you may press star one from your telephone keypad and a confirmation tone will indicate your line is in the question queue Let me press star two if you'd like to remove your question from the queue for participants using speaker equipment , it may be necessary to pick up your handset before pressing the star keys .

Operator 2: Thank you. If you'd like to ask a question at this time, you may press star one from your telephone keypad, and a confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Thank you. Our first question is from the line of Todd Brooks with Benchmark StoneX. Please proceed with your question.

Operator: Thank you. If you'd like to ask a question at this time, you may press star one from your telephone keypad, and a confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Thank you. Our first question is from the line of Todd Brooks with Benchmark StoneX. Please proceed with your question.

Speaker #4: Thank you . And our first question is from the line of Todd Brooks with benchmark Stonex . Please proceed with your questions

Speaker #5: Hey , congrats on another solid quarter and continued momentum into the third quarter . Great to see .

Todd Brooks: Hey, congrats on another solid quarter and continued momentum into Q3. Great to see.

Speaker #2: Thanks , Todd .

Liz Williams: Thanks, Todd.

Speaker #6: If we can

Todd Brooks: Liz, if we can talk about franchisees. You gave us some good color last quarter about some of the magnitude of the openings in Washington and New Mexico. Now you've added Idaho on top of it. What are you seeing for kind of continued strength of performance in newer markets?

Speaker #5: Talk about franchisees , you gave us some good color last quarter about some of the magnitude of the openings in Washington and New Mexico .

Speaker #5: Now you've added Idaho on top of it . What are you seeing for kind of continued strength of performance in newer markets

Speaker #2: Yes . Appreciate the question . Our newer markets are opening really well . We're very pleased with the strength of the sales . Most are opening above system average , particularly when it's the first restaurant and the first state .

Liz Williams: Yes. Appreciate the question. Our newer markets are opening really well. We're very pleased with the strength of the sales. Most are opening above system average, particularly when it's the first restaurant in the first state and/or first market. They're opening to just blockbuster lines and, quite frankly, exceeding our expectations, which is giving us a belief that the Fire-Grilled Chicken is resonating and our brand is resonating. It also gives us the confidence to open more units and those franchisees to open more units in those markets. Like I mentioned Idaho, the second Idaho location is coming on board in the next couple of months. They're already looking for additional sites. Similarly, up in Washington, we've got just one unit. We have been working on finding additional sites up there.

Speaker #2: And or first market . They're opening to just blockbuster lines and quite frankly , exceeding our expectations , which is , you know , giving us a belief that the fire grilled chicken is , is resonating .

Speaker #2: And our brand is resonating . It also gives us the confidence to open more units . And those franchisees to open more units in those markets .

Speaker #2: So like I mentioned , Idaho , the second Idaho location is coming on board in the next couple of months . They're already looking for additional sites Similarly , up in Washington , we've got just one unit .

Speaker #2: We have been working on finding additional sites up there , following on with the rest of the quarter , we'll have restaurants opening in New Mexico , in Colorado , another one in Washington .

Liz Williams: Following on with the rest of the quarter, we'll have restaurants opening in New Mexico, in Colorado, another one in Washington, as I mentioned, and a few more in California and one in New Mexico. Just really pleased with how these are opening and our franchise partners, it's giving a lot of confidence to them and additional new partners who are looking at coming into the brand.

Speaker #2: As I mentioned , and then a few more in California and one in New Mexico . So , you know , just really pleased with how these are opening .

Speaker #2: And our franchise partners , it's giving a lot of confidence to them . And then additional new partners who are looking at coming into the brand .

Speaker #5: And I wanted to follow up on that because I think you used the word national 3 or 4 times during the prepared remarks .

Todd Brooks: I wanted to follow up on that because I think you used the word national three or four times during the prepared remarks. These discovery days and the outbound work that you're doing to build a pipeline of interest with potential franchisees, can you give us a sense of how far afield the interest in the brand is reaching? Does it feel contiguous? Are you seeing interest nationwide, which kind of helps prove out that concept of Fire-Grilled Chicken working anywhere in your mind? I'm just curious how this is developing as this goes.

