Core Insights - The restaurant sector is experiencing significant volatility during the Q3 earnings season, with investors feeling particularly anxious due to multiple challenges such as cost inflation and weak consumer spending [1]. Industry Summary - The restaurant industry is facing headwinds that include rising costs and a decline in consumer spending, impacting major players like Chipotle [1].

Core Insights - The fast-casual restaurant sector has potential for growth, needing more investors and a compelling narrative to attract Wall Street interest [1] Company Insights - The research firm Goulart's Restaurant Stocks specializes in the U.S. restaurant industry, covering various segments from quick-service to fine dining [2] - The firm employs advanced financial modeling and sector-specific KPIs to identify hidden value in public equities, particularly focusing on micro and small-cap companies [2] Analyst Background - The founder of Goulart's Restaurant Stocks has a strong academic background with an MBA in Controllership and Accounting Forensics, and a Bachelor's in Business Administration [2] - The founder has practical experience in finance and business management, including a brief stint as a franchise partner for a regional ice cream shop [2]

Revenue and Sales Performance - Total revenue for the thirteen weeks ended September 24, 2025, was $121.5 million, with company-operated restaurant revenue at $100.7 million and franchise revenue at $20.8 million[168]. - System-wide comparable restaurant sales decreased by 0.8% for the thirteen weeks ended September 24, 2025, while company-operated restaurants saw a 1.1% decrease in comparable sales for the same period[169]. - Total revenue for the quarter was $121.520 million, an increase of 0.9% from $120.395 million in the comparable period of the prior year[227]. - Franchise revenue for the quarter ended September 24, 2025, increased by $1.5 million, or 13.5%, primarily due to franchisee IT pass-through revenue related to the new POS system[200]. - Franchise revenue year-to-date increased by $5.1 million, or 14.8%, primarily due to franchisee IT pass-through revenue related to the new POS system[201]. - Total revenue for the thirty-nine weeks ended September 24, 2025, was $366.5 million, compared to $358.7 million for the same period in 2024, representing a year-over-year increase of 2.2%[234]. Income and Expenses - Net income for the quarter ended September 24, 2025, was $7.36 million, representing an 18.9% increase from $6.19 million in the same quarter last year[194]. - Labor and related expenses decreased by $2.1 million, or 6.4%, for the quarter ended September 24, 2025, compared to the prior year[194]. - General and administrative expenses increased by $925,000, or 8.1%, for the quarter ended September 24, 2025, compared to the same period last year[194]. - Total expenses for the thirteen weeks ended September 24, 2025, were $110.06 million, a slight decrease of 0.2% from $110.26 million in the prior year[194]. - Restaurant contribution margin for the thirteen weeks ended September 24, 2025, was 18.3%, up from 16.7% for the same period in 2024[234]. Operational Developments - As of September 24, 2025, the company operated 498 locations, with three new openings in the thirty-nine weeks ended September 24, 2025, and the announcement of the 500th restaurant opening on October 14, 2025[165]. - The company completed 34 restaurant remodels during the thirty-nine weeks ended September 24, 2025, with an average investment of approximately $0.4 million per restaurant[171][173]. - Franchisees opened three new restaurants in the thirty-nine weeks ended September 24, 2025, while closing three in California[165]. - The company opened new restaurants, which typically experience a start-up period of approximately fourteen weeks before revenue and expenses normalize[235]. Customer Engagement and Loyalty - The Loco Rewards loyalty program had over 4.6 million members as of September 24, 2025, with $1.1 million in revenue allocated to unredeemed loyalty points[175]. - Comparable restaurant sales for company-operated restaurants increased by 0.2% year-to-date, driven by a 1.6% increase in average check size[169]. Financial Position and Liquidity - The company’s liquidity sources include cash from operations and the 2022 Revolver, which are deemed sufficient to finance operations for at least the next 12 months[246]. - The net increase in cash for the thirty-nine weeks ended September 24, 2025, was $8.4 million, compared to a net increase of $0.6 million for the same period in 2024[247]. - As of September 24, 2025, the company had $61.0 million in outstanding borrowings under the 2022 Revolver and $10.3 million in letters of credit, resulting in $78.7 million in borrowing availability[255]. Cost Management and Inflation - Labor and regulatory compliance costs increased due to California legislation, impacting fiscal 2024 and 2025, although the company has managed to offset some of these costs through menu price increases[159]. - The company expects ongoing inflationary pressures and potential tariff impacts to affect food and supply costs, which may not be fully offset in the future[162][163]. - Inflation has impacted costs related to food, labor, and general expenses, although the company has managed to offset some increases through menu price adjustments[261]. - The company is exposed to commodity price fluctuations, particularly in food product prices, which can materially affect food and beverage costs[262]. - The company has not used financial instruments to hedge commodity risk, which may adversely affect results of operations if cost increases are not passed on to customers[262].

