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El Pollo Loco Holdings, Inc.

El Pollo Loco Holdings, Inc.LOCOEarnings & Financial Report

Nasdaq · restaurant

El Pollo Loco, Inc., is a restaurant chain based in the United States, specializing in Mexican-style grilled chicken. Restaurant service consists of dine-in and take-out, with some locations offering drive-through options. The company is headquartered in Costa Mesa, California, and operates about 500 company-owned and franchised restaurants in the Southwestern United States.

What changed in El Pollo Loco Holdings, Inc.'s 10-K — 2024 vs 2025

Top changes in El Pollo Loco Holdings, Inc.'s 2025 10-K

347 paragraphs added · 339 removed · 284 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

63 edited+11 added−9 removed61 unchanged
Regulation and Compliance We and our franchisees are subject to various federal, state and local laws and regulations that govern our business operations, including those governing: ​ ● employment and wage and hour practices, including, but not limited to, minimum wage rates, overtime, meal and rest periods, prevention of discrimination, harassment, and retaliation, employment of minors, paid and family leave, unemployment tax rates, workers’ compensation rates, suitable seating, and citizen, visa, or lawful permanent resident requirements, and other working conditions; ● privacy and data security, including the collection, maintenance and use of information regarding employees and guests; ● compliance with the Americans with Disabilities Act and similar laws affording various protections and accommodations to employees and guests with disabilities; ● environmental practices, including the discharge, storage, handling, release and disposal of hazardous or toxic substances; regulation of discharges into the air, water and soils, storage and disposal of liquid and solid waste, and clean-up of contaminated soil and groundwater, and regulations restricting the use of straws, utensils and the certain packaging materials; ● compliance with Federal Trade Commission and laws that govern the franchisor-franchisee relationship, including the offer and sale of franchises and certain disclosures to franchisees; ● the preparation, sale and labeling of food, including regulations of the Food and Drug Administration, which oversees the safety of the entire food system, including inspections and mandatory food recalls, menu labeling and nutritional content; 10 Table of Contents ● working hours and working conditions, health, sanitation, safety and fire standards, building and zoning requirements, public accommodations and safety conditions, environmental matters, and data privacy; ● building and zoning requirements, including state and local licensing and regulation governing the design and operation of facilities and land use; and ● health and sanitation and public safety. ​ We require each of our franchise partners to comply with all federal, state and local laws and regulations.
Regulation and Compliance We and our franchisees are subject to various federal, state and local laws and regulations that govern our business operations, including those governing: ​ ● employment and wage and hour practices, including, but not limited to, minimum wage rates, overtime, meal and rest periods, prevention of discrimination, harassment, and retaliation, employment of minors, paid and family leave, unemployment tax rates, workers’ compensation rates, suitable seating, and citizen, visa, or lawful permanent resident requirements, and other working conditions; ● privacy and data security, including the collection, maintenance and use of information regarding employees and guests; ● compliance with the Americans with Disabilities Act and similar laws affording various protections and accommodations to employees and guests with disabilities; ● environmental practices, including the discharge, storage, handling, release and disposal of hazardous or toxic substances; regulation of discharges into the air, water and soils, storage and disposal of liquid and solid waste, and clean-up of contaminated soil and groundwater, and regulations restricting the use of straws, utensils and the certain packaging materials; ● compliance with Federal Trade Commission and laws that govern the franchisor-franchisee relationship, including the offer and sale of franchises and certain disclosures to franchisees; ● the preparation, sale and labeling of food, including regulations of the Food and Drug Administration, which oversees the safety of the entire food system, including inspections and mandatory food recalls, menu labeling and nutritional content; 11 Table of Contents ● working hours and working conditions, health, sanitation, safety and fire standards, building and zoning requirements, public accommodations and safety conditions, environmental matters, and data privacy; ● building and zoning requirements, including state and local licensing and regulation governing the design and operation of facilities and land use; and ● health and sanitation and public safety. ​ We require each of our franchise partners to comply with all federal, state and local laws and regulations.
We believe that our food, which is quality fire-grilled chicken served in a variety of freshly prepared meals and entrees and inspired by broadly appealing Mexican flavors, served in contemporary restaurant environments at reasonable prices, positions us well to satisfy the needs of a wide customer base by appealing to the broader general market who seek convenient and high-quality meals at reasonable prices.
We believe that our food, which is quality fire-grilled chicken served in a variety of freshly prepared meals and entrees and inspired by broadly appealing Mexican flavors and served in contemporary restaurant environments at reasonable prices positions us well to satisfy the needs of a wide customer base by appealing to the broader general market who seek convenient quality meals at reasonable prices.
We have food safety and quality assurance programs designed to maintain the highest standards for the food and the food preparation procedures that are used by both company-operated and franchised restaurants. We have a quality assurance team and employ third-party auditors that perform our workplace and food safety restaurant audits.
We have food safety and quality assurance programs designed to maintain the highest standards for the food and the food preparation procedures that are used by both company-operated and franchised restaurants. We have a quality assurance team and employ third-party auditors that perform our workplace, brand standards, and food safety restaurant audits.
Our signature product is our chicken, marinated with a proprietary recipe of citrus juice, garlic, and spices, which serves as the foundation of our distinctive menu of flavorful bone-in chicken meals and entrees.
Our signature product is our chicken, marinated with a proprietary recipe of citrus juice, pineapple, garlic, and spices, which serves as the foundation of our distinctive menu of flavorful bone-in chicken meals and entrees.
In addition, we compete with franchisors of other restaurant concepts for prospective franchisees. 9 Table of Contents Environmental Matters Our operations are subject to federal, state, and local laws and regulations relating to environmental protection, including regulation of discharges into the air and water, storage and disposal of liquid and solid waste, and clean-up of contaminated soil and groundwater.
In addition, we compete with franchisors of other restaurant concepts for prospective franchisees. 10 Table of Contents Environmental Matters Our operations are subject to federal, state, and local laws and regulations relating to environmental protection, including regulation of discharges into the air and water, storage and disposal of liquid and solid waste, and clean-up of contaminated soil and groundwater.
We have processes in place to monitor our own compliance with the numerous, complex, applicable laws and regulations governing our operations. Other than as described above, the Company’s compliance with federal, state or local laws and regulations, including environmental laws, is not expected to materially affect our earnings or competitive position or result in material capital expenditures.
We have processes in place to monitor our own compliance with the numerous, complex, applicable laws and regulations governing our operations. Other than as described herein, the Company’s compliance with federal, state or local laws and regulations, including environmental laws, is not expected to materially affect our earnings or competitive position or result in material capital expenditures.
Our restaurants in Texas, Louisiana and Colorado utilize regional distributors for produce. Our franchisees are required to use our primary distributor or an approved regional distributor, and franchisees must purchase food and supplies from approved suppliers. Poultry is our largest product cost item and represented approximately 37% of our total food and paper costs for 2024.
Our restaurants in Texas, Louisiana and Colorado utilize regional distributors for produce. Our franchisees are required to use our primary distributor or an approved regional distributor, and franchisees must purchase food and supplies from approved suppliers. Poultry is our largest product cost item and represented approximately 37% of our total food and paper costs for 2025.
Our point-of-sale system provides a touch-screen interface and is integrated with segmented Europay, Mastercard and Visa tokenized high speed credit and gift card processing hardware. Our point-of-sale system is used to collect daily transaction data, which provides daily sales and product mix information that we actively analyze.
Our third-party point-of-sale system provides a touch-screen interface and is integrated with segmented Europay, Mastercard and Visa tokenized high speed credit and gift card processing hardware. Our point-of-sale system is used to collect daily transaction data, which provides daily sales and product mix information that we actively analyze.
Financial Statements and Supplementary Data.” Our Industry The restaurant industry is divided into two segments: full service and limited service. We operate within the broader LSR segment, and we strive to offer the food and dining experience of a fast-casual restaurant and the speed, value, and convenience of a quick-service restaurant (“QSR”).
Financial Statements and Supplementary Data.” Our Industry The restaurant industry is divided into two market segments: full service and limited service. We operate within the LSR segment, and we strive to offer the food and dining experience of a fast-casual restaurant and the speed, value, and convenience of a quick-service restaurant (“QSR”).
Financial information about our operations, including our revenues and expenses for fiscal 2024, 2023 and 2022, and our total assets as of the end of fiscal 2024 and 2023, is included in our “Audited Consolidated Financial Statements” and accompanying “Notes to Consolidated Financial Statements” in this Annual Report. See “Item 8.
Financial information about our operations, including our revenues and expenses for fiscal 2025, 2024 and 2023, and our total assets as of the end of fiscal 2025 and 2024, is included in our “Audited Consolidated Financial Statements” and accompanying “Notes to Consolidated Financial Statements” in this Annual Report. See “Item 8.
In our expansion markets, we seek highly-qualified and experienced new franchisees for multi-unit development opportunities. We believe that creating a foundation of initial and on-going support is important for future success, both for our franchisees and for our brand.
In our expansion markets, we seek highly-qualified, well-capitalized and experienced new franchisees for multi-unit development opportunities. We believe that creating a foundation of initial and on-going support is important for future success, both for our franchisees and for our brand.
We believe that our restaurant model is designed to generate strong cash flow, consistent restaurant-level financial results, and compelling returns on invested capital. In 2024, our company-operated restaurants generated average annual sales per restaurant of approximately $2.3 million and restaurant-level contribution margins of 17.4%. Experienced Leadership. Most of our senior management team has extensive operating experience in the restaurant industry.
We believe that our restaurant model is designed to generate strong cash flow, consistent restaurant-level financial results, and compelling returns on invested capital. In 2025, our company-operated restaurants generated average annual sales per restaurant of approximately $2.3 million and restaurant-level contribution margins of 17.8%. Experienced Leadership. Most of our senior management team has extensive operating experience in the restaurant industry.
We use a combination of our in-house development team and outside real estate 6 Table of Contents consultants to locate, evaluate, and negotiate new sites using various criteria, including demographic characteristics, daytime population thresholds, and traffic patterns, along with the potential visibility of, and accessibility to, the restaurant.
We use a combination of our in-house development team and outside real estate consultants to locate, evaluate, and negotiate new sites using various criteria, including demographic characteristics, daytime population thresholds, and traffic patterns, along with the potential visibility of, and accessibility to, the restaurant.
Starting in March 2025, Performance Food Group Customized Distribution (“PFG Customized”) will be our new primary distributor for substantially all of our food and supplies, including the poultry that our restaurants receive from suppliers. Our primary distributor delivers supplies to most of our restaurants two to three times per week.
Starting in March 2025, Performance Food Group Customized Distribution (“PFG Customized”) was our new primary distributor for substantially all of our food and supplies, including the poultry that our restaurants receive from suppliers. Our primary distributor delivers supplies to most of our restaurants two to three times per week.
We also use social media as a research and customer service tool, and apply insights gained to future marketing efforts. 8 Table of Contents Our Loco Rewards™ loyalty program uses points, rewards, and offers to build engagement with our customers. Customers access the program on elpolloloco.com and the El Pollo Loco iOS Apple and Android app.
We also use social media as a research and customer service tool, and apply insights gained to future marketing efforts. Our Loco Rewards™ loyalty program uses points, rewards, and offers to build engagement with our customers. Customers access the program on elpolloloco.com and the El Pollo Loco iOS Apple and Android app.
In 2025, we plan to continue our standard practices for remodels, including 30-40 company-operated and 30-40 franchised restaurants. We expect future new unit development to be led by franchisees and complemented by company store growth, through both in-fill in existing markets and expansion into adjacent and contiguous new markets.
In 2026, we plan to continue our standard practices for remodels, including 25 to 35 company-operated and 30 to 40 franchised restaurants. We expect future new unit development to be led by franchisees and complemented by company store growth, through both in-fill in existing markets and expansion into adjacent and contiguous new markets.
We also offer digital ordering through our mobile app, mobile web, and desktop web to provide convenient, easy ordering options for our customers. In addition to offering digital ordering through our website and mobile app, we participate in 3rd party delivery marketplaces. We currently have partnerships with DoorDash, Postmates, Uber Eats, 5 Table of Contents and Grubhub.
We also offer digital ordering through our mobile app, mobile web, and desktop web to provide convenient, easy ordering options for our customers. In addition to offering digital ordering through our website and mobile app, we participate in 3rd party delivery marketplaces. We currently have partnerships with DoorDash, Postmates, Uber Eats, and Grubhub.
We provide our customers with the opportunity to enjoy citrus-marinated, fire-grilled chicken and entrees containing distinctive ingredients such as fresh avocados and serrano peppers at price points that appeal to a broad consumer base. We believe that our entree prices are typically lower than the fast-casual segment, and a slight premium to the QSR segment.
We provide our customers with the opportunity to enjoy citrus-marinated, fire-grilled chicken and entrees containing fresh ingredients, like avocados, tomatoes, and serrano peppers at price points that appeal to a broad consumer base. We believe that our entree prices are typically lower than the fast-casual segment, and a slight premium to the QSR segment.
In the past, we have entered into contracts ranging from one to two years depending on current and expected market conditions. During fiscal 2024, we sourced poultry from six suppliers, with three accounting for approximately 77% of our purchases for fiscal 2024. During fiscal 2025, more than 80% of our poultry purchases have been contracted at a fixed price.
In the past, we have entered into contracts ranging from one to two years depending on current and expected market conditions. During fiscal 2025, we sourced poultry from five suppliers, with three accounting for approximately 97% of our purchases for fiscal 2025. During fiscal 2025, more than 80% of our poultry purchases have been contracted at a fixed price.
The process for selecting locations incorporates management’s experience and expertise and includes extensive data collection and analysis. Additionally, we use information and intelligence gathered from managers and other restaurant personnel that live in or near the neighborhoods that we are considering.
The process for selecting locations incorporates management’s experience and expertise and includes extensive data collection and analysis. Additionally, we use 7 Table of Contents information and intelligence gathered from managers and other restaurant personnel that live in or near the neighborhoods that we are considering.
We communicate offers, loyalty updates and other Loco Rewards campaigns to customers via in-app messaging, mobile phone push notifications and email. Our online ordering program makes it easy for customers to skip the line and order ahead.
We communicate offers, loyalty 9 Table of Contents updates and other Loco Rewards campaigns to customers via in-app messaging, mobile phone push notifications and email. Our online ordering program makes it easy for customers to skip the line and order ahead.
We 3 Table of Contents also believe that our concept, which integrates the complexity of creating real food in real kitchens with the speed of our service model and the skill of our trained Grill Masters, provides a layer of competitive insulation around our restaurant model.
We also believe that our concept, which integrates the complexity of cooking real food in real kitchens with the speed of our 4 Table of Contents service model and the skill of our trained Grill Masters, provides a layer of competitive insulation around our restaurant model.
Restaurant management trainees participate in comprehensive, multi-week training programs touching on all aspects of the operations, including restaurant leadership. We provide key restaurant leadership roles with a quarterly cash-based performance bonus awards. Our corporate employees are provided an annual performance bonus award.
We offer our employees both online and on-the-job training. Restaurant management trainees participate in comprehensive, multi-week training programs touching on all aspects of the operations, including restaurant leadership. We provide key restaurant leadership roles with a quarterly cash-based performance bonus awards. Our corporate employees are provided an annual performance bonus award.
Our team members create our salsas and cilantro dressings with fresh tomatoes, avocados, serrano peppers, and cilantro, and our rice and beans are seasoned and simmered in our restaurants throughout each day.
Our team members create our salsas and Creamy Cilantro dressing with fresh tomatoes, avocados, serrano peppers, and cilantro, and our rice and beans are seasoned and simmered in our restaurants throughout each day.
Operations Infrastructure that Allows for Real-Time Control, Fast Feedback, and Innovation. We believe that satisfying our customers’ dining needs is the foundation for our business, and we have an operations platform that allows us to measure our performance in meeting and exceeding those needs. We utilize an operations dashboard that aggregates real-time, restaurant-level information for many aspects of our business.
We believe that satisfying our customers’ dining needs is the foundation for our business, and we have an operations platform that allows us to measure our performance in meeting and exceeding those needs. We utilize an operations dashboard that aggregates real-time, restaurant-level information for many aspects of our business.
We plan to continue to expand our business, drive restaurant sales growth and increase company profits by executing our Strategic Plan, which consists of the following five key strategies: Brand That Wins We believe that being the craveable, affordable, better for you chicken leader, reinforced with our marketing and product offering, positions us to deliver on our first strategic pillar, Brand That Wins.
We plan to continue to expand our business, drive restaurant sales growth and increase company profits by executing our Strategic Plan, which consists of the following five key strategies: Brand That Wins We believe that being the flavorful, affordable, quality chicken leader, reinforced with our marketing and product offering, positions us to deliver on our first strategic pillar, Brand That Wins.
Franchisees range in size from single-restaurant operators to our largest franchisee, which owned 79 restaurants as of December 25, 2024. Our existing franchise base consists of many successful, longstanding, multi-unit restaurant operators. As of December 25, 2024, approximately 86% of franchised restaurants were owned and operated by franchisees that had been with us for over 20 years.
Franchisees range in size from single-restaurant operators to our largest franchisee, which owned 79 restaurants as of December 31, 2025. Our existing franchise base consists of many successful, longstanding, multi-unit restaurant operators. As of December 31, 2025, approximately 83% of franchised restaurants were owned and operated by franchisees that had been with us for over 20 years.
Additionally, as of December 25, 2024 we had 10 licensed restaurants in the Philippines. Our typical restaurant is a free-standing building with drive-thru service that ranges in size from 2,200 to 3,000 square feet with seating for approximately 50-70 people.
Additionally, as of December 31, 2025, we had 8 licensed restaurants in the Philippines. Our typical restaurant is a free-standing building with drive-thru service that ranges in size from 2,200 to 3,000 square feet with seating for approximately 50 to 70 people.
Franchise Program We use a franchising strategy to increase new restaurant growth in certain markets, leveraging the ownership of entrepreneurs with specific local market expertise and requiring a relatively minimal capital commitment by us. As of December 25, 2024, we had a total of 325 franchised restaurants.