Speaker #5: These Discovery Days and the outbound work that you're doing to build a pipeline of interest with potential franchisees — can you give us a sense of how far afield the interest in the brand is reaching?

Speaker #5: Is it does it feel contiguous , are you are you seeing interest nationwide ? Which kind of helps prove out that concept of fire grilled chicken working anywhere in your mind ?

Speaker #5: I'm just just curious how this is developing as it goes .

Speaker #2: There is nationwide interest . And while we have been rather contiguous over the years , particularly West Coast and down into the south , you know , as we went over to Texas in just a couple in Louisiana , you know , jumping across the country is certainly something that we are considering doing , talking with folks .

Liz Williams: There is nationwide interest. While we have been rather contiguous over the years, particularly West Coast and down into the South, as we went over to Texas and just a couple in Louisiana. Jumping across the country is certainly something that we are considering doing, talking with folks, and there's a lot of population on the East Coast, and just throughout different parts of the country. We don't think it has to be contiguous. We certainly could see a world where we could go to jump many states and go across the country. It really just depends on how these conversations progress over the next couple of months. Hopefully, we'll share more in upcoming calls to that effect.

Speaker #2: And , you know , there's a lot of population in in on the East Coast and just , you know , throughout different parts of the country .

Speaker #2: So we don't think it has to be contiguous . We certainly could see a world where , you know , we could go to jump many states and , and go across the country .

Speaker #2: It really just depends on how these conversations progress over the next couple of months to , to , and hopefully we'll , we'll share more in upcoming calls to that , that effect .

Speaker #5: That's great . And then just a final question , I'll jump back queue . If you if you're going to make a jump into non-contiguous and a new territory , new market , what are you looking for in that franchisee partner and in your outreach ?

Todd Brooks: That's great. Then just a final question. I'll jump back in queue. If you're going to make a jump into non-contiguous and a new territory, new market, what are you looking for in that franchisee partner, and in your outreach, are those type of partners being drawn to the brand? Do you have to go find them? Just kind of if you could give us the criteria and the interest from that type of partner. Thanks.

Speaker #5: Are those type of partners being drawn to the brand ? You have to go find them . Just kind of if you could give us the criteria and the interest from that type of partner .

Speaker #5: Thanks .

Speaker #2: Certainly the partners that we're talking with are partners that have experience in the restaurant space . Multi units . We want partners that are a great fit with the brand , that love the brand , have the enthusiasm for the brand .

Liz Williams: Certainly. The partners that we're talking with are partners that have experience in the restaurant space, multi-units. We want partners that are a great fit with the brand, that love the brand, have the enthusiasm for the brand. They believe in the economic story of the brand, also they have a proven track record in the restaurant space, and they're great operators. That's really important to us. They've done this before. They know how to do new store development. They know how to do grand openings, they know how to do just great customer service. We also have the benefit of a fabulous franchise system today, and I can't say enough great things about our existing franchise partners. We're talking with many of them about their desires to be in additional states.

Speaker #2: They believe in the economic story of the brand , but also they have a proven track record in the restaurant space . And they're great operators .

Speaker #2: That's really important to us . They've done this before . They know how to do new store development . They know how to do grand openings .

Speaker #2: They know how to do just great customer service . We also have the benefit of a fabulous franchise system today . And I can't say enough great things about our our existing franchise partners .

Speaker #2: And , you know , we're talking with many of them about their desires to be in additional states . As I mentioned in the remarks , our partner up in Idaho is a partner that's been in the system for many years .

Liz Williams: As I mentioned in the remarks, our partner up in Idaho is a partner that's been in the system for many years, that's just been a great opening for many reasons, one of which is he knows the El Pollo Loco system, and he has just a great team that was able to get trained and ready to go with great efficiency.

Speaker #2: And so that's just been a . Great opening for many reasons . But one of which is he knows the El Pollo Loco system , and he has , you know , just a great team that was was able to get trained and ready to go with great efficiency .