Core Insights - El Pollo Loco Holdings (LOCO) reported quarterly earnings of $0.27 per share, exceeding the Zacks Consensus Estimate of $0.23 per share, and showing an increase from $0.21 per share a year ago, resulting in an earnings surprise of +17.39% [1] - The company posted revenues of $121.52 million for the quarter ended September 2025, which was 1.61% below the Zacks Consensus Estimate, but an increase from $120.39 million year-over-year [2] - El Pollo Loco shares have declined approximately 17.6% year-to-date, contrasting with the S&P 500's gain of 17.2% [3] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.20 on revenues of $124.98 million, and for the current fiscal year, it is $0.90 on revenues of $493.54 million [7] - The estimate revisions trend for El Pollo Loco was unfavorable prior to the earnings release, resulting in a Zacks Rank 4 (Sell) for the stock, indicating expected underperformance in the near future [6] Industry Context - The Retail - Restaurants industry, to which El Pollo Loco belongs, is currently ranked in the bottom 9% of over 250 Zacks industries, suggesting a challenging environment for stocks in this sector [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which could impact investor sentiment and stock performance [5]

Financial Data and Key Metrics Changes - For Q3 2025, total revenue was $121.5 million, a slight increase from $120.4 million in Q3 2024 [29] - Company-operated restaurant revenue decreased by 0.5% to $100.7 million from $101.2 million in the same period last year [30] - GAAP net income rose to $7.4 million, or $0.25 per diluted share, compared to $6.2 million, or $0.21 per diluted share in the prior year [36] Business Line Data and Key Metrics Changes - Franchise revenue increased by 13.5% to $12.9 million, driven by IT pass-through revenue and new franchise openings [30] - Company-operated comparable restaurant sales decreased by 1.1%, with a 1.3% decrease in average check size, partially offset by a 0.1% increase in transactions [30] - Restaurant contribution margin improved to 18.3% compared to 16.7% in the year-ago period [34] Market Data and Key Metrics Changes - System-wide traffic growth was positive at 1.6%, with franchise traffic up 2.5% in Q3 [31] - Digital business, including kiosks, grew to 27% of system sales compared to 20% in the same period last year [19] - Third-party delivery sales represented 15.1% of the business, up from 13.8% year-over-year [20] Company Strategy and Development Direction - The company is focused on five strategic pillars: brand marketing and menu innovation, operational excellence, digital-first approach, winning unit economics, and new unit growth [6][7] - A robust pipeline of menu innovations is planned for 2026, including new salads and portable options [12][13] - The company aims to open at least 10 new restaurants in 2025, with a strong pipeline for 2026 [25][26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strategy and noted improvements in customer engagement metrics, with complaints at a three-year low [17] - The company anticipates continued sales momentum into Q4 2025, despite a challenging macro consumer environment [31] - Management acknowledged ongoing challenges but emphasized operational improvements and customer experience enhancements [43] Other Important Information - The company completed 34 system-wide remodels in 2025, with plans for at least 55 remodels for the full year [26][37] - The "Let's Get Loco" brand campaign has resonated well with customers, driving engagement and brand awareness [15][16] Q&A Session Summary Question: Performance relative to peers in California - Management indicated that the company is outperforming peers in California in both sales and transactions, attributing this to value positioning and operational enhancements [40][41] Question: Tactics to offset market pressures - Management noted that adjustments made throughout the year have helped maintain performance, with no significant deterioration in consumer behavior observed [42][43] Question: Future cost efficiencies - Management believes there are still opportunities for cost savings and efficiencies, particularly in labor and supply chain [44][45] Question: Menu item testing and introduction - Management confirmed that new menu items like Loco Tenders and a chicken sandwich are in testing and could be introduced in 2026 [47][48] Question: Chicken contracting for next year - Management stated that they are in good shape regarding chicken contracts for the upcoming year, with some pressure on dark meat prices [49] Question: Supply chain innovations - Management is testing various ideas to improve consistency and quality, including pre-marination processes [51] Question: Margin outlook for Q4 - Management expects to grow margins year-over-year in Q4, despite some pressure from sales volume differences [54] Question: Marketing efforts and consumer response - Management noted that the "Let's Get Loco" campaign is driving awareness and attracting new customers, with a focus on balancing value and check protection [56][58]