Franchise Program We use a franchising strategy to increase new restaurant growth in certain markets, leveraging the ownership of entrepreneurs with specific local market expertise and requiring a relatively minimal capital commitment by us. As of December 31, 2025, we had a total of 328 franchised restaurants.
Our distinctive menu features our signature product, citrus-marinated fire-grilled chicken, served in a variety of Mexican-inspired entrees, like burritos and tostadas, healthier choices, like salads, and chicken meals available in a variety of sizes to feed individuals and larger groups.
Our distinctive menu features our signature product, citrus-marinated fire-grilled chicken, served in a variety of Mexican-inspired entrees, like burritos, tostadas, and salads, as well as bone-in chicken meals available in a variety of sizes to feed individuals and larger groups.
With menu items such as our signature Fire-Grilled Chicken Meals and Family Meals, Double Chicken Tostada, the Original Pollo Bowl®, Guacamole Chicken Burrito, and Double Chicken Avocado Salad, we believe that we offer our customers a “better for you” alternative to traditional food on-the-go.
With menu items such as our signature Fire-Grilled Chicken Meals and Family Meals, Double Chicken Tostada, the Original Pollo Bowl®, Guacamole Chicken Burrito, and Double Pollo Salads, we believe that we offer our customers a quality alternative to traditional food on-the-go.
Our Competitive Strengths We believe that the following strengths differentiate us from our competitors and serve as the foundation for our continued growth: Differentiated Restaurant Concept with Broad Appeal.
Our Competitive Strengths We believe that the following strengths differentiate us from our competitors and serve as the foundation for our continued growth: Unique Menu with Broad Appeal.
As of December 25, 2024, there were 4.2 million members in the Loco Rewards loyalty program, whom we target with segmented, dynamic campaigns with special offers tailored to each customer segment with the goals of increasing visit frequency and growing overall spend.
As of December 31, 2025, there were 5.3 million members in the Loco Rewards loyalty program, whom we target with segmented, dynamic campaigns with special offers tailored to each customer segment with the goals of increasing visit frequency and growing overall spend.
ITEM 1. BUSINESS Our Company We opened our first location on Alvarado Street in Los Angeles, California, in 1980, and have grown our restaurant system to 498 domestic restaurants, comprised of 173 company-operated and 325 franchised restaurants as of December 25, 2024. Our restaurants are located principally in California, but also in Arizona, Nevada, Texas, Utah, Colorado and Louisiana.
ITEM 1. BUSINESS Our Company We opened our first location on Alvarado Street in Los Angeles, California, in 1980, and have grown our restaurant system to 503 domestic restaurants, comprised of 175 company-operated and 328 franchised restaurants as of December 31, 2025. Our restaurants are located principally in California, but also in Arizona, Nevada, Texas, Utah, Colorado, Washington and Louisiana.
In 2024, 2023 and 2022, our comparable restaurant sales grew 2.8%, 0.3% and 5.9%, respectively.
In 2025, 2024 and 2023, our comparable restaurant sales grew 0.3%, 2.8% 5 Table of Contents and 0.3%, respectively.
We strive to find ways to simplify our methodology and invest in elevating our team members and leaders. In a rapidly evolving landscape, effective training depends not only on the quality of content but also on delivery methods. We believe in a blended approach to training to capture all audiences by integrating digital technology and traditional hands-on training activities.
In a rapidly evolving landscape, effective training depends not only on the quality of content but also on delivery methods. We believe in a blended approach to training to capture all audiences by integrating digital technology and traditional hands- 8 Table of Contents on training activities.
While some of the savings were realized in 2024, we believe that these initiatives will have a positive impact on overall profitability for future years as well. In addition to managing cost of sales, we also believe that having a cost-improved new store prototype will have a positive impact on overall profitability and fuel growth.
While some of the savings were realized in 2024 and 2025, we believe that these initiatives will have a positive impact on overall profitability for future years as well. In addition to managing cost of sales and operating expenses, we believe that a cost-improved restaurant prototype is critical to enhancing returns and supporting disciplined growth.
Human Capital As of December 25, 2024, we had approximately 4,143 employees, of whom approximately 3,977 were hourly restaurant employees comprised of 3,177 crewmembers, 178 general managers/acting general managers, 85 assistant managers, 518 shift leaders, and 19 employees in limited-time roles as acting managers or as managers in training. The remaining 166 employees were corporate and office personnel.
Human Capital As of December 31, 2025, we had approximately 4,034 employees, of whom approximately 3,857 were hourly restaurant employees comprised of 3,097 crewmembers, 172 general managers/acting general managers, 74 assistant managers, 483 shift leaders, and 31 employees in limited-time roles as acting managers or as managers in training. The remaining 177 employees were corporate and office personnel.
In addition, the El Pollo Loco logo, website name and address, Facebook, X (formerly Twitter), Instagram and YouTube accounts are our intellectual property.
Patent and Trademark Office, and El Pollo Loco ® in approximately 40 foreign countries and the European Union. In addition, the El Pollo Loco logo, website name and address, Facebook, X (formerly Twitter), Instagram, Tik Tok, and YouTube accounts are our intellectual property.
We plan to continue investing in our loyalty and delivery programs as well as other technology platforms to continue making it easier for customers to access our food. Winning Unit Economics We believe that creating strong margins is as important as driving topline sales.
As of December 31, 2025, all company-operated and franchise restaurants offered integrated delivery through a third-party service. We plan to continue investing in our loyalty and delivery programs as well as other technology platforms that make it easier for customers to access our food. Winning Unit Economics We believe that creating strong margins is as important as driving topline sales.
We seek to position ourselves as a differentiated restaurant concept, which we believe sources traffic from both dining segments and, as a result, we expect it to drive transaction growth in the future. Mexican-Inspired, Freshly-Prepared Fire-Grilled Chicken and Entrees.
We seek to position ourselves as a differentiated restaurant concept, which we believe sources traffic from both dining segments and, as a result, we expect it to drive transaction growth in the future. We also frequently test and introduce innovative new products.
El Pollo Loco is a differentiated and growing restaurant concept that specializes in fire-grilling citrus-marinated chicken and operates in the limited service restaurant (“LSR”) segment. We strive to make and serve food that is “better for you” and also flavorful.
El Pollo Loco is a differentiated and growing restaurant concept that specializes in fire-grilling citrus-marinated chicken and operates in the limited service restaurant (“LSR”) market segment. We believe that our market position to make and serve quality chicken that is fast and easy sets El Pollo Loco apart.
During fiscal 2024, we opened four new stores, of which two were franchised and two were company-owned. In addition to unit growth, we believe that remodels and refreshes to our existing fleet will keep El Pollo Loco relevant to our customers and keep them coming back. In 2024, we completed eight company-operated restaurant remodels, and our franchisees completed 44 remodels.
In addition to unit growth, we believe that remodels and refreshes to our existing fleet will keep El Pollo Loco relevant to our customers and keep them coming back. In 2025, we completed 17 company-operated restaurant remodels, and our franchisees completed 52 remodels.
We also believe that QSR competition is based primarily on quality, taste, speed of service, value, brand recognition, restaurant location, and customer service.
We believe that competition within the fast-casual restaurant segment is based primarily on ambience, price, taste, quality, and freshness of menu items, as well as on the convenience of drive-thru service. We also believe that QSR competition is based primarily on quality, taste, speed of service, value, brand recognition, restaurant location, and customer service.
We believe that we have opportunities for menu innovation around different forms of chicken and portability as we look to increase customer frequency and earn share from the competition. In addition, we will continue to tap into the need for healthier offerings by building on the success of our fire-grilled chicken and “better for you” products.
We will continue to adapt our menu to create individual entrees and group meals that feature our fire-grilled chicken and are inspired by the flavors of Mexico. We believe that we have opportunities for menu innovation around different forms of chicken and portability as we look to increase customer frequency and earn share from the competition.
In 2024, two new company-operated restaurants were opened in California and two new franchised restaurants were opened, one in California and one in Texas. In fiscal 2025, we intend to open one to two new company-operated restaurant in California and eight to nine new franchised restaurants.
In 2025, one new company-operated restaurant was opened in California and eight new franchised restaurants were opened, two in California, one in Texas, two in Arizona, one in Colorado, one in New Mexico, and one in Washington.
Our grilled chicken is versatile and is offered in bone-in and boneless options, giving our customers choice and variety. Our chicken will continue to be the focus of our advertising campaigns and consumer messaging, and we believe that we are positioned uniquely to be the alternative to fried chicken and overindulgent fast food in the marketplace.
Our chicken will continue to be the focus of our advertising campaigns and consumer messaging, and we believe that we are positioned uniquely to be a healthier alternative in the fast food marketplace. ​ We believe that we are uniquely positioned within the LSR restaurant space.
Our distinctive menu with “better for you” and more affordable healthier alternatives appeals to consumers across a wide variety of socio-economic backgrounds and drives our balanced composition of sales throughout the day (our “day-part mix”), including at lunch and dinner. The Company operates in one operating segment.
Our distinctive menu with high quality chicken entrees appeals to consumers across a wide variety of socio-economic backgrounds and drives our balanced composition of sales throughout the day, including at lunch and dinner. The Company operates in one operating segment. All significant revenues relate to retail sales of food and beverages through either company or franchised restaurants.
None of our employees are part of a collective bargaining agreement, and we believe that our relationships with our employees are satisfactory. We believe our efforts to maintain solid relationships with our employees are effective and are grounded in our company values. Our primary human capital objective is employee engagement, which is dependent upon hiring, retaining, developing and motivating employees.
None of our employees are part of a collective bargaining agreement, and we believe that our relationships with our employees are satisfactory. We believe our efforts to maintain solid relationships with our employees are effective and are grounded in our “STRONG” company values – Simple, Together, Relentless, Ownership, Nimble, and Growth.
Intellectual Property We have registered El Pollo Loco ® , Pollo Bowl ® , The Crazy Chicken ® , and certain other names used by our restaurants as trademarks or service marks with the U.S. Patent and Trademark Office, and El Pollo Loco ® in approximately 40 foreign countries and the European Union.
Moving into fiscal 2026, we have entered into contracts with six suppliers. Intellectual Property We have registered El Pollo Loco ® , Let’s Get Loco ®, Pollo Bowl ® , and certain other names used by our restaurants as trademarks or service marks with the U.S.
We believe that our family-sized chicken meals provide a “better for you” and more convenient alternative for families looking to solve the “dinnertime dilemma” of providing their families with high-quality meals without investing significant time or money. In 2024 approximately 25% of our company-operated sales were generated from family-sized meals, compared to 26% in 2023, and 28% in 2022.
We believe that our family-sized chicken meals provide an affordable and more convenient alternative for families looking to solve the “dinnertime dilemma” of providing their families with high-quality meals without investing significant time or money. Operations Infrastructure that Allows for Real-Time Control, Fast Feedback, and Innovation.
Members of the senior leadership team include Elizabeth Williams as our Chief Executive Officer, Maria Hollandsworth as our President and Chief Operating Officer, Ira Fils as our Chief Financial Officer, Anne Jollay as our Chief Legal Officer, Bjorn Erland as our Chief People Officer, Tim Welsh as our Chief Development Officer, Jill Adams as our Chief Marketing Officer, and Clark Matthews as our Chief Information Officer. 4 Table of Contents Our Growth Strategy We believe that we are well-positioned for sales growth because of our position in the high growth chicken category, appeal to a broad customer base, quality ingredients and a menu with broadly appealing Mexican flavors, disciplined business model, and strong unit economics.
Our Growth Strategy We believe that we are well-positioned for sales growth because of our position in the high growth chicken category, appeal to a broad customer base, quality ingredients and a menu with broadly appealing Mexican flavors, disciplined business model, and strong unit economics.
Franchise operations are supported by four directors of franchise and a Vice President, Franchise Operations, who reports to the Chief Operating Officer. 7 Table of Contents Training Our team members are the heart of El Pollo Loco, and it is our responsibility to equip them with the skills and knowledge necessary to deliver our high standards and commitments to the customer and team member experience.
Training Our team members are the heart of El Pollo Loco, and it is our responsibility to equip them with the skills and knowledge necessary to deliver our high standards and commitments to the customer and team member experience. We strive to find ways to simplify our methodology and invest in elevating our team members and leaders.
Our labor and deployment system allows us to focus our team on serving customers quickly and efficiently, while maintaining our quality and service standards. Initiatives currently in test include a chicken holding cabinet, which improves overall quality and chicken availability during off-peak hours, and self-ordering kiosks which make ordering easy for our customers.
Our labor and deployment system continue to evolve and allow us to focus our team on serving customers quickly and efficiently, while maintaining our quality and service standards. Initiatives currently in test include self-ordering kiosk enhancements which improve the customer ordering experience, and kitchen display screen enhancements which simplify product descriptions.
We tailor our message from television and direct mail, which garners broad exposure, to our Loco Rewards loyalty program and social media platform where we engage in more personalized marketing. Hospitality Mindset Serving our customers and delivering on exceptional hospitality begins with having an operations and training model that allows for consistent delivery of our products and services.
We tailor our message across television and direct mail, which garners broad exposure, to our Loco Rewards loyalty program, as well as through various social media platforms where we engage in more personalized marketing.
We engage customers through our seasonal product calendar, which features existing product platforms, like our Double Chicken Tostadas and Fire-Grilled Burritos, and limited-time offers like our Double Pollo Fit® Bowls. Our key points of differentiation are communicated through our advertising campaign, which highlights our food quality and “better for you” menu options.
We believe that our seasonal product calendar is an effective way to keep customers engaged with the brand throughout the year, featuring both existing product platforms, like Chicken Quesadillas and Double Chicken Burrito Bowls, and limited-time offers like our Baja Tostadas. Our key points of differentiation are communicated through our advertising campaigns, which highlights our food quality and flavorful entrees.
Site Selection Process We consider the location of a restaurant to be a critical variable in its long-term success and as such, we devote significant effort to the investigation and evaluation of potential restaurant locations. Our in-house development team has extensive experience building such brands as Burger King, Carl’s Jr., Jimmy John’s, QDOBA, Baskin Robbins, Denny’s and Dunkin’ Brands.
In fiscal 2026, we intend to open three to four new company-operated restaurants in California and Texas and 15 to 16 new franchised restaurants. Site Selection Process We consider the location of a restaurant to be a critical variable in its long-term success and as such, we devote significant effort to the investigation and evaluation of potential restaurant locations.
As of December 25, 2024, DoorDash maintained exclusivity for delivery orders placed directly with our restaurants. For orders placed directly from the restaurant, no fee is charged to the restaurant as the full delivery cost is borne by the customer.
As of December 31, 2025, DoorDash maintained exclusivity for delivery orders placed directly with our restaurants.
Drive Unit Growth Again Through National Expansion We believe that execution of our first four strategies will enable us to grow our restaurant base. Our restaurant model is designed to generate strong cash flow, attractive restaurant-level financial results and high returns on invested capital .
The full next-generation prototype, inclusive of identified cost savings to date, is expected to open in 2026. ​ Drive Unit Growth Again Through National Expansion We believe that execution of our first four strategies will enable us to grow our restaurant base.
We strive to build a culture centered around our mission, which is to “Feed the Love that Makes Us All Feel Like Family” and “Heart-Centered Leadership.” We believe this mission is predicated on 11 Table of Contents servant-led leadership, employee recognition and community involvement. We offer our employees both online and on-the-job training.
Our primary human capital objective is employee engagement, which is dependent upon hiring, retaining, developing and motivating employees. We strive to build a culture centered around these values to drive performance and employee retention. We 12 Table of Contents believe this mission is predicated on servant-led leadership, employee recognition and community involvement.
We believe that simplifying our restaurant operations will further enhance our ability to attract and retain the best employees and further improve customer service. In 2024, we continued to implement initiatives to make it easier for our employees to operate our restaurants.
Hospitality Mindset Serving our customers and delivering on exceptional hospitality begins with having an operations and training model that allows for consistent delivery of our products and services. We believe that simplifying our restaurant operations will further enhance our ability to attract and retain the best employees and further improve customer service.
Our competition includes a variety of locally-owned restaurants and national and regional chains that offer dine-in, carry-out, and delivery services. We believe that competition within the fast-casual restaurant segment is based primarily on ambience, price, taste, quality, and freshness of menu items, as well as on the convenience of drive-thru service.
Competition We operate in the restaurant industry, which is highly competitive and fragmented. The number, size, and strength of competitors varies by region. Our competition includes a variety of locally-owned restaurants and national and regional chains that offer dine-in, carry-out, and delivery services.
We maintain the recipe for our chicken marinade, as well as certain proprietary standards, specifications, and operating procedures, as trade secrets or as confidential proprietary information. Competition We operate in the restaurant industry, which is highly competitive and fragmented. The number, size, and strength of competitors varies by region.
We maintain the recipe for our chicken marinade, as well as certain proprietary standards, specifications, and operating procedures, as trade secrets or as confidential proprietary information. Our business relies in significant part on licensing our intellectual property to franchisees who operate restaurants using our brand, trademarks, and system. Our franchise and renewal terms are typically 20 years.
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Our entrees include favorites such as our Guacamole Chicken Burrito, Double Chicken Tostada, Crunchy Chicken Taco, and the Original Pollo Bowl®. Our famous Creamy Cilantro dressing and salsas are prepared fresh daily, allowing our customers to create their favorite flavor profiles to enhance their culinary experience.
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Our entrees include favorites such as tostadas, burritos, bowls, and salads, and we offer a variety of fresh salsas and delicious dressings that give our customers the opportunity to customize their meals.
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All significant revenues relate to retail sales of food and beverages through either company or franchised restaurants.
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For example, we are currently testing chicken tenders and sandwiches, products which we expect to launch to our restaurant system during fiscal year 2026. Mexican-Inspired, Freshly-Prepared Fire-Grilled Chicken and Entrees.
