El Pollo Loco(LOCO) - 2026 FY - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company has achieved notable margin improvement, reaching approximately 17% restaurant-level margins and aiming for 18% [4] - The company plans to finish 2025 with margins in the high 17% range, with long-term targets of 18%-20% [24][32] Business Line Data and Key Metrics Changes - The company has refreshed its menu with new items such as burritos, burrito bowls, and salads, while also focusing on chicken on the bone [4] - New unit growth has been initiated, with 10 new units opened in 2025 and plans to double that in 2026 [35] Market Data and Key Metrics Changes - The company operates predominantly on the West Coast, facing unique market pressures but believes it is well-positioned due to its affordability and value proposition [6][7] - The loyalty program has seen growth, with users visiting approximately 6% more frequently due to targeted discounts [9] Company Strategy and Development Direction - The company is focused on a brand turnaround through marketing campaigns like "Let's Get Loco" and menu innovation [3] - Plans for 2026 include launching new products such as chicken tenders and expanding into new markets outside California [11][35] Management's Comments on Operating Environment and Future Outlook - The macro environment remains challenging, with consumers under pressure, but the company feels well-positioned to navigate these challenges [6][7] - Management is optimistic about future growth, citing improved unit economics and a strong pipeline for new restaurant openings [27][32] Other Important Information - The company has implemented various operational efficiencies, including a new labor scheduling system and in-store ordering kiosks, to improve productivity [20][21] - The company is also focusing on remodeling existing restaurants to drive sales uplift [38] Q&A Session Questions and Answers Question: What has been accomplished in the brand turnaround? - The company has launched the "Let's Get Loco" campaign, refreshed its menu, and improved its business model and margins [3][4] Question: How is the company positioned in the current macro environment? - The company acknowledges the challenging environment but believes it offers affordable options that provide good value compared to competitors [6][7] Question: What are the long-term targets for margins? - The company aims for 18%-20% store-level margins, with current margins in the high 17% range [24][32] Question: What is the approach to new unit growth? - The company plans to double new unit openings in 2026, focusing on both existing and new franchise partners [35] Question: How will cash flow be utilized? - The company intends to use cash for new store development, remodel programs, and operational efficiencies [38][39]