Revenue Performance - Company-operated restaurant revenue for Q3 2025 was $100.7 million, a decrease of 0.5% from $101.2 million in Q3 2024[3] - Total revenue increased to $121.5 million, up from $120.4 million year-over-year[3] - System-wide comparable restaurant sales decreased by 0.8%[3] - Total revenue for the thirteen weeks ended September 24, 2025, was $121.52 million, a slight increase from $120.40 million for the same period in 2024, representing a growth of 0.9%[33] - Company-operated restaurant revenue was $100.72 million, accounting for 82.9% of total revenue, compared to $101.18 million (84.0%) in the prior year[33] - Franchise revenue increased to $12.86 million (10.6% of total revenue) from $11.33 million (9.4%) year-over-year[33] - Total revenue for the thirty-nine weeks ended September 24, 2025, reached $366,531,000, compared to $358,724,000 for the same period in 2024, indicating a 2.2% growth[41] Net Income and Earnings - Net income for Q3 2025 was $7.4 million, or $0.25 per diluted share, compared to $6.2 million, or $0.21 per diluted share in Q3 2024[8] - Adjusted net income was $7.8 million, or $0.27 per diluted share, compared to $6.3 million, or $0.21 per diluted share in the prior year[8] - Net income for the thirteen weeks ended September 24, 2025, was $7.36 million, up from $6.19 million in the same period last year, reflecting a growth of 18.9%[33] - Adjusted net income for the thirty-nine weeks ended September 24, 2025, was $21,588,000, compared to $20,898,000 for the same period in 2024, a 3.3% increase[40] Operational Metrics - Restaurant contribution was $18.5 million, representing 18.3% of company-operated restaurant revenue, up from 16.7% in Q3 2024[6] - Comparable restaurant sales growth for company-operated restaurants was 0.2%, a decline from 3.2% in the prior year[34] - Adjusted EBITDA for the thirteen weeks ended September 24, 2025, was $17,418,000, compared to $15,452,000 for the same period in 2024, representing a 12.7% increase[37] - Restaurant contribution margin for the thirteen weeks ended September 24, 2025, was 18.3%, compared to 16.7% in the same period of 2024, showing an improvement of 1.6 percentage points[41] Debt and Cash Position - As of September 24, 2025, the company's outstanding debt was $61.0 million, with $10.9 million in cash and cash equivalents[9] - Total debt decreased to $61.00 million from $71.00 million, reflecting a reduction of 14.1%[34] - Cash and cash equivalents as of September 24, 2025, were $10.87 million, significantly higher than $2.48 million as of December 25, 2024[34] Future Plans and Expansion - The company plans to open at least ten new system-wide restaurants in 2025[11] - Capital spending is expected to be between $28.0 million and $30.0 million for the remainder of 2025[11] Challenges and Risks - Forward-looking statements indicate potential risks including competition, economic conditions, and supply chain challenges[26][27] - The company faces challenges related to labor costs and regulatory compliance impacting its operations[28] - Risks include potential liabilities from environmental laws and the impact of government regulations[28] Company Overview - El Pollo Loco operates over 495 company-owned and franchised restaurants across seven U.S. states and has eight licensed locations in the Philippines[25] - The company emphasizes inclusivity with a workforce of over 4,000 employees[25] - The company aims to expand its digital business, delivery orders, and catering services[27] - El Pollo Loco's financial performance is subject to fluctuations due to seasonality and economic factors[28] - There is a focus on achieving social and environmental sustainability goals[28] - The company has a commitment to transparency regarding its financial condition and operational results[30] - Non-GAAP financial measures such as System-wide sales and Adjusted EBITDA are used to evaluate operational performance[30][31]

Core Insights - El Pollo Loco Holdings, Inc. reported its financial results for the third quarter ended September 24, 2025, highlighting both challenges and growth opportunities within the business [1][4]. Financial Performance - Company-operated restaurant revenue decreased to $100.7 million, down from $101.2 million in the same quarter of 2024, primarily due to a 1.1% decline in comparable restaurant revenue [5]. - Franchise revenue increased by 13.5% to $12.9 million, driven by new franchise openings and IT pass-through revenue related to a new Point of Sale system [6]. - Total revenue for the quarter was $121.5 million, compared to $120.4 million in the prior year [8]. - Net income rose to $7.4 million, or $0.25 per diluted share, compared to $6.2 million, or $0.21 per diluted share, in the same quarter of 2024 [10]. Operational Highlights - The company opened its 500th restaurant and plans to nearly double unit openings in the next year [4]. - Comparable restaurant sales decreased by 0.8%, with a 1.3% decline in average check size, partially offset by a 0.1% increase in transactions [5][8]. - Restaurant contribution increased to $18.5 million, representing 18.3% of company-operated restaurant revenue, up from 16.7% in the prior year [7]. Cost Management - General and administrative expenses rose to $12.3 million, primarily due to increases in stock compensation and legal fees related to shareholder activism [8][9]. - The company achieved margin expansion at both the restaurant and corporate levels through operational efficiencies and higher menu prices [4]. Debt and Cash Position - As of September 24, 2025, the company had an outstanding debt balance of $61.0 million and $10.9 million in cash and cash equivalents [11]. - Subsequent to the quarter-end, an additional $6.0 million was paid down on its revolving credit facility, reducing outstanding borrowings to $55.0 million [12]. Future Outlook - The company anticipates capital spending between $28.0 million and $30.0 million for the remainder of 2025, with expectations to open at least ten new restaurants [16].