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Our bone-in chicken meals and Mexican-inspired entrees accounted for 41% and 52% of our company-operated restaurant sales in 2024, respectively, 43% and 50%, respectively, in 2023, and 44% and 50%, respectively, in 2022.
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Members of the senior leadership team include Elizabeth Williams as our Chief Executive Officer, Ira Fils as our Chief Financial Officer, Jason Weintraub as our Chief Legal and People Officer, Tim Welsh as our Chief Development Officer, Jill Adams as our Chief Marketing Officer, Vadim Parizher, Chief Technology Officer, and Clark Matthews as our Chief Information Officer.
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We believe that we are uniquely positioned within the LSR restaurant space. We will continue to adapt our menu to create individual entrees and group meals that feature our fire-grilled chicken and are inspired by the flavors of Mexico.
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Our grilled chicken is versatile and is offered in bone-in and boneless options, giving our customers choice and variety.
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These included eliminating low-volume menu items with unique ingredients or complex builds, like our Keto Burrito, as well as purchasing pre-chopped serrano peppers and fresh cilantro to reduce prep and ensure consistency, and using new equipment to simplify salsa production.
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In 2025, we continued to implement initiatives to make it easier for our employees to operate our restaurants.
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In total, during fiscal 2024, all digital and delivery orders including mobile and web orders constituted 12.2% of our total sales mix. As of December 25, 2024, all company-operated and franchise restaurants offered integrated delivery through a third-party service.
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These included standardizing product builds and reducing unique ingredients with our bowls and salads, using new equipment such as a chicken holding cabinet, which improves overall quality and chicken availability during off-peak hours, and self-ordering kiosks which make ordering easy for our customers.
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Work was completed in 2024 to reduce the overall cost of the restaurant prototype through updating layout, materials, and furnishings, while keeping a modern, durable, and quality aesthetic. The brand will open its first cost-improved prototype in 2025.
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For orders placed directly from the restaurant, no fee is charged to the restaurant as the full delivery cost is borne by the customer. 6 Table of Contents In total, during fiscal 2025, all digital and delivery orders including mobile, web orders, and excluding kiosks constituted 13.8% of our total sales mix.
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To lead our restaurant management teams, we have area leaders, each of whom is responsible for 6 to 9 restaurants. Overseeing the area leaders are three Regional Directors of Operations who report up to the Sr. Director of Operation who reports to our Chief Operating Officer.
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Cost optimization efforts related to furniture, fixtures, and equipment (“FF&E”), layout, materials, and design standards were initiated at the end of 2024. Identified savings – particularly within FF&E – have been incorporated into new restaurant builds beginning in 2025.
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We contracted with McLane Company (our “primary distributor”), a major foodservice distributor, for substantially all of our food and supplies, including the poultry that our restaurants receive from suppliers for fiscal 2024.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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As part of our longer-term growth strategy, we may enter into geographic markets in which we have little or no prior operating or franchising experience, including through company-operated restaurant growth and franchise development agreements. For example, we are pursuing the new development agreements covering territories in Texas, Colorado, New Mexico, Idaho and Washington State.
As part of our longer-term growth strategy, we may enter into geographic markets in which we have little or no prior operating or franchising experience, including through company-operated restaurant growth and franchise development agreements. For example, we are pursuing new development agreements covering territories in Texas, Colorado, New Mexico, Idaho and Washington State.
We are subject to federal, state, and local laws, regulations, and ordinances that: ● govern activities or operations that may have adverse environmental effects, such as discharges into the air, water and soils, as well as waste handling and disposal practices for solid and hazardous wastes and wastewater; and ● impose liability for the costs of remediating, and the damage resulting from, past spills, disposals, or other releases of petroleum products and hazardous materials. 25 Table of Contents In particular, under applicable environmental laws, we may be responsible for remediation of environmental conditions and subject to associated liabilities, including liabilities for cleanup costs, personal injury, or property damage, relating to our restaurants and the land on which our restaurants are located, regardless of whether we lease or own the restaurants or land in question and regardless of whether such environmental conditions were created by us or by a prior owner or tenant.
We are subject to federal, state, and local laws, regulations, and ordinances that: ● govern activities or operations that may have adverse environmental effects, such as discharges into the air, water and soils, as well as waste handling and disposal practices for solid and hazardous wastes and wastewater; and ● impose liability for the costs of remediating, and the damage resulting from, past spills, disposals, or other releases of petroleum products and hazardous materials. 27 Table of Contents In particular, under applicable environmental laws, we may be responsible for remediation of environmental conditions and subject to associated liabilities, including liabilities for cleanup costs, personal injury, or property damage, relating to our restaurants and the land on which our restaurants are located, regardless of whether we lease or own the restaurants or land in question and regardless of whether such environmental conditions were created by us or by a prior owner or tenant.
The ability to open new restaurants is dependent upon a number of factors, many of which are beyond our control, including our and our franchisees’ abilities to: identify available and suitable restaurant sites; compete for restaurant sites; reach acceptable agreements regarding the lease or purchase of locations; obtain or have available the financing required to acquire and operate a restaurant, including construction and opening costs; respond to unforeseen engineering or environmental problems with leased premises; avoid the impact of inclement weather and natural and man-made disasters; hire, train, and retain the skilled management and other employees necessary to meet staffing needs; obtain, in a timely manner and for an acceptable cost, required licenses, permits, and regulatory approvals; respond effectively to any changes in local, state, and federal law and regulations that adversely 12 Table of Contents affect our and our franchisees’ costs or abilities to open new restaurants; and control construction and equipment cost increases for new restaurants.
The ability to open new restaurants is dependent upon a number of factors, many of which are beyond our control, including our and our franchisees’ abilities to: identify available and suitable restaurant sites; compete for restaurant sites; reach acceptable agreements regarding the lease or purchase of locations; obtain or have available the financing required to acquire and operate a restaurant, including construction and opening costs; respond to unforeseen engineering or environmental problems with leased premises; avoid the impact of inclement weather and natural and man-made disasters; hire, train, and retain the skilled management and other employees necessary to meet staffing needs; obtain, in a timely manner and for an acceptable cost, required licenses, permits, and regulatory approvals; respond effectively to any changes in local, state, and federal law and regulations that adversely affect our and our franchisees’ costs or abilities to open new restaurants; and control construction and equipment cost increases for new restaurants.
These cybersecurity incidents have included, and, may in the future include, those caused by physical or electronic break-ins, computer viruses, malware, worms, attacks by hackers or foreign governments, ransomware, unauthorized access through the use of compromised credentials and tampering, including through social engineering such as phishing attacks, coordinated denial-of-service attacks, exploitation of design flaws, bugs or security vulnerabilities and similar breaches, or intentional or unintentional acts by employees or other insiders with access privileges.
These cybersecurity incidents have included, and, may in the future include, those caused by physical or electronic break-ins, computer viruses, malware, worms, attacks by hackers or foreign governments, ransomware, use of artificial intelligence, unauthorized access through the use of compromised credentials and tampering, including through social engineering such as phishing attacks, coordinated denial-of-service attacks, exploitation of design flaws, bugs or security vulnerabilities and similar breaches, or intentional or unintentional acts by employees or other insiders with access privileges.
There are numerous factors involved in identifying and securing an appropriate restaurant site, including: evaluating size of the site, traffic patterns, local retail, residential and business attractions and infrastructure that will drive high levels of customer traffic and sales; competition in new markets, including competition for restaurant sites; financial conditions affecting developers and potential landlords, such as the effects of macro-economic conditions and the credit market (including the potential for rising interest rates), which could lead to these parties delaying or canceling development projects (or renovations of existing projects), in turn reducing the number of appropriate restaurant sites available; developers and potential landlords obtaining licenses or permits for development projects on a timely basis; proximity of potential restaurant sites to existing restaurants; anticipated commercial, residential and infrastructure development near the potential restaurant site; and availability of acceptable lease terms and arrangements, including construction costs.
There are numerous factors involved in identifying and securing an appropriate restaurant site, including: evaluating size of the site, traffic patterns, local retail, residential and business attractions and infrastructure that will drive high levels of customer traffic and sales; competition in new markets, including competition for restaurant sites; financial conditions affecting developers and potential landlords, such as the effects of macro-economic conditions and the credit market (including the potential for rising interest rates), which could lead to these parties delaying or canceling development projects (or renovations of existing projects), in turn reducing the number of appropriate restaurant sites available; developers and potential landlords obtaining licenses or permits for development projects on a timely basis; proximity of potential restaurant sites to existing restaurants; anticipated commercial, 16 Table of Contents residential and infrastructure development near the potential restaurant site; and availability of acceptable lease terms and arrangements, including construction costs.
Our level of indebtedness could have significant effects on our business, such as: limiting our ability to borrow additional amounts to fund working capital, capital expenditures, acquisitions, debt service requirements, execution of our growth strategy, and other purposes; requiring us to dedicate a portion of our cash flow from operations to pay interest on our debt, which could reduce availability of our cash flow to fund working capital, capital expenditures, acquisitions, execution of our growth strategy, and other general corporate purposes; making us more vulnerable to adverse changes in general economic, industry, government regulatory, and competitive conditions in our business by 18 Table of Contents limiting our ability to plan for and react to changing conditions; placing us at a competitive disadvantage compared with our competitors with less debt; and exposing us to risks inherent in interest rate fluctuations, because our borrowings are at variable rates of interest, which could result in higher interest expense in the event of increases in interest rates.
Our level of indebtedness could have significant effects on our business, such as: limiting our ability to borrow additional amounts to fund working capital, capital expenditures, acquisitions, debt service requirements, execution of our growth strategy, and other purposes; requiring us to dedicate a portion of our cash flow from operations to pay interest on our debt, which could reduce availability of our cash flow to fund working capital, capital expenditures, acquisitions, execution of our growth strategy, and other general corporate purposes; making us more vulnerable to adverse changes in general economic, industry, government regulatory, and competitive conditions in our business by limiting our ability to plan for and react to changing conditions; placing us at a competitive disadvantage compared with our competitors with less debt; and exposing us to risks inherent in interest rate fluctuations, because our borrowings are at variable rates of interest, which could result in higher interest expense in the event of increases in interest rates.
We may become subject to liabilities arising from environmental laws that could likely increase our operating expenses and materially and adversely affect our business and results of operations.
We may become subject to liabilities arising from environmental laws that could increase our operating expenses and materially and adversely affect our business and results of operations.
Thus, holders of our common stock bear the risk that our future offerings may reduce the market price of our common stock and dilute their stockholdings in us. 26 Table of Contents Delaware law, our organizational documents, our shareholder rights agreement and our existing and future debt agreements may impede or discourage a takeover, depriving our investors of the opportunity to receive a premium for their shares.
Thus, holders of our common stock bear the risk that our future offerings may reduce the market price of our common stock and dilute their stockholdings in us. 28 Table of Contents Delaware law, our organizational documents, our shareholder rights agreement and our existing and future debt agreements may impede or discourage a takeover, depriving our investors of the opportunity to receive a premium for their shares.
Although we have been able to substantially offset these cost pressures through various actions, such as increasing menu prices, managing menu mix, and productivity improvements, we expect these cost pressures to continue into 2025 and we may not be able to offset cost increases in the future.
Although we have been able to substantially offset these cost pressures through various actions, such as increasing menu prices, managing menu mix, and productivity improvements, we expect these cost pressures to continue into 2026 and we may not be able to offset cost increases in the future.
Our business is subject to extensive federal, state and local laws and regulations, including those relating to the preparation, sale and labeling of food and beverages, labor and employment practices and working conditions, health, sanitation, safety and fire standards, building and zoning requirements, registration, offer, sale, termination and renewal of franchises, public accommodations and safety conditions, environmental matters, and consumer protection and 24 Table of Contents privacy obligations.
Our business is subject to extensive federal, state and local laws and regulations, including those relating to the preparation, sale and labeling of food and beverages, labor and employment practices and working conditions, health, sanitation, safety and fire standards, building and zoning requirements, registration, offer, sale, termination and renewal of franchises, public accommodations and safety conditions, environmental matters, and consumer protection and privacy obligations.
While we are still evaluating the potential impacts of these proposed tariffs, as well as our ability to mitigate their related impacts, we anticipate it might adversely impact our revenue and cost of goods sold in the United States.
While we are still evaluating the potential impacts of potential tariffs, as well as our ability to mitigate their related impacts, we anticipate it might adversely impact our revenue and cost of goods sold in the United States.
Such delivery and catering offerings also increase the risk of illnesses associated with our food because the food is transported and/or served by third parties in conditions we cannot control. 17 Table of Contents We do not have a long history with our catering offering and it is difficult for us to anticipate the level of sales they may generate.
Such delivery and catering offerings also increase the risk of illnesses associated with our food because the food is transported and/or served by third parties in conditions we cannot control. We do not have a long history with our catering offering and it is difficult for us to anticipate the level of sales they may generate.
Our profitability depends in part on our ability to anticipate and react to changes in the cost of food, supplies, labor, construction and utilities. In 2024, the costs of certain commodities, labor, and other inputs necessary to operate our restaurants have increased.
Our profitability depends in part on our ability to anticipate and react to changes in the cost of food, supplies, labor, construction and utilities. In 2025, the costs of certain commodities, labor, and other inputs necessary to operate our restaurants have increased.
Furthermore, any inappropriate use of social media platforms by our employees could also result in negative publicity that could damage our reputation, or lead to litigation that increases our costs. We rely on our ability to continue to expand our digital business, delivery orders and catering is uncertain, and these new business lines are subject to various risks.
Furthermore, any inappropriate use of social media platforms by our employees could also result in negative publicity that could damage our reputation, or lead to litigation that increases our costs. We rely on our ability to continue to expand our digital business, delivery orders and catering, and these business lines are subject to various risks.
Should our competitors increase spending on marketing, advertising, and other initiatives, or our marketing funds decrease for any reason, or should our advertising, promotions, new menu items, and restaurant designs and remodels be less effective than those of our competitors or not resonate with our customers, there could be a material adverse effect on our results of operations and financial condition.
Should our competitors increase spending on marketing, advertising, and other initiatives, or our marketing funds decrease for any reason, or 20 Table of Contents should our advertising, promotions, new menu items, and restaurant designs and remodels be less effective than those of our competitors or not resonate with our customers, there could be a material adverse effect on our results of operations and financial condition.
If the economy experiences a significant 13 Table of Contents decline, our business, results of operations, our ability to access the capital markets and our ability to comply with the terms of our secured revolving credit facility could be materially and adversely affected, and we and our franchisees might decelerate the number and timing of new restaurant openings and/or the number of planned restaurant remodels.
If the economy experiences a significant decline, our business, results of operations, our ability to access the capital markets and our ability to comply with the terms of our secured revolving credit facility could be materially and adversely affected, and we and our franchisees might decelerate the number and timing of new restaurant openings and/or the number of planned restaurant remodels.
Given the difficulty in projecting results for newer restaurants in newer markets, as well as the impact of the current macroeconomic environment, we monitor the recoverability of the carrying value of the assets of several restaurants on an ongoing basis. Asset impairments to new units or future capital expenditures could present additional exposure.
Given the difficulty in projecting results for newer restaurants in newer markets, as well as the impact of the current macroeconomic environment, we monitor the recoverability of the carrying value of the assets of several restaurants on an ongoing basis. Asset impairments to new units or future capital expenditures could present additional exposure. Closures could also require additional expenditures.
We have contracts with a limited number of suppliers for the chicken and other food and supplies for our restaurants. Further, increases in fuel prices could result in increased distribution costs. In addition, one company distributes substantially all of the products that we receive from suppliers to company-operated and franchised restaurants.
We have contracts with a limited number of suppliers for the chicken and other food and supplies for our restaurants. Further, increases in fuel prices could result in increased distribution costs. In addition, one company distributes substantially all of the products that we receive from suppliers to company-operated 19 Table of Contents and franchised restaurants.
In addition, our operations depend upon our ability to protect our information systems against damage from physical theft, fire, power loss, telecommunications failure, and other catastrophic events and disruptive problems.
In addition, our operations depend upon our ability to protect our information systems against damage from physical theft, fire, power loss, telecommunications failure, and other disruptive events.
Disputes with franchisees also divert the attention, time, and financial resources of our management and our franchisees from our restaurants, which could have a material adverse effect on our (and our franchisees’) business, financial condition, results of operations, and cash flows, as well as our ability to attract new franchisees.
Disputes with franchisees also divert the attention, time, and financial resources of our management and our franchisees from our restaurants, which could have a material adverse effect on our (and our franchisees’) business, financial condition, results of operations, and cash flows, as well 21 Table of Contents as our ability to attract new franchisees.
In particular, our labor and regulatory compliance have been adversely impacted as a result of AB 1228, signed into law by Governor Newsom on September 28, 2023, which repealed and replaced the FAST Act on January 1, 2024.
In particular, our labor and regulatory compliance have been adversely impacted as a result of AB 1228, 24 Table of Contents signed into law by Governor Newsom on September 28, 2023, which repealed and replaced the FAST Act on January 1, 2024.
In fiscal 2024, 2023, and 2022, the cost of chicken included in our product cost was approximately 9.3%, 10.0%, and 11.0%, respectively, of our revenue from company-operated restaurants. Material increases in the cost of chicken could materially and adversely affect our business, operating results, and financial condition.
In fiscal 2025, 2024, and 2023, the cost of chicken included in our product cost was approximately 9.0%, 9.3%, and 10.0%, respectively, of our revenue from company-operated restaurants. Material increases in the cost of chicken could materially and adversely affect our business, operating results, and financial condition.
These risks and uncertainties include, but are not limited to, our ability to achieve our ESG goals within currently projected costs and expected timeframes; unforeseen operational and technological difficulties; the success of our collaboration with our suppliers and other third parties; and competitive pressures.
These risks and uncertainties include, but are not limited to, our ability to achieve our corporate responsibility goals within currently projected costs and expected timeframes; unforeseen operational and technological difficulties; the success of our collaboration with our suppliers and other third parties; and competitive pressures.