Speaker #5: Okay . Thanks , Liz .

Todd Brooks: Okay. Thanks, Liz.

Speaker #2: Yeah . Thank you .

Liz Williams: Yeah. Thank you.

Speaker #4: As a reminder to ask a question , you may press star one from your telephone keypad . The next question is in the line of Matt Curtis with D.A.

Operator 2: As a reminder, to ask a question, you may press star one from your telephone keypad. The next question is in the line of Matt Curtis with D.A. Davidson. Please proceed with your question.

Operator: As a reminder, to ask a question, you may press star one from your telephone keypad. The next question is in the line of Matt Curtis with D.A. Davidson. Please proceed with your question.

Speaker #4: Davidson . Please proceed with your question .

Speaker #7: Hey , guys . Thanks for taking the question . You know , I want to talk about comp trends . You know , July accelerated I in terms of traffic relative to the second quarter .

Matt Curtis: Hey, guys. Thanks for taking the question. I want to talk about comp trends. July accelerated in terms of traffic relative to Q2. I just was wondering if you could unpack what drove the sequential acceleration. Was it LTO momentum, loyalty activity, easier comparisons, or something else? Then, given the guidance for the full Q3 on comps, it implies a deceleration. Is that just a function of more difficult comparisons in August and September, or is there something else going on we should be aware of?

Speaker #7: I just was wondering if you could unpack what drove the sequential acceleration . I mean , was it omentum loyalty activity user comparisons or something else .

Speaker #7: And then , you know , given the guidance for the full third quarter on comps , it implies that deceleration . Is that just a function of more difficult comparisons in August and September , or is there something else going on we should be aware of ?

Speaker #2: Thanks for the question . I'll start and then hand it over to IRA for the back half of that . So I would say all of the above .

Liz Williams: Thanks for the question. I'll start and then hand it over to Ira for the back half of that. I would say all of the above, when you gave the list. We were proud of how our loaded quesadilla got off to a great start. It's a nice eat at a great value, combined with just the media that we've had behind it. We wish we could have a World Cup advertising in the month of July every year. Usually, people aren't watching live sports in July, and we think that that certainly got eyeballs on El Pollo Loco.

Speaker #2: When you gave the list , you know , we were proud of how our loaded quesadilla got off to a great start . It's a , it's a nice eat at a great value combined with just the , the media that we've had behind it and also we wish we could have a World Cup advertising in the month of July .

Speaker #2: Every other year , you know , usually people aren't watching live sports in July . And , you know , we think that that certainly got eyeballs on El Pollo Loco also , in terms of just the momentum that the brand , you know , was experiencing .

Liz Williams: In terms of just the momentum that the brand was experiencing, in terms of as we think about the lap from last year as well, you think about with everything going on last year, people weren't coming out of their homes as much, some of that certainly has come back as well. In fact, we're seeing even some trends where people are eating in the dining room more, whereas last year, if they were coming out, maybe they were going through the drive-thru. I would say all of those factors have played a role. As we look into the back half of the year.

Speaker #2: And then , you know , in terms of as we think about the lap from last year as well , you think about with everything going on last year there , people weren't coming out of their homes as much .

Speaker #2: And so some of that certainly has come back as well. In fact, we're seeing even some trends where people are eating in the dining room more.

Speaker #2: Whereas last year , if they were coming out , maybe they were going through the drive through . So I would say all of those factors , you know , have have played a role .

Speaker #2: And then as we look into the back half of the year .

Speaker #3: Yeah , as we think about our full year guidance for the year and even for the quarter , you know , we ran a 3.9% in Q two .

Ira Fils: Yeah. As we think about our full year guidance for the year and even for the quarter, we ran a 3.9% in Q2, and if you think about the midpoint of the guidance for both Q3 and Q4, that's right at 4%. Really consistent with what we ran in Q2. I will tell you, there is a little bit of about a 200 basis point change as you go into Q4 versus Q3 in regards to the compares get tougher as you move into Q4. As you can see by our guidance, we feel great about what's going on from a same store sales trend, and we really foresee Q3 being pretty much on the same pace as Q2.