Core Viewpoint - El Pollo Loco Holdings, Inc. will host a conference call to discuss its third quarter 2025 financial results on October 30, 2025, at 4:30 PM Eastern Time, led by CEO Liz Williams and CFO Ira Fils [1] Group 1: Conference Call Details - The conference call can be accessed live by dialing 201-493-6780, with a replay available until November 13, 2025, using the passcode 13755803 [2] - The call will also be webcast live on the company's corporate website, with an archive available shortly after the call [3] Group 2: Company Overview - El Pollo Loco is a leading fire-grilled chicken restaurant in the U.S., known for its flavorful and healthier offerings, with a menu featuring innovative meals made daily using quality ingredients [4] - The company operates approximately 500 company-owned and franchised restaurants across seven U.S. states and has eight licensed locations in the Philippines [4]

Core Insights - El Pollo Loco has opened its 500th restaurant, marking a significant milestone in the company's growth and expansion during its 50th anniversary year [1][2] - The new location in Colorado Springs is part of a broader strategy to expand outside California, with 10 new openings planned for 2025 [2][3] - The company is experiencing strong interest from franchisees, indicating confidence in its brand and growth potential [3] Expansion and Growth - The opening of the 500th restaurant reflects El Pollo Loco's evolution from a regional favorite to a brand with national growth momentum [2] - The company has a robust development pipeline, with additional restaurants under construction in cities like El Paso, Dallas, Albuquerque, and the Greater Seattle area [3] - El Pollo Loco aims to further expand its U.S. footprint in 2025 and beyond, with a focus on both current and emerging markets [7] Marketing and Brand Strategy - The brand launched the Let's Get Loco™ manifesto video to celebrate its 50th anniversary, emphasizing its commitment to fire-grilled chicken and bold flavors [4] - Menu innovations include new offerings such as Mango Habanero Chicken and expanded quesadilla options, aimed at enhancing customer appeal [5] - El Pollo Loco has engaged in cultural activations by partnering with athletes to introduce its products to new audiences [6] Company Overview - El Pollo Loco is recognized as the leading fire-grilled chicken restaurant in the U.S., known for its flavorful and healthier offerings [8] - The company operates over 500 locations across several states and has expanded internationally with licensed locations in the Philippines [9]

Core Insights - El Pollo Loco has launched two new Double Chicken Burrito Bowls, the Queso Crunch Burrito Bowl and the Street Corn Burrito Bowl, aimed at providing hearty and satisfying meal options [2][9] - The new offerings emphasize bold flavors and generous portions, featuring the brand's signature fire-grilled chicken and quality ingredients [1][3] Product Details - The Queso Crunch Burrito Bowl includes a double portion of fire-grilled chicken, pinto beans, seasoned rice, queso blanco, Jack cheese, guacamole, cilantro, and salsa, with prices starting at $11.79 for a la carte and $14.59 for a combo [8] - The Street Corn Burrito Bowl features similar ingredients but adds corn, red peppers, creamy chipotle sauce, and cotija cheese, with the same pricing structure as the Queso Crunch Bowl [8] Marketing Strategy - The Chief Marketing Officer stated that the new bowls are designed to be craveable and distinct from typical burrito bowls, reinforcing the brand's commitment to quality and flavor [3] - In addition to the burrito bowls, El Pollo Loco is introducing the Fam Feast, a meal deal starting at $29.99, designed for sharing and featuring eight pieces of chicken and large sides [3] Company Background - El Pollo Loco is recognized as the leading fire-grilled chicken restaurant in the U.S., with over 500 locations and a commitment to quality and healthier meal options [5] - The company has been acknowledged for its innovative menu and inclusive workplace culture, reflecting its dedication to community and employee engagement [5]