We rely on third-party providers to fulfill delivery orders, and the ordering and payment platforms used by these third parties, or our mobile app or online ordering system, could be damaged or interrupted by technological failures, user errors, cybersecurity incidents or other factors, which may adversely impact our sales through these channels and could negatively impact our brand.
We rely on third-party providers to fulfill delivery orders, and the ordering and payment platforms used by these third parties, or our mobile app or online ordering system, could be damaged or interrupted by technological failures, user errors, cybersecurity incidents or other factors, which may adversely impact our sales through these channels and 18 Table of Contents could negatively impact our brand.
Any unauthorized access of our systems or the information stored on such systems, damage or failure of our 21 Table of Contents computer systems or network infrastructure that causes an interruption in our operations could damage our reputation, subject us to litigation or to actions by regulatory authorities, harm our business relations or increase our security and insurance costs, which could have a material adverse effect on our business, financial condition and results of operations.
Any outage of our technology systems, unauthorized access of our systems or the information stored on such systems, damage or failure of our computer systems or network infrastructure that causes an interruption in our operations could damage our reputation, subject us to litigation or to actions by regulatory authorities, harm our business relations or increase our security and insurance costs, which could have a material adverse effect on our business, financial condition and results of operations.
We cannot make any assurances regarding our ability to effectively respond to changes in consumer preferences or our ability to develop new products that appeal to consumer preferences. If we are unable to attract, develop, assimilate, and retain employees, we may not be able to grow or successfully operate our business.
We cannot make any assurances regarding our ability to effectively respond to changes in consumer preferences or our ability to develop new products that appeal to consumer preferences. 15 Table of Contents If we are unable to attract, develop, assimilate, and retain employees, we may not be able to grow or successfully operate our business.
We may not be able to offset all or any portion of increased food and supply costs, or labor, construction and utility costs through higher menu prices in the future.
We may not be able to offset all 17 Table of Contents or any portion of increased food and supply costs, or labor, construction and utility costs through higher menu prices in the future.
We may also be subject to data privacy laws in other jurisdictions that we have expanded or are planning to expand into, such as Colorado and Texas. Such data privacy laws impose similar requirements as the CCPA and CPRA.
We may also be subject to data privacy laws in other jurisdictions 23 Table of Contents that we have expanded or are planning to expand into, such as Colorado and Texas. Such data privacy laws impose similar requirements as the CCPA and CPRA.
In addition, we may be affected by higher consumer debt and interest rates, adverse conditions in the mortgage housing markets, high unemployment levels, increases in gas prices, declines in median income growth, lower consumer confidence, lower consumer discretionary spending and uncertainties due to geopolitical turmoil and potential national or international security concerns.
In addition, we may be affected by higher consumer debt and interest rates, adverse conditions in the mortgage housing markets, high unemployment levels, increases in gas prices, declines in median income growth, lower consumer confidence, lower consumer discretionary spending and uncertainties due to geopolitical turmoil and potential national or international security concerns, including the recent outbreak of war in Iran.
We are subject to extensive laws, government regulation, and other legal requirements and our failure to comply with existing or new laws and regulations could adversely affect our operational efficiencies, ability to attract and retain talent and results of operations.
We are subject to extensive laws, government regulation, and other legal requirements and our failure to comply with existing or new laws and regulations could adversely affect our operational efficiencies and results of operations.
Further, different stakeholder groups have divergent views on ESG matters, which increases the risk that any action or lack thereof with respect to ESG matters will be perceived negatively by at least some stakeholders and adversely impact our reputation and business. Anti-ESG sentiment has gained some momentum across the United States.
Further, different stakeholder groups have divergent views on corporate responsibility matters, which increases the risk that any action or lack thereof with respect to corporate responsibility matters will be perceived negatively by at least some stakeholders and adversely impact our reputation and business. Some contrary sentiment about certain corporate responsibility matters has gained some momentum across the United States.
In that event, the price of our common stock would likely decrease. Future offerings of debt or equity securities by us may adversely affect the market price of our common stock.
In that event, the price of our common stock would likely decrease. Future offerings of debt or equity securities by us may adversely affect the market price of our common stock or dilute the ownership of our existing stockholders.
Adverse changes in the economic environment, including inflation and increased labor and supply costs, could result in our franchisees filing for bankruptcy or becoming delinquent in their payments to us, which could have significant adverse impacts on our business, due to loss or delay in payments of (i) royalties, (ii) information technology (“IT”) support service fees, (iii) contributions to our advertising funds, and (iv) other fees.
Adverse changes in the economic position of our franchisees, whether due to macroeconomic factors, such as inflation and increased labor and supply costs, or otherwise, could result in our franchisees filing for bankruptcy or becoming delinquent in their payments to us, which could have significant adverse impacts on our business, due to loss or delay in payments of (i) royalties, (ii) information technology (“IT”) support service fees, (iii) contributions to our advertising funds, and (iv) other fees.
For example, we are also subject to federal and state laws regulating the collection and use of personal information of our employees and customers, including the California Consumer Privacy Act (“CCPA”), which took effect January 1, 2020, and the California Privacy Rights Act (“CPRA”), which was approved in November 2020, and beginning in January 2023 imposed additional data protection obligations on companies doing business in California, including rights of access, correction, deletion and opt-outs from sale of personal information or sharing of personal information for cross-context behavioral advertising.
For example, we are also subject to federal and state laws regulating the collection and use of personal information of our employees and customers, including the California Consumer Privacy Act (“CCPA”) and the California Privacy Rights Act (“CPRA”), which imposed additional data protection obligations on companies doing business in California, including rights of access, correction, deletion and opt-outs from sale of personal information or sharing of personal information for cross-context behavioral advertising.
If we are unable to achieve our social and environmental sustainability goals, our reputation and results of operations could be adversely affected. In addition to financial performance, companies increasingly are being judged by their performance on a variety of environmental, social and governance (“ESG”) factors.
If we are unable to achieve our corporate responsibility goals, our reputation and results of operations could be adversely affected. In addition to financial performance, companies increasingly are being judged by their performance on a variety of corporate responsibility factors.
Our company-operated and franchised restaurants in the greater Los Angeles area generated, in the aggregate, approximately 72.0% of our revenue in fiscal 2024 and approximately 71.3% in fiscal 2023.
Our company-operated and franchised restaurants in the greater Los Angeles area generated, in the aggregate, approximately 71.9% of our revenue in fiscal 2025 and approximately 72% in fiscal 2024.
We currently have two restaurants in Colorado. We plan on opening our first locations in New Mexico, El Paso, Idaho and Washington State.
We currently have three restaurants in Colorado and opened our first locations in New Mexico, El Paso and Washington State in 2025. We plan on opening our first locations in Idaho in 2026.
In addition, the perceived risk of infection or a resurgence or concern of a resurgence of COVID-19 or other similar diseases may continue to adversely affect traffic to our restaurants and, in turn, may have a material adverse effect on our business, liquidity, financial condition and results of operations.
In addition, the perceived risk of infection or a resurgence of disease may adversely affect traffic to our restaurants and, in turn, may have a material adverse effect on our business, liquidity, financial condition and results of operations.
Since 2023, we have continued to experience a competitive and tight labor market. A sustained labor shortage could lead to increased costs, such as increased overtime incurred to meet the demands of our customers and increased wage rates to attract and retain employees.
In recent years, we have experienced a competitive and tight labor market. A sustained labor shortage could lead to increased costs, such as increased overtime incurred to meet the demands of our customers and increased wage rates to attract and retain employees.
The restaurant industry is dependent upon consumer discretionary spending, which may be affected by general global economic conditions or other business conditions that may affect the desire or ability of our customers to purchase our products, including recessions or inflationary pressures, which have caused, and may continue to cause, increased labor, commodity and other restaurant operating costs.
The restaurant industry is dependent upon consumer discretionary spending, which may be affected by general global economic conditions or other business conditions that may affect the desire or ability of our customers to purchase our products, including economic recessions or inflationary pressures.
We have limited control with respect to the operations of our franchisees, which could have a negative impact on our business. As of December 25, 2024, approximately 65% of our restaurants were franchised restaurants, therefore, our success relies on the financial success and cooperation of our franchisees, yet we have limited influence over their operations. Franchisees are independent business operators.
We are dependent on the success of our franchisees, but have limited control with respect to their operations, which could have a negative impact on our business. As of December 31, 2025, approximately 65% of our restaurants were franchised restaurants; therefore, our success relies on the financial success and cooperation of our franchisees.
Pandemics, epidemics or other public health crises, such as the COVID-19, have disrupted, and may continue to disrupt, our restaurant operations, including by causing temporary closures of some restaurants, closures of dining rooms, limited capacity restrictions and/or decreased operating hours for some restaurants due to government mandates and/or staffing shortages.
Pandemics, epidemics or other public health crises, including avian flu outbreaks, have previously disrupted, and may in the future disrupt, our restaurant operations, including by causing temporary closures of some restaurants, closures of dining rooms, limited capacity restrictions, product supply shortages, and/or decreased operating hours for some restaurants due to government mandates and/or staffing shortages.
If future public health emergencies at a significant number of our locations require us to temporarily close those locations for disinfection or result in a large number of our employees becoming ill or quarantined and being unable to work, our business and results of operations could be further adversely affected, which may also impact our financial condition.
If future public health emergencies require us to temporarily close locations or result in a large number of our employees becoming unable to work, as has occurred in the past, our business and results of operations could be further adversely affected, which may also impact our financial condition.
For example, since 2022 we experienced inflationary pressures due to supply chain disruptions that adversely impacted and may continue to adversely impact our business and results of operations.
For example, we experienced inflationary pressures in recent years due to supply chain disruptions and commodity pricing volatility that adversely impacted and may continue to adversely impact our business and results of operations.
We are locked into long-term and non-cancelable leases, and may be unable to renew leases at the ends of their terms. Many of our restaurant leases are non-cancelable and typically have initial terms of up to 20 years with up to four renewal terms of five years that we may exercise at our option.
Many of our restaurant leases are non-cancelable and typically have initial terms of up to 20 years with up to four renewal terms of five years that we may exercise at our option.
In addition, political developments regarding U.S. relations with Mexico may harm our business. For example, increases in tariffs, restrictions on trade, or deterioration in American political or economic relations with Mexico could harm our brand and profitability.
In addition, political developments regarding U.S. relations with Mexico may harm our business. For example, increases in tariffs, restrictions on trade, or deterioration in American political or economic relations with Mexico could harm our brand and profitability. United States’ immigration laws are currently a topic of considerable political focus, and U.S.
Closures could also require 15 Table of Contents additional expenditures. Furthermore, franchised unit closings could result in the loss of franchise revenue and have other adverse effects on us. Changes in food, supply costs, especially for chicken, labor, construction and utilities could adversely affect our business, financial condition, and results of operations.
Furthermore, franchised unit closings could result in the loss of franchise revenue and have other adverse effects on us. Changes in food costs, supply costs, and other operating expenses, especially for chicken could adversely affect our business, financial condition, and results of operations.
We are vulnerable to changes in political and economic conditions such as trade policies, tariff and import regulations by the United States, as well as consumer preferences.
Any of these competitive factors may harm our business. 14 Table of Contents We are vulnerable to changes in political and economic conditions such as trade policies, tariff and import regulations by the United States, as well as consumer preferences.
Adverse changes in demographic, unemployment, economic, or regulatory conditions in the greater Los Angeles area or in the State of California, including, enforcement policies for and changes in immigration law, have had and may continue to have material adverse effects on our business. 14 Table of Contents We also may be negatively affected by weather conditions specific to the Los Angeles region, including fires, earthquakes, or other natural disasters.
Adverse changes in demographic, unemployment, economic, or regulatory conditions in the greater Los Angeles area or in the State of California, including, enforcement policies for and changes in immigration law, have had and may continue to have material adverse effects on our business.
If a change in control or change in management is delayed or prevented by these provisions, the market price of our securities could decline. ​ Shareholder activism could cause us to incur significant expense, disrupt our business, result in a proxy contest or litigation and impact our stock price. ​ We may be subject to shareholder activism in the future, which could result in substantial costs and divert management’s and our Board of Directors’ attention and resources from our business.
If a change in control or change in management is delayed or prevented by these provisions, the market price of our securities could decline. ​ Shareholder activism could cause us to incur significant expense, disrupt our business, result in a proxy contest or litigation and impact our stock price. ​ From time to time, we are subject to proposals by stockholders urging us to take certain corporate actions.
If actual performance does not achieve the projections, or if the assumptions used change in the future, we may be required to recognize impairment charges in future periods, and such charges could be material.
There is uncertainty in the projected undiscounted future cash flows used in our impairment review analysis, which requires the use of estimates and assumptions. If actual performance does not achieve the projections, or if the assumptions used change in the future, we may be required to recognize impairment charges in future periods, and such charges could be material.
See also our risk factor titled “ Public health crises, such as the COVID-19 pandemic have had, and may in the future have, a significant negative impact on our business, sales, results of operations and financial condition ” above for labor shortage risks we may face in connection with pandemics, epidemics and other public health emergencies, such as COVID-19 .
See also our risk factor titled “ Public health crises have had, and may in the future have, a significant negative impact on our business, sales, results of operations and financial condition ” above for labor shortage risks we may face in connection with pandemics, epidemics and other public health emergencies, such as COVID-19 . 25 Table of Contents Federally-mandated, state-mandated, or locally-mandated minimum wages have recently increased in several jurisdictions, including state and county mandates in California, and could be further raised in the future, including as a result of the AB 1228 in California.
If we implement further menu price increases in the future to protect our margins, average check size and restaurant transactions could be materially and adversely affected, at both company-operated and franchised restaurants.
If we implement further menu price increases in the future to protect our margins, average check size and restaurant transactions could be materially and adversely affected, at both company-operated and franchised restaurants. Public health crises have had, and may in the future have, a significant negative impact on our business, sales, results of operations and financial condition.
They are not our employees, and we do not exercise control over the day-to-day operations of their restaurants. We provide training and support to franchisees, and set and monitor operational standards, but the quality of franchised restaurants may be diminished by any number of factors beyond our control.
While we provide training and support to franchisees, and set and monitor operational standards, we have limited influence over how our franchisees’ businesses are run, and the quality of franchised restaurants may be diminished by any number of factors beyond our control.
Franchisees may not have access to the financial or management resources that they need to open the restaurants contemplated by their agreements with us, or be able to find suitable sites on which to develop those restaurants. 19 Table of Contents Franchisees may not be able to negotiate acceptable lease or purchase terms for restaurant sites, obtain necessary permits and government approvals, or meet construction schedules.
Franchisees may not have access to the financial or management resources that they need to open the restaurants contemplated by their agreements with us, or be able to find suitable sites on which to develop those restaurants.
In some cases, it may be difficult to anticipate or immediately detect such incidents and the damage they cause. We may be required to expend significant financial resources to protect against or to remediate such security breaches, including the cost of providing notification to affected individuals and governmental authorities.
We may be required to expend significant financial resources to protect against or to remediate such security breaches, including enhancing our systems, hiring and training personnel, and the cost of providing notification to affected individuals and governmental authorities.
There is also the potential for increased regulatory enforcement by the state agencies empowered to enforce these laws, including the recently formed California Privacy Protection Agency.
There is also the potential for increased regulatory enforcement by the state agencies empowered to enforce these laws, including the recently formed California Privacy Protection Agency. Noncompliance with the CCPA, CRPA and other privacy laws could result in injunctions, fines and/or proceedings against us by governmental agencies or others.
We have incurred, and may continue to incur, significant impairment of certain of our assets, in particular in our new markets. The recognition of impairment charges may adversely affect our future operations and results.
We have incurred, and may continue to incur, significant impairment of certain of our assets, particularly in our new markets. The recognition of impairment charges may adversely affect our future operations and results. In assessing the recoverability of our property and equipment assets, we consider changes in economic conditions and make assumptions regarding estimated future cash flows and other factors.
We currently maintain employee health insurance coverage on a self-insured basis. We do maintain stop loss coverage which sets a limit on our liability for both individual and aggregate claim costs. We currently record a liability for our estimated cost of claims incurred and unpaid as of each balance sheet date.
We currently maintain employee health insurance coverage on a self-insured basis, and we carry large deductibles or self-insure portions of other insurance programs, such as workers’ compensation insurance. We do maintain stop loss coverage for health insurance, which sets a limit on our liability for both individual and aggregate claim costs.
Such public health crises may also adversely affect our ability to implement our growth plans, including delays in the opening or construction of new restaurants or the remodel of existing restaurants. For example, the global pandemic resulting from the outbreak of COVID-19 disrupted our restaurant operations from 2020 to 2023.
Such public health crises may also adversely affect our ability to implement our growth plans, including delays in the opening or construction of new restaurants or the remodel of existing restaurants, as they have done in the past.
It is possible, however, that our actual liabilities may exceed our estimates of loss. We may also experience an unexpectedly large number of claims that result in costs or liabilities in excess of our projections, and therefore we may be required to record additional expenses.
We may also experience an unexpectedly large number of claims that result in costs or liabilities in excess of our projections, and therefore we may be required to record additional expenses. For these and other reasons, our self-insurance reserves could prove to be inadequate, resulting in liabilities in excess of our available insurance and self-insurance.
If we do not successfully manage ESG-related expectations across these varied stakeholder interests, we may face scrutiny, reputational risk, lawsuits, or market access restrictions from these parties regarding our ESG initiatives. Risks Related to Information Technology and Data Security Information technology system failures or breaches of our network security could interrupt our operations and adversely affect our business.
If we do not successfully manage corporate responsibility-related expectations across these varied stakeholder interests, we may face scrutiny, reputational risk, lawsuits, or market access restrictions from these parties regarding our corporate responsibility initiatives.
Our estimated liability is recorded on an undiscounted basis and includes a number of significant assumptions and factors, including historical trends, expected costs per claim, actuarial assumptions, and current economic conditions. Our history of claims activity for all lines of coverage is closely monitored, and liabilities are adjusted as warranted based on changing circumstances.