Speaker #3: And if you think about the midpoint of the guidance for both Q3 and Q4 , that's that's right at 4% . So really consistent with what we , you know , what we ran in .

Speaker #3: Q two , I will tell you , there is a little bit of about a 200 basis point change as you go into QQ4 versus Q3 .

Speaker #3: In regards to the compares get tougher as you move into Q4 . But as you can see by our , our guidance , you know , we feel great about what's going on from a same store sales trend .

Speaker #3: And we're and we really foresee Q3 being pretty much on the pace as Q2 .

Speaker #7: Okay . Got it . Then separately on loco tenders , can you can you maybe just expand on what you learned from the loco tenders in terms of new guest acquisition ?

David Brown: Okay, got it. Separately on Loco Tenders, can you maybe just expand on what you learned from the Loco Tenders in terms of new guest acquisition, repeat rates, check impact, and all of that? Given that the product brought new guests into the brand, it sounds like.

Matt Curtis: Okay, got it. Separately on Loco Tenders, can you maybe just expand on what you learned from the Loco Tenders in terms of new guest acquisition, repeat rates, check impact, and all of that? Given that the product brought new guests into the brand, it sounds like.

Speaker #7: Repeat rates ? Check impact and all of that ? And I mean , given that the product brought new guests into the brand , it sounds like I guess what I'm what needs to be true for tenders to return in a more permanent or recurring way

Liz Williams: Yeah.

David Brown: I just wonder, what needs to be true for tenders to return in a more permanent or recurring way?

Matt Curtis: I just wonder, what needs to be true for tenders to return in a more permanent or recurring way?

Speaker #2: Yes . So terms of what needs to be true , so tenders did great for us . And we'll come around to the answers to some of those first questions on the back half .

Liz Williams: Yeah. In terms of what needs to be true, so tenders did great for us and we'll come around to the answers to some of those first questions. On the back half, the tenders, we had always planned as a limited time offer for the main reason of having some of the equipment in the restaurants to be able to hold them, so that we could operate at a higher velocity and just operationally, we could execute them for just a better execution. We're working with the system now. We're testing holding equipment so that they could be a permanent menu item.

Speaker #2: The tenders , we had always planned as a limited time offer for the main reason of having some of the equipment in the restaurants to be able to hold them at a so that we could operate at a higher velocity and just operationally , we could execute them for just a better execution .

Speaker #2: And so we're working with the system now . We're testing , holding equipment so that they could be a permanent menu item . What gives us the confidence in earning that spot for a permanent menu item was that tenders drove a lot of incrementality , particularly around a new consumer .

Liz Williams: What gives us the confidence in earning that spot for a permanent menu item was that tenders drove a lot of incrementality, particularly around a new consumer, with that younger consumer, but also that consumer that is wanting something more portable, that consumer that wants them late night. We saw a higher incidence and attach rate through delivery coupled by late night. When I say late night, for us, late night is like eight to 10 o'clock in the evening. We're not even talking true deep into late night. Just, it was really evident that this fit a need state also in snacking, which was an afternoon as well. We also just were really pleased with how it helped with check across the board, all times of the day. We learned a lot there.

Speaker #2: With that younger consumer , but also that consumer that is wanting something more portable , that consumer that wants them late night , we saw , you know , a higher incidence and attach rate through delivery delivery coupled by late night .

Speaker #2: And when I say late night for us , late night is like , you know , 8 to 10:00 in the evening , we're not even talking , you know , true deep into late night .

Speaker #2: So just it was really evident that this fit a need state . Also in snacking , which was , you know , an afternoon as well .

Speaker #2: We also just , we're , we're really pleased with how it helped with check across the board all , all times of the day .

Speaker #2: So, we learned a lot there. The other thing that we're going back in to test—and we'll learn some more—is different ways to enjoy tenders.