We currently record a liability for our estimated cost of claims incurred and unpaid as of each balance sheet date. Our estimated liability is recorded on an undiscounted basis and includes a number of significant assumptions and factors, including historical trends, expected costs per claim, actuarial assumptions, and current economic conditions.
Any of these problems could slow our growth and reduce our franchise revenue. Additionally, our franchisees typically depend on financing from banks and other financial institutions, which may not always be available to them, in order to construct and open new restaurants.
Additionally, our franchisees typically depend on financing from banks and other financial institutions, which may not always be available to them, in order to construct and open new restaurants. For these reasons, franchisees operating under development agreements may not be able to meet the new restaurant opening dates required under those agreements.
In fiscal 2025, we plan to open one to two company-operated restaurant and our franchisees intend to open eight to nine.
In fiscal 2026, we plan to open three to four company-operated restaurant and our franchisees intend to open 15 to 16 restaurants.
Under the law, the Fast Food Council also has the power to develop and propose minimum standards for fast food workers, including standards for working hours, working conditions, and health and safety.
Under the law, the Fast Food Council also has the power to develop and propose minimum standards for fast food workers, including standards for working hours, working conditions, and health and safety. As a result of AB 1228, we have experienced an increase in our labor and regulatory compliance costs and these costs may continue in 2026.
A significant increase in the number of these claims, or an increase in the number of successful claims, could materially and adversely affect our business, brand image, employee recruitment, financial condition, results of operations, or cash flows. 23 Table of Contents We are from time to time the target of class action lawsuits and other claims proceedings, which could adversely affect our business and results of operations.
We are from time to time the target of class action lawsuits and other claims proceedings, which could adversely affect our business and results of operations.
Noncompliance with the CCPA, CRPA and other privacy laws could result in injunctions, fines and/or proceedings against us by governmental agencies or others. ​ 22 Table of Contents Risks Related to Intellectual Property The failure to enforce and maintain our trademarks and protect our other intellectual property could materially and adversely affect our business, including our ability to establish and maintain brand awareness.
Risks Related to Intellectual Property The failure to enforce and maintain our trademarks and protect our other intellectual property could materially and adversely affect our business, including our ability to establish and maintain brand awareness.
Legislation and regulations regarding certain of our menu offerings, new information or attitudes regarding diet and health, or adverse opinions about the health effects of consuming our menu offerings, could affect consumer preferences and negatively impact our results of operations.
For example, changes to health insurance law could diminish our customers’ disposable incomes and thus reduce their frequency of eating or ordering out, even from QSR or fast casual restaurants, including us. 26 Table of Contents Legislation and regulations regarding certain of our menu offerings, new information, attitudes, or regulations regarding diet and health, or adverse opinions about the health effects of consuming our menu offerings, could affect consumer preferences and negatively impact our results of operations.
In response to federal, state and local mandates that were aimed at limiting the spread of COVID-19, or due to staffing shortages, we and our franchisees experienced temporary closures of some restaurants, closures of dining rooms, limited capacity restrictions and/or decreased operating hours for some restaurants. 16 Table of Contents If in the event of another public health crisis, such as the COVID-19 pandemic, emerge, our sales and operating costs may be materially adversely affected, which could impact our asset values, including goodwill, derivative instruments and property and equipment assets, as well as our ability to meet certain covenant provisions in our debt arrangements in future periods, and have a material adverse effect on our financial results, future operations and liquidity.
Such crises have materially adversely affected, and may in the future so affect, our sales and operating costs, which could impact our asset values, including goodwill, derivative instruments and property and equipment assets, as well as our ability to meet certain covenant provisions in our debt arrangements in future periods, and have a material adverse effect on our financial results, future operations and liquidity.
Changes in trade, labor, or immigration policy could raise our input prices, or reduce the supply of immigrants, who are in many cases our customers or employees, diminishing our sales and increasing our labor costs. In addition, factors that decrease consumer spending or increase security costs, such as social unrest, terrorist attacks or military action, may adversely affect our business.
In addition, factors that decrease consumer spending or increase security costs, such as social unrest, terrorist attacks or military action, including wars, may adversely affect our business.
These types of employee claims could also be asserted against us, on a co-employer theory, by employees of our franchisees.
These types of employee claims could also be asserted against us, on a co-employer theory, by employees of our franchisees. A significant increase in the number of these claims, or an increase in the number of successful claims, could materially and adversely affect our business, brand image, employee recruitment, financial condition, results of operations, or cash flows.
For these and other reasons, our self-insurance reserves could prove to be inadequate, resulting in liabilities in excess of our available insurance and self-insurance. If a 20 Table of Contents successful claim is made against us and is not covered by our insurance or exceeds our policy limits, our business may be negatively and materially impacted.
If a successful claim is made against us and is not covered by our insurance or exceeds our policy limits, our business may be negatively and materially impacted. We are party to long-term and non-cancelable leases, and may be unable to renew leases at the ends of their terms.
Current uncertainties about increases in tariffs of imported products from countries, including Mexico, may have an adverse effect on our Company. On February 1, 2025, the U.S. government proposed tariffs up to 25% on imports from certain countries, including Mexico and Canada, and implemented other tariffs on countries including China.
For example, on February 1, 2025, the U.S. government proposed tariffs up to 25% on imports from certain countries, including Mexico and Canada, and implemented other tariffs on countries including China, largely doing so under the International Emergency Economic Powers Act (“IEEPA”). However, on February 20, 2026, the U.S.
Adverse changes in the economic environment may affect our franchisees, with adverse consequences to us.
Adverse changes in our franchisees’ economic position could have adverse consequences to us.
We are also subject to all of the foregoing risks in connection with the outbreak of other diseases, epidemics or pandemics, or similar public threats or fear of such events. Social media and negative publicity could have a material adverse impact on our business.
Diseases associated with the products we sell, including the avian flu, may also adversely impact our business, even if our products are not directly impacted. Negative social media and other negative publicity could have a material adverse impact on our business.
Removed
In assessing the recoverability of our property and equipment assets, we consider changes in economic conditions and make assumptions regarding estimated future cash flows and other factors. There is uncertainty in the projected undiscounted future cash flows used in our impairment review analysis, which requires the use of estimates and assumptions.
Added
In addition, we may experience delays in our shop development and expansion plans due to unexpectedly long processing times or delays on the part of governmental agencies who issue necessary licenses, permits, and approvals.
Removed
Public health crises, such as the COVID-19 pandemic have had, and may in the future have, a significant negative impact on our business, sales, results of operations and financial condition.
Added
Delays in the permitting or licensure processes that may result from government shutdowns, staffing shortages, or similar actions that are out of our control, due to, among other things, loss 13 Table of Contents of or uncertainty around federal funding, including the receipt of federal funding by states or state agencies where we operate, could lead to delays in building our shops and affect our shop development and expansion plans, which could harm our results of operations and financial condition.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Such systems are regularly reviewed for adequacy and potential enhancements. ● The Company employs an information security and training program for our employees, including annual mandatory computer-based training, regular internal communications, and ongoing end-user testing throughout the year to measure the effectiveness of our information security program. ● The Company engages external third parties to advise on emerging threats to stay current and strengthen our security capabilities. ● The Company performs penetration testing and other exercises within internal and external networks for potential vulnerabilities. ● The Company additionally performs annual tabletop exercises with the information technology team pertaining to infrastructure and cyber security related events, to test the Company’s incident response and business continuity plans in the event of a cybersecurity incident. 28 Table of Contents ● Bi-annually the Company engages a third party to conduct an audit of the Company's cybersecurity systems and processes to test their adequacy and efficacy.
Such systems are regularly reviewed for adequacy and potential enhancements. ● The Company employs an information security and training program for our employees, including annual mandatory computer-based training, regular internal communications, and ongoing end-user testing throughout the year to measure the effectiveness of our information security program. ● The Company engages external third parties to advise on emerging threats to stay current and strengthen our security capabilities. ● The Company performs penetration testing and other exercises within internal and external networks for potential vulnerabilities. ● The Company additionally performs annual tabletop exercises with the information technology team pertaining to infrastructure and cyber security related events, to test the Company’s incident response and business continuity plans in the event of a cybersecurity incident. ● Bi-annually the Company engages a third party to conduct an audit of the Company's cybersecurity systems and processes to test their adequacy and efficacy.
The VP, Chief Privacy Officer and the Cyber Security Analyst are further supported by other members of the IT department. ​ The Company’s processes to assess, identify and manage material risks from cybersecurity threats include, but are not limited to, the following: ​ ● The SVP, Chief Privacy Officer, dedicated Cyber Security Analyst, and other key members of the information technology team actively monitor threats to the information technology environment.
The SVP, Chief Information Officer and the Cyber Security Analyst are further supported by other members of the IT department. ​ The Company’s processes to assess, identify and manage material risks from cybersecurity threats include, but are not limited to, the following: ​ ● The SVP, Chief Information Officer, dedicated Cyber Security Analyst, and other key members of the information technology team actively monitor threats to the information technology environment.
The SVP, Chief Privacy Officer, who has over 30 years of IT and IT security experience, 21 of which are at the Company, employs a team of information technology experts, including a dedicated Cyber Security Analyst.
The SVP, Chief Information Officer, who has over 30 years of IT and IT security experience, 22 of which are at the Company, employs a team of information technology experts, including a dedicated Cyber Security Analyst.
ITEM 1C. CYBERSECURITY ​ The Company has multi-layer processes to assess, identify and manage material risks from cybersecurity threats.
ITEM 1C. CYBERSECURITY 29 Table of Contents ​ The Company has multi-layer processes to assess, identify and manage material risks from cybersecurity threats.
Vendors deemed to have insufficient controls balancing the relevant criteria will not be approved. ​ The Board of Directors is kept apprised of material risks from cybersecurity threats through the Audit Committee. The Audit Committee is responsible for overseeing threats to the Company, including those involving cyber threats, and reviewing the Company’s protocols and procedures to mitigate those threats.
Vendors deemed to have insufficient controls balancing the relevant criteria will not be approved. ​ 30 Table of Contents The Board of Directors is kept apprised of material risks from cybersecurity threats through the Audit Committee.
As applicable, these quarterly presentations also include reports of cybersecurity incidents affecting our information systems along with updates on the status of prior cybersecurity incidents and applicable remediation efforts. The Audit Committee discusses the adequacy and efficacy of the controls and shares the information with the Board as part of its risk oversight function.
The Audit Committee discusses the adequacy and efficacy of the controls and shares the information with the Board as part of its risk oversight function.
On a quarterly basis, the SVP, Chief Privacy Officer, presents to the Audit Committee on the Company’s cybersecurity compliance and risk management practices. These presentations address, among other things, the results of audits and reviews of our security information systems and other cybersecurity measures, the current threat environment and cybersecurity trends and best practices.
These presentations address, among other things, the results of audits and reviews of our security information systems and other cybersecurity measures, the current threat environment and cybersecurity trends and best practices. As applicable, these quarterly presentations also include reports of cybersecurity incidents affecting our information systems along with updates on the status of prior cybersecurity incidents and applicable remediation efforts.
Added
The Audit Committee is responsible for overseeing threats to the Company, including those involving cyber threats, and reviewing the Company’s protocols and procedures to mitigate those threats. On a quarterly basis, the SVP, Chief Privacy Officer, presents to the Audit Committee on the Company’s cybersecurity compliance and risk management practices.

Item 2. Properties

Properties — owned and leased real estate

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In addition, we operate 161 company-operated restaurants on leased real estate, we own one operating unit with additional parking on leased real estate, and we have another 57 leased sites that are subleased or assigned to franchisees who operate El Pollo Loco restaurants.
In addition, we operate 163 company-operated restaurants on leased real estate, we own one operating unit with additional parking on leased real estate, and we have another 45 leased sites that are subleased or assigned to franchisees who operate El Pollo Loco restaurants.
The table below sets forth the locations (by state) for all restaurants in operation as of December 25, 2024. ​ ​ ​ ​ ​ ​ ​ ​ ​ Company- ​ ​ State Operated Franchised Total California 145 247 392 Nevada 28 5 33 Arizona — 27 27 Texas — 32 32 Utah — 10 10 Louisiana — 2 2 Colorado ​ — ​ 2 ​ 2 Total 173 325 498 ​ 29 Table of Contents Our restaurants are either free-standing facilities, typically with drive-thru capability, or in-line.
The table below sets forth the locations (by state) for all restaurants in operation as of December 31, 2025. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Company- ​ ​ ​ ​ ​ ​ ​ ​ State ​ ​ ​ Operated ​ ​ ​ Franchised ​ ​ ​ Total California 147 245 392 Nevada 28 5 33 Arizona — 29 29 Texas — 32 32 Utah — 10 10 Louisiana — 2 2 Washington ​ — ​ 1 ​ 1 New Mexico ​ — ​ 1 ​ 1 Colorado ​ — ​ 3 ​ 3 Total 175 328 503 ​ Our restaurants are either free-standing facilities, typically with drive-thru capability, or in-line.
ITEM 2. PROPERTIES As of December 25, 2024, our restaurant system consisted of 498 restaurants, comprised of 173 company-operated restaurants and 325 franchised restaurants, located in California, Nevada, Arizona, Texas, Utah, Louisiana and Colorado. In addition, as of December 25, 2024, we licensed our brand to 10 restaurants in the Philippines.
ITEM 2. PROPERTIES As of December 31, 2025, our restaurant system consisted of 503 restaurants, comprised of 175 company-operated restaurants and 328 franchised restaurants, located in California, Nevada, Arizona, Texas, Utah, Louisiana, New Mexico, Washington, and Colorado. In addition, as of December 31, 2025, we licensed our brand to 8 restaurants in the Philippines.
We also have two closed units, two of which are subleased for uses other than El Pollo Loco. We also sublease a surplus property of an operating location to a third party. We lease our headquarters, consisting of approximately 24,890 square feet in Costa Mesa, California, for a term expiring in 2026, plus a one-year extension option. ​
We also have two closed units, both of which are subleased for uses other than El Pollo Loco. We also sublease a surplus property of an operating location to a third party.
Added
We lease our headquarters, consisting of approximately 24,011 square feet in Costa Mesa, California, for a term expiring in 2033, plus a five-year extension option. 31 Table of Contents ​

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Dividend payments are subject to the discretion and approval of our Board of Directors and our compliance with applicable law, and depends upon, among other things, our results of operations, financial condition, level of indebtedness, capital requirements, contractual restrictions, and other factors that our Board of Directors may deem relevant.
Dividends Dividend payments are subject to the discretion and approval of our Board of Directors and our compliance with applicable law, and depends upon, among other things, our results of operations, financial condition, level of indebtedness, capital requirements, contractual restrictions, and other factors that our Board of Directors may deem relevant.
The graph assumes the investment of $100 at the beginning of the period (at the closing price of our common stock on December 26, 2018) and the reinvestment of all dividends. Specifically, the graph assumes that the $1.50 per share special cash dividend paid to shareholders was reinvested in 2022.
The graph assumes the investment of $100 at the beginning of the period (at the closing price of our common stock on December 30, 2020) and the reinvestment of all dividends. Specifically, the graph assumes that the $1.50 per share special cash dividend paid to shareholders was reinvested in 2022.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock has been listed on The Nasdaq Stock Market LLC under the symbol “LOCO” since July 25, 2014. As of February 28, 2025, there were approximately 64 holders of record of our common stock.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock has been listed on The Nasdaq Stock Market LLC under the symbol “LOCO” since July 25, 2014. As of March 6, 2026, there were approximately 61 holders of record of our common stock.
The stock performance graph shall not be deemed soliciting material or to be filed with the SEC or subject to Regulation 14A or 14C under the Exchange Act or to the liabilities of Section 18 of the Exchange Act, nor shall it be incorporated by reference into any past or future filing under the Securities Act of 1933, as amended (the “Securities Act”) or the Exchange Act, except to the extent we specifically request that it be treated as soliciting material or specifically incorporate it by reference into a filing under the Securities Act or the Exchange Act. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nasdaq ​ S&P Composite ​ ​ ​ ​ ​ Composite ​ 1500 Date LOCO Index Restaurants December 24, 2019 ​ $ 100.00 ​ $ 100.00 ​ $ 100.00 December 30, 2020 ​ $ 121.00 ​ $ 144.92 ​ $ 119.57 December 29, 2021 ​ $ 93.09 ​ $ 177.06 ​ $ 145.93 December 28, 2022 ​ $ 66.18 ​ $ 119.45 ​ $ 133.03 December 27, 2023 ​ $ 60.13 ​ $ 172.77 ​ $ 153.95 December 25, 2024 (1) ​ $ 78.47 ​ $ 223.87 ​ $ 164.08 ​ ​ (1) Since December 25, 2024 was a market holiday, the price quoted in this column is based on our closing share price on December 24, 2024. ​ ITEM 6. [RESERVED] ​
The stock performance graph shall not be deemed soliciting material or to be filed with the SEC or subject to Regulation 14A or 14C under the Exchange Act or to the liabilities of Section 18 of the Exchange Act, nor shall it be incorporated by reference into any past or future filing under the Securities Act of 1933, as amended (the “Securities Act”) or the Exchange Act, except to the extent we specifically request that it be treated as soliciting material or specifically incorporate it by reference into a filing under the Securities Act or the Exchange Act. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nasdaq ​ S&P Composite ​ ​ ​ ​ ​ Composite ​ 1500 Date ​ ​ ​ LOCO ​ ​ ​ Index ​ ​ ​ Restaurants December 30, 2020 ​ $ 100.00 ​ $ 100.00 ​ $ 100.00 December 29, 2021 ​ $ 76.94 ​ $ 122.18 ​ $ 122.05 December 28, 2022 ​ $ 54.70 ​ $ 82.42 ​ $ 111.26 December 27, 2023 ​ $ 49.70 ​ $ 119.22 ​ $ 128.75 December 25, 2024 (1) ​ $ 64.85 ​ $ 154.48 ​ $ 137.23 December 31, 2025 ​ $ 57.44 ​ $ 179.14 ​ $ 173.38 ​ ​ (1) Since December 25, 2024 was a market holiday, the price quoted in this column is based on our closing share price on December 24, 2024. ​ ITEM 6. [RESERVED] ​
The Share Repurchase Program will terminate on March 31, 2025. ​ (2) Consists of (a) 103,702 shares repurchased by us pursuant to the Share Repurchase Program and (b) 17,664 shares acquired by us to satisfy employee tax withholding obligations in connection with the vesting of previously issued restricted stock. ​ 31 Table of Contents Stock Performance Graph The following graph and table illustrate the total cumulative shareholder return for (i) our common stock, (ii) the Nasdaq Composite Index and (iii) the Standard and Poor’s Composite 1500 Restaurants Index (formerly called the S&P Supercomposite Restaurants Index), for the five years ended December 25, 2024.
Issuer Purchases of Equity Securities The following table sets forth information with respect to the shares of our common stock we acquired during the fourth quarter ended December 31, 2025 (in thousands, except number of shares and per share amounts) . ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Number of Shares Purchased ​ ​ ​ ​ Average Price Paid Per Share ​ ​ ​ Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs ​ ​ ​ ​ Approximate Dollar Value of Shares That May Be Purchased Under the Plans or Programs September 25, 2025 to October 22, 2025 — ​ $ — ​ — ​ $ — October 23, 2025 to November 19, 2025 — ​ $ — ​ — ​ $ — November 20, 2025 to December 31, 2025 22,424 ​ $ 10.17 ​ — ​ $ — Total 22,424 (1) ​ ​ ​ ​ — ​ ​ ​ ​ 32 Table of Contents ​ (1) Consists of 22,424 shares acquired by us to satisfy employee tax withholding obligations in connection with the vesting of previously issued restricted stock. 33 Table of Contents Stock Performance Graph The following graph and table illustrate the total cumulative shareholder return for (i) our common stock, (ii) the Nasdaq Composite Index and (iii) the Standard and Poor’s Composite 1500 Restaurants Index, for the five years ended December 31, 2025.
Removed
Dividends In fiscal 2022, the Board of Directors declared a special cash dividend of $1.50 per share on our common stock. T he special dividend was paid on November 9, 2022, to stockholders of record, including holders of restricted stock, at the close of business on October 24, 2022.
Removed
Issuer Purchases of Equity Securities The following table sets forth information with respect to the shares of our common stock we acquired during the fourth quarter ended December 25, 2024 (in thousands, except number of shares and per share amounts) . 30 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Number of Shares Purchased ​ Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) ​ Approximate Dollar Value of Shares That May Be Purchased Under the Plans or Programs September 26, 2024 to October 23, 2024 6,750 ​ $ 12.86 ​ 6,750 ​ $ 3,043 October 24, 2024 to November 20, 2024 61,366 ​ $ 12.62 ​ 43,702 ​ $ 2,496 November 21, 2024 to December 25, 2024 53,250 ​ $ 12.31 ​ 53,250 ​ $ 1,841 Total 121,366 (2) ​ ​ ​ ​ 103,702 ​ ​ ​ ​ (1) On November 2, 2023, our Board of Directors approved a share repurchase program under which we are authorized to repurchase up to $20.0 million of shares of our common stock (the “Share Repurchase Program”).
Removed
Under the Share Repurchase Program, we are permitted to repurchase our common stock from time to time, in amounts and at prices that we deemed appropriate, subject to market conditions and other considerations.
Removed
Pursuant to the Share Repurchase Program, we are authorized to effect repurchases using open market purchases, including pursuant to Rule 10b5-1 trading plans, and/or through privately negotiated transactions. The Share Repurchase Program does not obligate us to acquire any particular number of shares.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

125 edited+25 added−30 removed75 unchanged
As such, the fair value of the reporting unit retained can include expected cash flows from future royalties from those restaurants currently being refranchised, future royalties from existing franchise businesses and company restaurant operations. During fiscal 2024, we determined that there were no indicators of potential impairment of our goodwill and indefinite-lived intangible assets.
As such, the fair value of the reporting unit retained can include expected cash flows from future royalties from those restaurants currently being refranchised, future royalties from existing franchise businesses and company restaurant operations. During fiscal 2025 and fiscal 2024, we determined that there were no indicators of potential impairment of our goodwill and indefinite-lived intangible assets.
Additionally, we are impacted by macroeconomic challenges, such as inflationary pressures and changes in trade policies, that have in the past, and may continue to in the future, affect our operations in certain areas such as food cost, labor costs, construction costs and other restaurant operating costs.
Additionally, we are impacted by macroeconomic challenges, such as inflationary pressures and changes in trade policies, that have in the past affected, and may continue in the future, to affect our operations in certain areas such as food cost, labor costs, construction costs and other restaurant operating costs.
Company-Operated Average Unit Volumes We measure company-operated AUVs on both a weekly and an annual basis. Weekly AUVs consist of comparable restaurant sales over a seven-day period from Thursday to Wednesday. Annual AUVs are calculated using a step process.
Company-Operated Average Unit Volumes We measure company-operated AUVs on both a weekly and an annual basis. Weekly AUVs consist of comparable restaurant sales over a seven-day period from Thursday to Wednesday. Annual AUVs are calculated using a two-step process.
Accordingly, we did not record any impairment to our goodwill or indefinite-lived intangible assets in fiscal 2024. During fiscal 2023, we determined that, in connection with the sale of 18 units, there were indicators of potential impairment of our goodwill and indefinite-lived intangible assets.
Accordingly, we did not record any impairment to our goodwill or indefinite-lived intangible assets in fiscal 2025 and fiscal 2024 . During fiscal 2023, we determined that, in connection with the sale of 18 units, there were indicators of potential impairment of our goodwill and indefinite lived intangible assets.
In addition to historical information, this discussion contains forward-looking statements that involve risks, uncertainties, and assumptions that could cause actual results to differ materially from management’s expectations. See “Forward- 32 Table of Contents Looking Statements” and “Item 1A. Risk Factors” included elsewhere in this Annual Report. We assume no obligation to update any of these forward-looking statements.
In addition to historical information, this discussion contains forward-looking statements that involve risks, uncertainties, and assumptions that could cause actual results to differ materially from management’s expectations. See “Forward- 34 Table of Contents Looking Statements” and “Item 1A. Risk Factors” included elsewhere in this Annual Report. We assume no obligation to update any of these forward-looking statements.
Loss on Disposal of Assets Loss on disposal of assets includes the loss on disposal of assets related to retirements and replacement or write-off of leasehold improvements or equipment. 36 Table of Contents Impairment and Closed-Store Reserves We review long-lived assets such as property, equipment, and intangibles on a unit-by-unit basis for impairment when events or circumstances indicate the carrying value of the assets may not be recoverable.
Loss on Disposal of Assets Loss on disposal of assets includes the loss on disposal of assets related to retirements and replacement or write-off of leasehold improvements or equipment. 38 Table of Contents Impairment and Closed-Store Reserves We review long-lived assets such as property, equipment, and intangibles on a unit-by-unit basis for impairment when events or circumstances indicate the carrying value of the assets may not be recoverable.
The cost of our restaurant remodels varies depending on the scope of work required, but on average the investment is $0.3 million to $0.4 million per restaurant. Loco Rewards Our Loco Rewards loyalty program offers rewards that incentivize customers to visit our restaurants more often each month.
The cost of our restaurant remodels varies depending on the scope of work required, but on average the investment is approximately $0.4 million per restaurant. Loco Rewards™ Our Loco Rewards™ loyalty program offers rewards that incentivize customers to visit our restaurants more often each month.
(m) Pre-opening costs are a component of general and administrative expenses, and consist of costs directly associated with the opening of new restaurants and incurred prior to opening, including management labor costs, staff labor costs during training, food and supplies used during training, marketing costs, and other related pre-opening costs.
(n) Pre-opening costs are a component of general and administrative expenses, and consist of costs directly associated with the opening of new restaurants and incurred prior to opening, including management labor costs, staff labor costs during training, food and supplies used during training, marketing costs, and other related pre-opening costs.
Risk Factors”, including the risk factor titled “ We are vulnerable to changes in political and economic 33 Table of Contents conditions, such as trade policies, tariff and import regulations by the United States, as well as consumer preferences.” Growth Strategies and Outlook We plan to continue to expand our business, drive restaurant sales growth, and enhance our competitive positioning, by executing the following five key strategies : ● Brand That Wins; ● Hospitality Mindset ; ● Digital First ; ● Winning Unit Economics; and ● Drive Unit Growth Again with National Expansion.
Risk Factors,” including the risk factor titled “ We are vulnerable to changes in political and economic conditions, such as trade policies, tariff and import regulations by the United States, as well as consumer preferences.” 35 Table of Contents Growth Strategies and Outlook We plan to continue to expand our business, drive restaurant sales growth, and enhance our competitive positioning, by executing the following five key strategies : ● Brand That Wins; ● Hospitality Mindset ; ● Digital First ; ● Winning Unit Economics; and ● Drive Unit Growth Again with National Expansion.
For the years ended December 25, 2024, December 27, 2023 and December 28, 2022, income tax receivable agreement (income) expense consisted of the amortization of interest expense and changes in estimates for actual tax returns filed, related to our total expected TRA payments.
For the years ended December 25, 2024, and December 27, 2023, income tax receivable agreement (income) expense consisted of the amortization of interest expense and changes in estimates for actual tax returns filed, related to our total expected TRA payments.
The fair value of the portion of the 50 Table of Contents reporting unit disposed of in a refranchising is determined by reference to the discounted value of the future cash flows expected to be generated by the restaurant and retained by the franchisee, which includes a deduction for the anticipated, future royalties the franchisee will pay us associated with the franchise agreement entered into simultaneously with the refranchising transition.
The fair value of the portion of the reporting unit disposed of in a refranchising is determined by reference to the discounted value of the future cash flows expected to be generated by the restaurant and retained by the franchisee, which includes a deduction for the anticipated, future royalties the franchisee will pay us associated with the franchise agreement entered into simultaneously with the refranchising transition.
Share Repurchases Share Repurchase Program On November 2, 2023, we announced that the Board approved a share repurchase program (“Share Repurchase Program”) under which we are authorized to repurchase up to $20,000,000 of shares of our common stock.
Share Repurchases Share Repurchase Program On November 2, 2023, we announced that the Board approved a share repurchase program (“Share Repurchase Program”) under which we were authorized to repurchase up to $20,000,000 of shares of our common stock.
In a 53-week fiscal year, the first, second and third quarters each include 13 weeks of operations, and the fourth quarter includes 14 weeks of operations. Approximately every six or seven years a 53-week fiscal year occurs.
In a 53-week fiscal year, the first, second and third quarters each include 13 weeks of operations, and the fourth quarter includes 14 weeks of operations. Approximately every five or six years a 53-week fiscal year occurs.
Comparable restaurant sales indicate the performance of existing restaurants, since new restaurants are excluded. Comparable restaurant sales growth can be generated by an increase in the number of meals sold and/or by increases in the average check size, resulting from a shift in menu mix and/or higher prices resulting from new products or price increases.
Comparable restaurant sales indicate the performance of existing restaurants, since new restaurants are excluded. Comparable restaurant sales growth can be generated by an increase in the number of meals sold and/or by increases in the average check size, resulting from a shift 43 Table of Contents in menu mix and/or higher prices resulting from new products or price increases.
On May 29, 2024, we terminated most of the obligations under the TRA, with respect to any payments or obligations owed to the Sellers thereunder in exchange for a payment to the Sellers of $0.4 million. As of December 25, 2024, there was no remaining obligations owed on our consolidated balance sheets.
On May 29, 2024, we terminated most of the obligations under the TRA, with respect to any payments or obligations owed to the Sellers thereunder in exchange for a payment to the Sellers of $0.4 million. As of December 31, 2025 and December 25, 2024, there was no remaining obligations owed on our consolidated balance sheets.
Following completion of this repurchase, approximately $7.4 million of our common stock remained available for repurchase under the share repurchase program at December 27, 2023. For the year ended December 25, 2024, we repurchased 535,628 shares of common stock under the Share Repurchase Program, using open market purchases, for total consideration of approximately $5.6 million.
Following completion of this repurchase, approximately $7.4 million of 50 Table of Contents our common stock remained available for repurchase under the Share Repurchase Program at December 27, 2023. For the year ended December 25, 2024, we repurchased 535,628 shares of common stock under the Share Repurchase Program, using open market purchases, for total consideration of approximately $5.6 million.
We also make significant assumptions and judgments in determining an appropriate discount rate for property leases. These include using a consistent discount rate for a 51 Table of Contents portfolio of leases entered into at varying dates, using the full 20-year term of the lease, excluding any options, and using the total minimum lease payments.
We also make significant assumptions and judgments in determining an appropriate discount rate for property leases. These include using a consistent discount rate for a portfolio of leases entered into at varying dates, using the full 20-year term of the lease, excluding any options, and using the total minimum lease payments.
On May 29, 2024, we terminated most of the obligations under the TRA, with respect to any payments or obligations owed to the FS Equity Partners V, L.P. 40 Table of Contents and FS Affiliates V, L.P. (together, the “Sellers”) thereunder in exchange for a payment to the Sellers of $0.4 million.
On May 29, 2024, we terminated most of the obligations under the TRA, with respect to any payments or obligations owed to the FS Equity Partners V, L.P. and FS Affiliates V, L.P. (together, the “Sellers”) thereunder in exchange for a payment to the Sellers of $0.4 million.
Under the Share Repurchase Program, we are permitted to repurchase our common stock from time to time, in amounts and at prices that we deemed appropriate, subject to market conditions and other considerations.
Under the Share Repurchase Program, we were permitted to repurchase our common stock from time to time, in amounts and at prices that we deemed appropriate, subject to market conditions and other considerations.
Restaurant contribution therefore excludes franchise revenue, franchise advertising fee revenue and franchise expenses as well as certain other costs, such as general and administrative expenses, franchise expenses, depreciation and amortization, asset impairment and closed-store reserve, loss on disposal of assets and other costs that are considered corporate-level expenses and are not considered normal operating costs of our restaurants.
Restaurant contribution therefore excludes franchise revenue, franchise advertising fee revenue and franchise expenses as well as certain other costs, such as general and administrative expenses, franchise expenses, depreciation and amortization, impairment and closed-store reserves, loss on disposal of assets and other costs that are considered corporate-level expenses and are not considered normal operating costs of our restaurants.
We have been able to substantially offset these inflationary and other cost pressures through various actions, such as increasing menu prices, managing menu mix, and productivity improvements. However, we expect these inflationary and other cost pressures to continue in fiscal 2025 and we may not be able to offset cost increases in the future.
We have been able to substantially offset these inflationary and other cost pressures through various actions, such as increasing menu prices, managing menu mix, and productivity improvements. However, we expect these inflationary and other cost pressures to continue in 2026 and we may not be able to offset cost increases in the future.
Fiscal Year 2023 Compared to Fiscal Year 2022 Year-to-year comparisons of fiscal 2023 and fiscal 2022 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 on our Annual Report on Form 10-K for the year ended December 27, 2023, which was filed with the SEC on March 8, 2024. ​ Key Performance Indicators To evaluate the performance of our business, we utilize a variety of financial and performance measures.
Fiscal Year 2024 Compared to Fiscal Year 2023 Year-to-year comparisons of fiscal 2024 and fiscal 2023 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 on our Annual Report on Form 10-K for the year ended December 25, 2024, which was filed with the SEC on March 7, 2025. ​ Key Performance Indicators To evaluate the performance of our business, we utilize a variety of financial and performance measures.
As of December 25, 2024, we had no federal and less than $0.1 million state net operating loss ( “ NOL ” ) carryforwards. These State NOLs expire beginning 2029. ​ A valuation allowance is required when there is significant uncertainty as to whether certain deferred tax assets can be realized.
As of December 31, 2025, we had no federal and less than $0.1 million state net operating loss ( “ NOL ” ) carryforwards. These State NOLs expire beginning 2029. ​ A valuation allowance is required when there is significant uncertainty as to whether certain deferred tax assets can be realized.
Refer to Note 6 “Leases” in the accompanying “Notes to Consolidated Financial Statements” in this Annual Report for further details regarding our obligations and the timing of expected payments. (2) Long-Term Debt — Represents our contractual debt obligations. Includes expected interest expenses, calculated based on applicable interest rates at December 25, 2024.
Refer to Note 6 “Leases” in the accompanying “Notes to Consolidated Financial Statements” in this Annual Report for further details regarding our obligations and the timing of expected payments. (2) Long-Term Debt — Represents our contractual debt obligations. Includes expected interest expenses, calculated based on applicable interest rates at December 31, 2025.
In fiscal 2025, we plan to continue our standard practices for remodels, which includes completing a total of 30-40 company and 30-40 franchise remodels. Remodeling is a use of cash and has implications for our net property and depreciation line items on our consolidated balance sheets and statements of income, among others.
In fiscal 2026, we plan to continue our standard practices for remodels, which includes completing a total of 25 to 35 company and 30 to 40 franchise remodels. Remodeling is a use of cash and has implications for our net property and depreciation line items on our consolidated balance sheets and statements of income, among others.
The obligations under the 2022 Credit Agreement and related 47 Table of Contents loan documents are guaranteed by us. The obligations of our company, EPL and Intermediate under the 2022 Credit Agreement and related loan documents are secured by a first priority lien on substantially all of their respective assets.
The obligations under the 2022 Credit Agreement and related loan documents are guaranteed by us. The obligations of our company, EPL and Intermediate under the 2022 Credit Agreement and related loan documents are secured by a first priority lien on substantially all of their respective assets.
Restaurant contribution and restaurant contribution margin have limitations as analytical tools, and you should not consider them in 42 Table of Contents isolation, or superior to, or as substitutes for the analysis of our results as reported under GAAP.
Restaurant contribution and restaurant contribution margin have limitations as analytical tools, and you should not consider them in isolation, or superior to, or as substitutes for the analysis of our results as reported under GAAP.