Liz Williams: The other thing that we're going back into tests and we'll learn some more, is different ways to enjoy tenders. We have a great menu item that has the tender in a wrap. That's, again, a portable, more robust eat. I personally love the tender chopped up on a salad. There's a lot of things that we can do with tenders, and I think you'll see a lot more over the upcoming quarters.

Speaker #2: So we have a great menu item that has the tender and a wrap . That's again , a portable , more robust eat .

Speaker #2: I personally love the tender chopped up on a salad . So there's a lot of things that we can do with tenders . And I think you'll see a lot more over the the upcoming quarters .

Speaker #7: Okay . Got it . Thanks very much for your time .

David Brown: Okay, got it. Thanks very much for the time.

Matt Curtis: Okay, got it. Thanks very much for the time.

Speaker #2: Thank you

Liz Williams: Thank you.

Speaker #4: Our next question is from the line of Todd Brooks with benchmark Stonex . Please proceed with your question .

Operator 2: Our next question is from the line of Todd Brooks with Benchmark StoneX. Please proceed with your question.

Operator: Our next question is from the line of Todd Brooks with Benchmark StoneX. Please proceed with your question.

Speaker #5: Thank you . Get rid of me yet ? I have one for IRA that I forgot to ask here . IRA , you talked about cost pressure in the quarter , and I've heard from a couple of other operators that it was very spiky , but relatively short lived .

Todd Brooks: Don't get rid of me yet. I have one for Ira that I forgot to ask here. Ira, you talked about produce cost pressure in the quarter, and I've heard from a couple of other operators that it was very spiky, but relatively short-lived. If you look at the COGS pressure that you talked about, I guess, what proportion of that was related to produce? Are you finding that it is more short-lived and kind of retrenching here as we get into Q3? If that's the case, just wondering about the 19.1% restaurant level margin in Q2 versus the 18 and a quarter, or, sorry, the 18 to 18 and a half.

Speaker #5: If you look at the the cogs pressure that you talked about , I guess what proportion of that was related to produce and if .

Speaker #5: Are you finding that it is more short lived and kind of retrenching here as we get into Q3 ? And if that's the case , just wondering about the 19.1% restaurant level margin in Q2 versus the 18.25 for , sorry , the 18 to 18.5 .

Speaker #3: Yeah . So two . So answer the first part about , you know , three quarters of the cogs pressure that we did see in Q2 was related to produce in particular , we've had we've have seen it mitigate some .

Ira Fils: Yeah. To answer the first part. About three-quarters of the COGS pressure that we did see in Q2 was related to produce in particular. We have seen it mitigate some. There's still a little pressure there, but it has mitigated some. We're seeing some pressure on some other lines. We've seen some pressure in packaging, and we've seen some pressure in oil costs. Not as significant as what we've seen in produce. There's been some fuel pressure as well for delivery charges as far as getting things to the restaurant. We've got all that baked in to we think about our guidance when we think about the balance of the year and margins as we look forward.

Speaker #3: There's still a little pressure there , but it has mitigated some . And we're seeing , you know , some pressure and some other lines .

Speaker #3: We've seen some pressure in packaging and we've seen some pressure in oil costs , not as significant as what we've seen in produce So we and there's been some fuel pressure as well for delivery charges as far as getting things to the restaurant .

Speaker #3: And we've got all that baked in. Do we think about our guidance when we think about the balance of the year and margins as we look forward?

Speaker #5: Okay . So it's kind of anticipatory based on what you're seeing now . Now not baking in any relief from these levels . Currently .

Todd Brooks: Okay. It's kind of anticipatory based on what you're seeing now, not baking in any relief from these levels currently.

Ira Fils: We definitely have relief from produce, but there's still some other items where we're feeling pressure on.

Speaker #3: We definitely got we definitely have relief from produce , but there's still some other items where we're feeling pressure on .

Speaker #5: Okay , perfect . Thank you

Todd Brooks: Okay. Perfect. Thank you.

Speaker #4: Thank you . The next question is from the line of Jeremy Hamblin with Craig-hallum . Please see with your questions .