The lease term used for the evaluation includes renewal option periods only in instances in which the exercise of the renewal option can be reasonably assured because failure to exercise such an option would result in an economic penalty.
The lease term used for the evaluation includes renewal option periods only in instances in which the exercise of the renewal option can be reasonably assured because failure to exercise such an option would result in an economic 52 Table of Contents penalty.
Basis of Presentation We use a 52- or 53-week fiscal year ending on the last Wednesday of each calendar year. Fiscal 2024, 2023, and 2022 ended on December 25, 2024, December 27, 2023 and December 28, 2022, respectively. In a 52-week fiscal year, each quarter includes 13 weeks of operations.
Basis of Presentation We use a 52- or 53-week fiscal year ending on the last Wednesday of each calendar year. Fiscal 2025, 2024, and 2023 ended on December 31, 2025, December 25, 2024 and December 27, 2023, respectively. In a 52-week fiscal year, each quarter includes 13 weeks of operations.
For Term SOFR loans, the margin is in the range of 1.25% to 2.25%, and for base rate loans the margin is in a range of 0.25% to 1.25%. Borrowings under the 2022 Revolver may be repaid and reborrowed. For borrowings under the 2022 Revolver during fiscal 2024, the interest rate range was 5.7% to 7.0%.
For Term SOFR loans, the margin is in the range of 1.25% to 2.25%, and for base rate loans the margin is in a range of 0.25% to 1.25%. Borrowings under the 2022 Revolver may be repaid and reborrowed. For borrowings under the 2022 Revolver during fiscal 2025, the interest rate range was 5.3% to 7.75%.
Finally, we expect a portion of our incurred capital expenditures in 2025 to be for additional corporate initiatives, including investments in 48 Table of Contents technology for support centers to boost innovation, enhancing the customer experience, and improving operations. We expect to fund these capital expenditures primarily with operating cash flows.
Finally, we expect a portion of our incurred capital expenditures in 2026 to be for additional corporate initiatives, including investments in technology for support centers to boost innovation, enhancing the customer experience, and improving operations. We expect to fund these capital expenditures primarily with operating cash flows.
Fiscal 2024, 2023 and 2022 were 52-week fiscal years. 53-week years may cause revenues, expenses, and other results of operations to be higher due to the additional week of operations. Fiscal years are identified in this Annual Report according to the calendar years in which they ended.
Fiscal 2025 was a 53-week fiscal year, and fiscal 2024 and 2023 were 52-week fiscal years. 53-week years may cause revenues, expenses, and other results of operations to be higher due to the additional week of operations. Fiscal years are identified in this Annual Report according to the calendar years in which they ended.
During fiscal 2023, we recorded a $1.5 million non-cash impairment charge primarily related to the property and equipment assets of one restaurant in Nevada and the carrying value of the ROU assets of one restaurant in California .
In fiscal 2023, we recorded non-cash impairment charges of $1.5 million, primarily related to the property and equipment assets of one restaurant in Nevada and the carrying value of the ROU assets of one restaurant in California.
During fiscal 2024, we recognized $0.1 million of closed-store reserve expense related to the amortization of ROU assets, property taxes and CAM payments for our closed locations compared to $0.2 million during fiscal 2023 .
During fiscal 2024, we recognized $0.1 million of closed-store reserve expense, primarily related to the amortization of ROU assets, property taxes and CAM payments for our closed locations.
During fiscal 2024, we recorded non-cash impairment charges of $0.1 million, primarily related to the property and equipment assets of two restaurants in Nevada. D uring fiscal 2024, we recognized $0.1 million of closed-store reserve expense, primarily related to the amortization of ROU assets, property taxes and CAM payments for our closed locations.
D uring fiscal 2025, we recognized less than $0.1 million of closed-store reserve expense, p rimarily related to the amortization of ROU assets, property taxes and CAM payments for our closed locations. In fiscal 2024, we recorded non-cash impairment charges of $0.1 million, primarily related to the property and equipment assets of two restaurants in Nevada.
During fiscal 2022, we recognized $0.3 million of closed-store reserve expense, primarily related to the amortization of ROU assets, property taxes and CAM payments for our closed locations. (d) During fiscal 2024, we completed the sale of one restaurant within California to an existing franchisee due to an expiring lease term on April 30, 2024.
During fiscal 2023, we recognized $0.2 million of closed-store reserve expense, primarily related to the amortization of ROU assets, property taxes and CAM payments for our closed locations. 46 Table of Contents (d) During fiscal 2024, we completed the sale of one restaurant within California to an existing franchisee due to an expiring lease term on April 30, 2024.
Management believes that system-wide sales is an important figure for investors, because it is widely used in the restaurant industry, including by our management, to evaluate brand scale and market penetration. 41 Table of Contents System-wide sales does not include the 10 licensed stores in the Philippines.
Management believes that system-wide sales is an important figure for investors, because it is widely used in the restaurant industry, including by our management, to evaluate brand scale and market penetration. System-wide sales does not include the 8 licensed stores in the Philippines.
In fisc al 2023, net cash used in investing activities decreased by $5.5 milli on compared to fiscal 2022. This decrease was primarily due to cash proceeds of $7.7 million received during fiscal 2023 related to the sale of 18 company-operated restaurants to existing franchisees .
In fisc al 2024, net cash used in investing activities increased by $5.5 milli on compared to fiscal 2023. This increase was primarily due to cash proceeds of $7.7 million received during fiscal 2023 related to the sale of 18 company-operated restaurants to existing franchisees .
These key measures include company-operated restaurant revenue, system-wide sales, comparable restaurant sales, company-operated average unit volumes (“AUV”), restaurant contribution, restaurant contribution margin, new restaurant openings, EBITDA, and Adjusted EBITDA.
These key measures include company-operated restaurant revenue, system-wide sales, comparable restaurant sales, company- 42 Table of Contents operated average unit volumes (“AUV”), restaurant contribution, restaurant contribution margin, new restaurant openings, EBITDA, and Adjusted EBITDA.
For borrowings under the 2022 Revolver during fiscal 2023, the interest rate range was 5.7% to 7.0%. The interest rate under the 2022 Revolver was 5.7% at December 25, 2024 and 7.0% under the 2022 Revolver at December 27, 2023. ​ The 2022 Credit Agreement contains certain financial covenants.
For borrowings under the 2022 Revolver during fiscal 2024, the interest rate range was 5.7% to 7.0%. The interest rate under the 2022 Revolver was 5.3% at December 31, 2025 and 5.7% under the 2022 Revolver at December 25, 2024. ​ The 2022 Credit Agreement contains certain financial covenants.
As advertising fee revenue is a percentage of franchisees’ revenue, the year-to-date fluctuation was due to the increases and decreases noted in franchise revenue above. Food and Paper Costs Food and paper costs decreased $7.5 million, or 7.0%, in fiscal 2024 from the prior year.
As advertising fee revenue is a percentage of franchisees’ revenue, the year-to-date fluctuation was due to the increases noted in franchise revenue above. Food and Paper Costs Food and paper costs decreased $0.6 million, or 0.6%, in fiscal 2025 from the prior year.
The company-operated comparable restaurant sales increase consisted of a 7.9% increase in average check size due to increases in menu prices and partially offset by a 4.7% decrease in the number of transactions. In fiscal 2024, for company-operated restaurants, our annual AUV was $2.3 million, restaurant contribution margin was 17.4%, and Adjusted EBITDA was $62.7 million.
The company-operated comparable restaurant sales increase consisted of a 2.1% increase in average check size due to increases in menu prices and partially offset by a 1.8% decrease in the number of transactions. In fiscal 2025, for company-operated restaurants, our annual AUV was $2.3 million, restaurant contribution margin was 17.8%, and Adjusted EBITDA was $66.7 million.
An impairment test consists of either a qualitative assessment or a comparison of the fair value of an intangible asset with its carrying amount. The excess of the carrying amount of an intangible asset over its fair value is its impairment loss.
An impairment test consists of either a qualitative assessment or a comparison of the fair value of an intangible asset with its carrying amount.
Impairment and Closed-Store Reserves During fiscal 2024, we recorded a $0.1 million non-cash impairment charge primarily related to the property and equipment assets of two restaurants in Nevada.
Impairment and Closed-Store Reserves During fiscal 2025, we did not record any non-cash impairment charges. During fiscal 2024, we recorded a $0.1 million non-cash impairment charge primarily related to the property and equipment assets of two restaurants in Nevada .
As points are available for redemption past the quarter earned, a portion of the revenue associated with the earned points will be deferred until redemption or expiration. As of December 25, 2024, the revenue allocated to loyalty points that had not been redeemed was $0.8 million.
As points are available for redemption past the quarter earned, a portion of the revenue associated with the earned points will be deferred until redemption or expiration. As of December 31, 2025, the revenue allocated to loyalty points that had not been redeemed was $1.1 million.
(“Intermediate”), as a guarantor, Bank of America, N.A., as administrative agent, swingline lender, and letter of credit issuer, the lenders party thereto, and the other parties thereto, which provides for a $150.0 million five-year senior secured revolving credit facility (the “2022 Revolver”).
(“EPL”), as borrower, and our direct subsidiary. EPL Intermediate, Inc. (“Intermediate”), as a guarantor, Bank of America, N.A., as administrative agent, swingline lender, and letter of credit issuer, the lenders party thereto, and the other parties thereto, which provides for a $150.0 million five-year senior secured revolving credit facility (the “2022 Revolver”).
We maintain a reserve for estimated claims both reported and incurred but not reported, based on historical claims experience and other assumptions. In estimating our insurance accruals, we utilize independent actuarial estimates of expected losses, which are based on statistical analyses of historical data. Our actuarial assumptions are closely monitored and adjusted when warranted by changing circumstances.
We maintain a reserve for estimated claims both reported and incurred but not reported, based on historical claims experience and other assumptions. In estimating our insurance accruals, we utilize independent actuarial estimates of expected losses, which are based on statistical analyses of historical data.
We had over 4.2 million loyalty program members as of December 25, 2024. 35 Table of Contents Key Financial Definitions Revenue Our revenue is derived from three primary sources: company-operated restaurant revenue, franchise revenue, which is comprised primarily of franchise royalties and, to a lesser extent, franchise fees and sublease rental income, and franchise advertising fee revenue.
We had over 5.3 million loyalty program members as of December 31, 2025. 37 Table of Contents Key Financial Definitions Revenue Our revenue is derived from three primary sources: company-operated restaurant revenue, franchise revenue, which is comprised primarily of franchise royalties and, to a lesser extent, franchise fees and sublease rental income, and franchise advertising fee revenue.
A restaurant enters our comparable restaurant base the first full week after it has operated for fifteen months. Comparable restaurant sales exclude restaurants closed during the applicable period. At December 25, 2024, December 27, 2023 and December 28, 2022, there were 479, 470 and 464 comparable restaurants, 168, 178 and 184 company-operated and 311, 292 and 280 franchised, respectively.
A restaurant enters our comparable restaurant base the first full week after it has operated for fifteen months. Comparable restaurant sales exclude restaurants closed during the applicable period. At December 31, 2025, December 25, 2024 and December 27, 2023, there were 482, 479 and 470 comparable restaurants, 170, 168 and 178 company-operated and 312, 311 and 292 franchised, respectively.
Critical Accounting Policies and Estimates The preparation of our consolidated financial statements in accordance with GAAP requires us to make estimates and judgments that affect our reported amounts of assets, liabilities, revenue, and expenses, and related disclosure of contingent assets and liabilities.
The repurchase program was terminated on March 31, 2025. Critical Accounting Policies and Estimates The preparation of our consolidated financial statements in accordance with GAAP requires us to make estimates and judgments that affect our reported amounts of assets, liabilities, revenue, and expenses, and related disclosure of contingent assets and liabilities.
Our restaurant counts at the beginning and end of each of the last three years were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year Ended ​ 2024 2023 2022 Company-operated restaurant activity (1) : ​ ​ ​ Beginning of period ​ 172 ​ 188 ​ 189 Openings ​ 2 ​ 2 ​ 4 Restaurant sale to franchisee ​ (1) ​ (18) ​ (3) Closures ​ — ​ — ​ (2) Restaurants at end of period ​ 173 ​ 172 ​ 188 Franchised restaurant activity: ​ ​ ​ Beginning of period ​ 323 ​ 302 ​ 291 Openings ​ 2 ​ 3 ​ 9 Restaurant sale to franchisee ​ 1 ​ 18 ​ 3 Closures ​ (1) ​ — ​ (1) Restaurants at end of period ​ 325 ​ 323 ​ 302 System-wide restaurant activity: ​ ​ ​ Beginning of period ​ 495 ​ 490 ​ 480 Openings ​ 4 ​ 5 ​ 13 Closures ​ (1) ​ — ​ (3) Restaurants at end of period ​ 498 ​ 495 ​ 490 (1) Our restaurant count above includes 498 domestic restaurants and excludes 10 licensed restaurants in the Philippines. ​ ​ Restaurant Remodeling ​ During the year ended December 25, 2024, we completed eight company-operated restaurant remodels and 44 franchise remodels.
Our restaurant counts at the beginning and end of each of the last three years were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year Ended ​ ​ ​ ​ 2025 ​ ​ ​ 2024 ​ ​ ​ 2023 Company-operated restaurant activity (1) : ​ ​ ​ ​ ​ ​ Beginning of period ​ 173 ​ 172 ​ 188 Openings ​ 1 ​ 2 ​ 2 Restaurant sale to Company ​ 1 ​ — ​ — Restaurant sale to franchisee ​ — ​ (1) ​ (18) Closures ​ — ​ — ​ — Restaurants at end of period ​ 175 ​ 173 ​ 172 Franchised restaurant activity: ​ ​ ​ ​ ​ ​ Beginning of period ​ 325 ​ 323 ​ 302 Openings ​ 8 ​ 2 ​ 3 Restaurant sale to Company ​ (1) ​ — ​ — Restaurant sale to franchisee ​ — ​ 1 ​ 18 Closures ​ (4) ​ (1) ​ — Restaurants at end of period ​ 328 ​ 325 ​ 323 System-wide restaurant activity: ​ ​ ​ ​ ​ ​ Beginning of period ​ 498 ​ 495 ​ 490 Openings ​ 9 ​ 4 ​ 5 Closures ​ (4) ​ (1) ​ — Restaurants at end of period ​ 503 ​ 498 ​ 495 (1) Our restaurant count above includes 503 domestic restaurants and excludes 8 licensed restaurants in the Philippines. ​ ​ Restaurant Remodeling ​ During the year ended December 31, 2025, we completed 17 company-operated restaurant remodels and 52 franchise remodels.
See subsection titled “Our Growth Strategy” in Item 1. Business in this Annual Report for a detailed description of the five key pillars of our growth strategy. As of December 25, 2024, we had 498 locations in seven states.
See subsection titled “Our Growth Strategy” in Item 1. Business in this Annual Report for a detailed description of the five key pillars of our growth strategy. As of December 31, 2025, we had 503 locations in nine states.
For company-operated restaurants in 2024, the change in comparable restaurant sales consisted of a 7.9% increase in average check size due to increases in menu prices partially offset by a 4.7% decrease in transactions.
For company-operated restaurants in 2025, the change in comparable restaurant sales consisted of a 2.1% increase in average check size due to increases in menu prices partially offset by a 1.8% decrease in transactions.
We were in compliance with the financial covenants as of December 25, 2024. ​ At December 25, 2024, $10.3 million of letters of credit and $71.0 million of the revolving line of credit were outstanding. The amount available under the revolving line of credit was $68.7 million at December 25, 2024.
We were in compliance with the financial covenants as of December 31, 2025. ​ At December 31, 2025, $10.3 million of letters of credit and $51.0 million of the revolving line of credit were outstanding. The amount available under the revolving line of credit was $88.7 million at December 31, 2025.
As of December 25, 2024, there was no remaining obligations owed on our consolidated balance sheets. Provision for Income Taxes In fiscal 2024, we recorded an income tax expense of $9.6 million, compared to income tax expense of $9.3 million in fiscal 2023, reflecting an estimated effective tax rate of 27.2% and 26.7%, respectively.
As of December 31, 2025 and December 25, 2024, there were no remaining obligations owed on our consolidated balance sheets. Provision for Income Taxes In fiscal 2025, we recorded an income tax expense of $11.1 million, compared to income tax expense of $9.6 million in fiscal 2024, reflecting an estimated effective tax rate of 29.5% and 27.2%, respectively.
Although we have been able to substantially offset these cost pressures through various actions, such as increasing menu prices, managing menu mix, and productivity improvements, we expect these cost pressures to continue into 2025 and we may not be able to offset cost increases in the future.
Although we have been able to substantially offset these cost pressures through various actions, such as increasing menu prices, managing menu mix, and productivity improvements, we expect these cost pressures to continue in 2026.
System-wide comparable restaurant sales include restaurant sales at all comparable company-operated restaurants and at all comparable franchised restaurants, as reported by franchisees. Refer to “Comparable Restaurant Sales” definition in the subsection titled “Key Performance Indicators” below for further information. Comparable restaurant sales at company-operated restaurants increased 2.8%, 0.3%, and 3.7%, respectively, in fiscal 2024, 2023 and 2022.
System-wide comparable restaurant sales include restaurant sales at all comparable company-operated restaurants and at all comparable franchised restaurants, as reported by franchisees. Refer to “Comparable Restaurant Sales” definition in the subsection titled “Key Performance Indicators” below for further information.
Interest Expense, Net For fiscal 2024, net interest expense, increased by $1.1 million, primarily related to higher outstanding balances on our 2022 Revolver (as defined below) as well as the higher interest rates during fiscal 2024 versus the comparable period during the prior year.
Interest Expense, Net For fiscal 2025, net interest expense decreased by $1.4 million or 24.2%, primarily related to lower outstanding balances on our 2022 Revolver (as defined below) as well as the lower interest rates during fiscal 2025 versus the comparable period during the prior year.
Changes in these estimates and assumptions could materially affect our determinations of fair value and impairment. Upon the sale or refranchising of a restaurant, we evaluate whether there is a decrement of goodwill.