Operator 2: Thank you. The next question is on the line of Jeremy Hamblin with Craig-Hallum. Please proceed with your questions.

Operator: Thank you. The next question is on the line of Jeremy Hamblin with Craig-Hallum. Please proceed with your questions.

Speaker #8: Thanks . I'll add my congratulations on the strong results . Just want to come back to the question around the Q3 guide . So if we look back , I don't think that the compare is actually get tougher in August or September .

Jeremy Hamblin: Thanks. I'll add my congratulations on the strong results. Just want to come back to the question around the Q3 guide. If we look back, I don't think that the compares actually get tougher in August or September. I think they're pretty similar to what July looked like. Just wanted to see if you could confirm that. Just maybe some assumption that there's a moderation from the current 5.8% level.

Speaker #8: I think they're pretty similar to what July looked like . Just wanted to see if you could confirm that . And so , just maybe some assumption that there's a moderation from the current 5.8% level .

Speaker #3: That's exactly right . Jeremy . The , the , the balance of the quarter is pretty similar to what July was . And I think the way to think about it is , is , is more about the balance of the quarter being more similar to what Q2 was .

Ira Fils: That's exactly right, Jeremy. The balance of the quarter is pretty similar to what July was. I think, the way to think about it is more about the balance of the quarter being more similar to what Q2 was. Really in July, we had some outsized benefit from some things that Liz mentioned. We had some great advertising mentions and spots in related to the World Cup. It really worked hard for us this year. Live sports is great for us, from a media standpoint, and it, again, played really well for us. I think July was a little more outsized, and as we think about the quarter in a whole, kind of the midpoint of our guide, that's where you think about where our trend is.

Speaker #3: And that really in July , we had some outsized benefit from some things that Liz mentioned . Are , you know , we had some great advertising mentions and spots and related to the World Cup .

Speaker #3: It really worked hard for us this year . Live sports is great for us from a from a media standpoint . And we had and again , played really well for us .

Speaker #3: I think July was a little more outsized. And as we think about the quarter as a whole, you know, kind of the midpoint of our guide, that's where you think about where our trend is.

Speaker #8: Got it . And have to ask , since it's kind of topical here , you know , some other , you know , kind of Mexican food concepts have have been thrown some curveballs here , you know , with their sourcing .

Jeremy Hamblin: Got it. Have to ask since it's kind of topical here, some other kind of Mexican food concepts have been thrown some curve balls here with their sourcing. Have you scoured your food sourcing to ensure no potential issues with jalapenos, anything like that? Have you seen any impact at all with those headlines that are reaching consumers?

Speaker #8: Have you ? You know , I have you kind of scoured your food sourcing to ensure no potential issues with how pino's anything like that .

Speaker #8: And have you seen any impact at all ? You know , kind of with those headlines that are reaching consumers ?

Speaker #2: Yeah , yeah . So we take food safety , you know , utmost seriousness and , you know , of course , we've scoured every bit of our supply chain and work really closely with our suppliers .

Liz Williams: Yeah. We take food safety utmost seriousness and of course, we've scoured every bit of our supply chain and work really closely with our suppliers. El Pollo Loco was not involved in any of the lettuce recalls. There was no lettuce product pulled, and no illnesses have been linked to us. All of our lettuce is currently sourced from the US. All of that, then on the peppers, we don't use jalapeno peppers, we use serrano peppers. We also don't use the supplier that I know people are talking about right now. We continue to be vigilant with the supply chain and it's definitely part of the industry and caring deeply about that. In terms of benefits, it's hard to tease out. I think possibly, we probably got a little bit of help from it.

Speaker #2: El Pollo Loco was not involved in any of the lettuce , recalls . There was no lettuce product pulled and no illnesses have been linked to us .

Speaker #2: And all of our lettuce is currently sourced from the USA . So all of that . And then on the peppers , we don't use jalapeno peppers .

Speaker #2: We use serrano peppers . And we also don't use the supplier that I know people are talking about right now . So , you know , we continue to be vigilant with the supply chain and , you know , it definitely part of the industry and caring deeply about that in terms of benefit , it's hard to to tease out , you know , I think possibly , you know , we , we probably got a little bit of , of help from it .

Speaker #2: I know our salad business, and it is a core part of our menu, and it remains strong. Don't have any worries in terms of consumer demand.

Liz Williams: I know our salad business. It is a core part of our menu, and it remains strong. Don't have any worries in terms of consumer demand there. Particularly in the summertime, they're really popular items, and they continue to remain strong.

Speaker #2: There , particularly in the summertime . It's it's they're really popular items and they continue to remain strong

Speaker #8: Got it . And then I want to come to the CapEx for a second . I think you lowered it by about 3 or $4 million .

Jeremy Hamblin: Got it. Want to come to the CapEx for a second. I think you lowered it by about $3 or $4 million, but you're maintaining your unit growth, you might have mentioned it, but can you just talk about the lowering of that? Presumably, the new units are coming in at or below budget. Just color you might be able to share on that.

Speaker #8: But you're maintaining , you know , your unit growth and you might have mentioned it , but can you just talk about kind of the lowering of that ?

Speaker #8: Is it presumed that the new units are coming in at or below budget? Any color you might be able to share on that?

Speaker #3: Yeah . Great question . Jeremy . So where we really took the CapEx down is more just the timing of our middle remodel program .

Ira Fils: Yeah. Great question, Jeremy Hamblin. Where we really took the CapEx tipping down is more just the timing of our remodel program. We're very happy, we're very pleased with the results of the remodel program. We're continuing to move forward. Just as we evaluate, A, the timing of permits, number one, and two, making sure that we're deploying the right resources internally from an operations and from a development standpoint, we've just pulled the timing back a little bit of it, and that's really the first driver of the lowered CapEx. The second one is a little bit what Liz has mentioned. We're still testing, and we're working on holding equipment, which we feel like if the tests go, that's something we're going to move forward with. It's just more of a timing issue than a cancellation of a project.

Speaker #3: We're very happy . We're very pleased with the results of the remodel program . We're continuing to move forward , but just as we evaluate a , you know , the timing of permits , number one and two , making sure that we're deploying the right resources internally from an operations and from a development standpoint , we've just pulled the timing back .

Speaker #3: A little bit of it . And that's really the first driver of , of the lowered CapEx . And the second one is , you know , a little bit what Liz has mentioned , we're still testing and we're working on holding equipment , which we feel like if the tests go , that's something we're going to move forward with .

Speaker #3: It's just more of a timing issue than than a cancellation of a project .

Speaker #8: Got it . One other housekeeping item with the extension of of your credit agreement , what's the what's the the interest rate that we could expect and .

Jeremy Hamblin: Got it. One other housekeeping item. With the extension of your credit agreement, what's the interest rate that we should expect and

Jeremy Hamblin: Got it. One other housekeeping item. With the extension of your credit agreement, what's the interest rate that we should expect and-

Ira Fils: The spread from what we were paying before will be going up by about 50 basis points.

Speaker #3: The spread from what we were paying before will be going up by about 50 basis points

Speaker #4: Thank you , ladies and gentlemen . We've reached the end of today's question and answer session . I'd like to turn the call back over to Liz Williams for closing remarks .

Jeremy Hamblin: Thank you.

Ira Fils: Yep.

Operator 2: Ladies and gentlemen, we've reached the end of today's question and answer session. I'd like to turn the call back over to Liz Williams for closing remarks.

Operator: Ladies and gentlemen, we've reached the end of today's question and answer session. I'd like to turn the call back over to Liz Williams for closing remarks.

Speaker #2: Thanks again , everyone , for your interest in El Pollo Loco . We look forward to talking to you again next quarter . Have a great evening .

Liz Williams: Thanks again, everyone, for your interest in El Pollo Loco. We look forward to talking to you again next quarter. Have a great evening.

Operator 2: This will conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.

Operator: This will conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.

Q2 2026 El Pollo Loco Holdings Inc Earnings Call

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