These assumptions are subject to change as a result of changing economic and competitive conditions. Changes in these estimates and assumptions could materially affect our determinations of fair value and impairment. Upon the sale or refranchising of a restaurant, we evaluate whether there is a decrement of goodwill.
During fiscal 2023, we recognized $0.2 million of closed-store reserve expense, primarily related to the amortization of ROU assets, property taxes and CAM payments for our closed locations.
During fiscal 2025, we recognized less than $0.1 million of closed-store reserve expense related to the amortization of ROU assets, property taxes and CAM payments for our closed locations compared to $0.1 million during fiscal 2024 .
A reconciliation of restaurant contribution and restaurant contribution margin to company-operated restaurant revenue is provided below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year (Dollar amounts in thousands) 2024 (52-Weeks) 2023 (52-Weeks) 2022 (52-Weeks) Restaurant contribution: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income from operations ​ $ 41,168 ​ $ 39,792 ​ $ 30,120 ​ Add (less): ​ ​ ​ ​ General and administrative expenses ​ 46,270 ​ 42,025 ​ 39,093 ​ Franchise expenses ​ 42,307 ​ 38,404 ​ 36,169 ​ Depreciation and amortization ​ 15,717 ​ 15,235 ​ 14,418 ​ Loss on disposal of assets ​ 221 ​ 192 ​ 165 ​ Gain on recovery of insurance proceeds, property, equipment and expenses ​ ​ (41) ​ ​ (247) ​ ​ — ​ Franchise revenue ​ (45,561) ​ (41,002) ​ (38,225) ​ Franchise advertising fee revenue ​ (31,187) ​ (29,225) ​ (28,516) ​ Impairment and closed-store reserves ​ 175 ​ 1,732 ​ 752 ​ Loss (gain) on disposition of restaurants ​ 7 ​ (5,034) ​ (848) ​ Restaurant contribution ​ $ 69,076 ​ $ 61,872 ​ $ 53,128 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Company-operated restaurant revenue: ​ ​ ​ ​ Total revenue ​ $ 473,008 ​ $ 468,664 ​ $ 469,959 ​ Less: ​ ​ ​ ​ Franchise revenue ​ (45,561) ​ (41,002) ​ (38,225) ​ Franchise advertising fee revenue ​ (31,187) ​ (29,225) ​ (28,516) ​ Company-operated restaurant revenue ​ $ 396,260 ​ $ 398,437 ​ $ 403,218 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Restaurant contribution margin (%) ​ 17.4 % 15.5 % 13.2 % ​ New Restaurant Openings The number of restaurant openings reflects the number of new restaurants opened by us and our franchisees during a particular reporting period.
A reconciliation of restaurant contribution and restaurant contribution margin to company-operated restaurant revenue is provided below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year (Dollar amounts in thousands) ​ ​ ​ 2025 (53-Weeks) ​ ​ ​ 2024 (52-Weeks) ​ ​ ​ 2023 (52-Weeks) Restaurant contribution: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income from operations ​ $ 42,045 ​ $ 41,168 ​ $ 39,792 ​ Add (less): ​ ​ ​ ​ ​ ​ ​ General and administrative expenses ​ 50,258 ​ 46,270 ​ 42,025 ​ Franchise expenses ​ 47,762 ​ 42,307 ​ 38,404 ​ Depreciation and amortization ​ 15,966 ​ 15,717 ​ 15,235 ​ Loss on disposal of assets ​ 277 ​ 221 ​ 192 ​ Gain on recovery of insurance proceeds, property, equipment and expenses ​ ​ — ​ ​ (41) ​ ​ (247) ​ Franchise revenue ​ (52,389) ​ (45,561) ​ (41,002) ​ Franchise advertising fee revenue ​ (31,840) ​ (31,187) ​ (29,225) ​ Impairment and closed-store reserves ​ 11 ​ 175 ​ 1,732 ​ 44 Table of Contents Loss (gain) on disposition of restaurants ​ — ​ 7 ​ (5,034) ​ Restaurant contribution ​ $ 72,090 ​ $ 69,076 ​ $ 61,872 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Company-operated restaurant revenue: ​ ​ ​ ​ ​ ​ ​ Total revenue ​ $ 490,046 ​ $ 473,008 ​ $ 468,664 ​ Less: ​ ​ ​ ​ ​ ​ ​ Franchise revenue ​ (52,389) ​ (45,561) ​ (41,002) ​ Franchise advertising fee revenue ​ (31,840) ​ (31,187) ​ (29,225) ​ Company-operated restaurant revenue ​ $ 405,817 ​ $ 396,260 ​ $ 398,437 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Restaurant contribution margin (%) ​ 17.8 % 17.4 % 15.5 % ​ New Restaurant Openings The number of restaurant openings reflects the number of new restaurants opened by us and our franchisees during a particular reporting period.
The following table reconciles system-wide sales to company-operated restaurant revenue and total revenue (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year ​ 2024 2023 2022 ​ ​ (52-Weeks) ​ (52-Weeks) ​ (52-Weeks) Company-operated restaurant revenue ​ $ 396,260 ​ $ 398,437 ​ $ 403,218 Franchise revenue ​ ​ 45,561 ​ ​ 41,002 ​ 38,225 Franchise advertising fee revenue ​ ​ 31,187 ​ ​ 29,225 ​ 28,516 Total Revenue ​ ​ 473,008 ​ ​ 468,664 ​ 469,959 Franchise revenue ​ ​ (45,561) ​ ​ (41,002) ​ (38,225) Franchise advertising fee revenue ​ ​ (31,187) ​ ​ (29,225) ​ ​ (28,516) Sales from franchised restaurants ​ ​ 699,456 ​ ​ 651,777 ​ 635,819 System-wide sales ​ $ 1,095,716 ​ $ 1,050,214 ​ $ 1,039,037 ​ Comparable Restaurant Sales Comparable restaurant sales reflect year-over-year sales changes for comparable company-operated, franchised, and system-wide restaurants.
The following table reconciles system-wide sales to company-operated restaurant revenue and total revenue (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year ​ ​ ​ ​ 2025 ​ ​ ​ 2024 ​ ​ ​ 2023 ​ ​ ​ ​ ​ (53-Weeks) ​ (52-Weeks) ​ (52-Weeks) ​ Company-operated restaurant revenue ​ $ 405,817 ​ $ 396,260 ​ $ 398,437 ​ Franchise revenue ​ ​ 52,389 ​ ​ 45,561 ​ 41,002 ​ Franchise advertising fee revenue ​ ​ 31,840 ​ ​ 31,187 ​ 29,225 ​ Total Revenue ​ ​ 490,046 ​ ​ 473,008 ​ 468,664 ​ Franchise revenue ​ ​ (52,389) ​ ​ (45,561) ​ (41,002) ​ Franchise advertising fee revenue ​ ​ (31,840) ​ ​ (31,187) ​ ​ (29,225) ​ Sales from franchised restaurants ​ ​ 719,588 ​ ​ 699,456 ​ 651,777 ​ System-wide sales ​ $ 1,125,405 ​ $ 1,095,716 ​ $ 1,050,214 ​ ​ Comparable Restaurant Sales Comparable restaurant sales reflect year-over-year sales changes for comparable company-operated, franchised, and system-wide restaurants.
Cash Flows The following table presents summary cash flow information for the years indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year (Amounts in thousands) 2024 (52-Weeks) 2023 (52-Weeks) 2022 (52-Weeks) Net cash provided by (used in) ​ ​ ​ ​ ​ ​ Operating activities ​ $ 46,781 ​ $ 40,688 ​ $ 38,549 Investing activities ​ (18,940) ​ (13,447) ​ (18,915) Financing activities ​ (32,645) ​ (40,446) ​ (29,187) Net decrease in cash ​ $ (4,804) ​ $ (13,205) ​ $ (9,553) ​ Operating Activities In fiscal 2024, net cash provided by operating activities increased by $6.1 million compared to fiscal 2023.
Cash Flows The following table presents summary cash flow information for the years indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year (Amounts in thousands) ​ ​ ​ 2025 (53-Weeks) ​ ​ ​ 2024 (52-Weeks) ​ ​ ​ 2023 (52-Weeks) Net cash provided by (used in) ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating activities ​ $ 48,076 ​ $ 46,781 ​ $ 40,688 Investing activities ​ (22,635) ​ (18,940) ​ (13,447) Financing activities ​ (21,697) ​ (32,645) ​ (40,446) Net increase/(decrease) in cash ​ $ 3,744 ​ $ (4,804) ​ $ (13,205) ​ Operating Activities In fiscal 2025, net cash provided by operating activities increased by $1.3 million compared to fiscal 2024.
First, we divide our total net sales for all company-operated restaurants for the fiscal year by the total number of restaurant operating weeks during the same period. Second, we annualize that average weekly per-restaurant sales figure by multiplying it by 52. An operating week is defined as a restaurant open for business over a seven-day period from Thursday to Wednesday.
First, we divide our total net sales for all company-operated restaurants for the fiscal year by the total number of restaurant operating weeks during the same period. Second, we annualize that average weekly per-restaurant sales figure by multiplying it by 53 for a 53-week year or 52 for a 52-week year.
The decrease was primarily due to repurchases of shares of our common stock of $20.6 million during the year ended December 25, 2024 compared to repurchases of shares of our common stock of $59.2 million during the year ended December 27, 2023.
In fiscal 2024, net cash used in financing activities decreased by $7.8 million compared to fiscal 2023. The decrease was primarily due to repurchases of shares of our common stock of $20.6 million during the year ended December 25, 2024 compared to repurchases of shares of our common stock of $59.2 million during the year ended December 27, 2023.
Unrecognized tax benefits involve our judgment regarding the likelihood of a benefit being sustained. The final resolutions of uncertain tax positions could result in adjustments to recorded amounts and affect our results of operations, financial position, and cash flows. However, we anticipate that any such adjustments would not materially impact our financial statements. ​ ​ ​ 52 Table of Contents
Unrecognized tax benefits involve our judgment regarding the likelihood of a benefit being sustained. The final resolutions of uncertain tax positions could result in adjustments to recorded amounts and affect our results of operations, financial position, and cash flows.
Labor and related expenses as a percentage of company-operated restaurant revenue were 32.1% in fiscal 2024, up from 31.9% in fiscal 2023 primarily due to the higher wage rates, partially offset by the increase in menu pricing and improved labor efficiencies. Occupancy and Other Operating Expenses Occupancy and other operating expenses decreased $2.1 million, or 2.1%, in fiscal 2024.
Labor and related expenses as a percentage of Company-operated restaurant revenue were 31.4% in fiscal 2025, down from 32.1% in fiscal 2024 primarily due to an increase in menu pricing and improved labor efficiencies being greater than the increase in wage rates. Occupancy and Other Operating Expenses Occupancy and other operating expenses increased $7.1 million, or 7.2%, in fiscal 2025.
Financing Activities In fiscal 2024, net cash used in financing activities decreased by $7.8 million compared to fiscal 2023.
Financing Activities In fiscal 2025, net cash used in financing activities decreased by $10.9 million compared to fiscal 2024.
Pursuant to the Share Repurchase Program, we are authorized to effect repurchases using open market purchases, including pursuant to Rule 10b5-1 trading plans, and/or through privately negotiated transactions. The repurchase program does not obligate us to acquire any particular number of shares.
Pursuant to the Share Repurchase Program, we were authorized to effect repurchases using open market purchases, including pursuant to Rule 10b5-1 trading plans, and/or through privately negotiated transactions.
(i) Consists of advisory fees pertaining to a Shareholder Rights Agreement adopted in connection with a shareholder’s accumulation of a significant amount of shares of our common stock. Refer to Note 16, “Shareholder Rights Agreement” for further details on the Shareholder Rights Agreement. (j) During fiscal 2022, one of our restaurants incurred damage resulting from a fire.
(i) Consists of advisory fees pertaining to a shareholder rights agreement adopted in connection with a shareholder’s accumulation of a significant amount of shares of our common stock. Refer to Note 16, “Shareholder Rights Agreement” for further details on the Shareholder Rights Agreement. (j) Consists of duplicate rent expense for the corporate headquarter relocation.
For example, references to fiscal 2024 refer to the fiscal year ended December 25, 2024. Overview El Pollo Loco is a differentiated and growing restaurant concept that specializes in fire-grilling citrus-marinated chicken and operates in the limited-service restaurant segment. We strive to offer food that integrates the culinary traditions of Mexico with the healthier lifestyle.
For example, references to fiscal 2025 refer to the fiscal year ended December 31, 2025. Overview El Pollo Loco is a differentiated and growing restaurant concept that specializes in fire-grilling citrus-marinated chicken and operates in the limited-service restaurant segment. We strive to offer quality chicken served fast and easy.
Adjusted EBITDA represents net income (loss) before interest expense, provision (benefit) for income taxes, depreciation, amortization, and other items that we do not consider representative of on-going operating performance, as identified in the reconciliation table below. 43 Table of Contents EBITDA and Adjusted EBITDA as presented in this Annual Report are supplemental measures of our performance that are neither required by, nor presented in accordance with, GAAP.
Adjusted EBITDA represents net income (loss) before interest expense, provision (benefit) for income taxes, depreciation, amortization, and other items that we do not consider representative of on-going operating performance, as identified in the reconciliation table below.
We compensate for these limitations by providing specific information regarding the GAAP amounts excluded from such non-GAAP financial measures. We further compensate for the limitations in our use of non-GAAP financial measures by presenting comparable GAAP measures more prominently.
We compensate for these limitations by providing specific information regarding the GAAP amounts excluded from such non-GAAP financial measures.
Restaurant contribution is defined as company-operated restaurant revenue less company restaurant expenses which includes food and paper cost, labor and related expenses and occupancy and other operating expenses, where applicable.
Restaurant Contribution and Restaurant Contribution Margin Restaurant contribution and restaurant contribution margin are neither required by, nor presented in accordance with, GAAP. Restaurant contribution is defined as company-operated restaurant revenue less company restaurant expenses which includes food and paper cost, labor and related expenses and occupancy and other operating expenses, where applicable.
We believe that our distinctive menu with better for you and more affordable alternatives appeals to consumers across a wide variety of socio-economic backgrounds and drives our balanced composition of sales throughout the day (our “day-part mix”), including at lunch and dinner.
We believe that our distinctive menu that features quality chicken is a flavorful and affordable option that appeals to consumers across a wide variety of socio-economic backgrounds and drives our balanced composition of sales throughout the day, including at lunch and dinner.
All other percentages use total revenue. Company-Operated Restaurant Revenue In fiscal 2024, company-operated restaurant revenue decreased $2.2 million, or 0.5%, from the prior year.
All other percentages use total revenue. Company-Operated Restaurant Revenue In fiscal 2025, company-operated restaurant revenue increased $9.6 million, or 2.4%, from the prior year.
This increase is primarily due to the cost increases described above. Franchise Expenses Franchise expenses increased $3.9 million, or 10.2%, in fiscal 2024 from the prior year.
This increase is primarily due to the cost increases described above. 41 Table of Contents Franchise Expenses Franchise expenses increased $5.5 million, or 12.9%, in fiscal 2025 from the prior year.
(b) Loss on disposal of assets includes the loss on disposal of assets related to retirements and replacement or write-off of leasehold improvements or equipment. (c) Includes costs related to impairment of property and equipment and ROU assets and closing restaurants.
(b) Loss on disposal of assets includes the loss on disposal of assets related to retirements and replacement or write-off of leasehold improvements or equipment. (c) Includes costs related to impairment of property and equipment and ROU assets and closed restaurants. During fiscal 2025, we did not record any non-cash impairment charges.
Following completion of these repurchases, approximately $1.8 million of our common stock remained available for repurchase under the Share Repurchase Program at December 25, 2024.
Following completion of these repurchases, approximately $1.8 million of our common stock remained available for repurchase under the Share Repurchase Program at December 25, 2024. For the year ended December 31, 2025, we repurchased 163,229 shares of our common stock for a total purchase price of $1.8 million under the Stock Repurchase Program.
Gain on Recovery of Insurance Proceeds, Lost Profits and Gain on Recovery of Insurance Proceeds Property, Equipment and Expenses During fiscal 2023 and fiscal 2022, two of the Company’s restaurants incurred damage resulting from a fire. In fiscal 2023, the Company incurred costs directly related to the fire of less than $0.1 million.
Gain on Recovery of Insurance Proceeds Property, Equipment and Expenses During fiscal 2023 and fiscal 2022, two of our restaurants incurred damage resulting from a fire. In fiscal 2024, we recognized gains of less than $0.1 million related to the reimbursement of property and equipment and expenses. We had no gain or loss on recovery of insurance proceeds in 2025.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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A 1.0% increase in the effective interest rate applied to our 2022 Revolver borrowings would result in a pre-tax interest expense increase of $0.7 million on an annualized basis.
A 1.0% increase in the effective interest rate applied to our 2022 Revolver borrowings would result in a pre-tax interest expense increase of $0.5 million on an annualized basis.
At this time, we do not use financial instruments to hedge our commodity risk. ​ 53 Table of Contents
At this time, we do not use financial instruments to hedge our commodity risk. ​ 55 Table of Contents
As of December 25, 2024, we had outstanding borrowings of $71.0 million under our 2022 Revolver, $10.3 million of letters of credit in support of our insurance programs, and the applicable margin on outstanding borrowings under 2022 Revolver was 1.5%.
As of December 31, 2025, we had outstanding borrowings of $51.0 million under our 2022 Revolver, $10.3 million of letters of credit in support of our insurance programs, and the applicable margin on outstanding borrowings under 2022 Revolver was 1.5%.
During the year ended December 25, 2024, we borrowed $14.0 million and paid down $27.0 million on our 2022 Revolver and the outstanding balance as of December 25, 2024 was $71.0 million.
During the year ended December 31, 2025, we borrowed $9.0 million and paid down $29.0 million on our 2022 Revolver and the outstanding balance as of December 31, 2025 was $51.0 million.

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