El Pollo Loco Holdings, Inc. Q4 FY2024 earnings call

• 2024 was a foundational year for brand transformation, focusing on modernizing the brand, driving operational consistency, and enhancing customer experience. Launched Mango Habanero, fresca wraps/salads, and plans for quesadilla launch. - Remodel program: Plan to touch 60-80 restaurants in 2025 with a 2-tier approach (low-cost 5-year refresh and extensive 10-year remodel). - Unit development: Plan to open 1-2 company-owned and 8-9 franchise restaurants in 2025, with majority of new openings outside California. - Cost savings: Substantially improved restaurant contribution margins through cost savings and asset modernization, with focus on labor efficiency (e.g., kiosks, holding cabinets for chicken) and equipment upgrades.

For the fourth quarter ended December 25, 2024, total revenue was $114.3 million, compared to $112.2 million in the prior year. Company-operated restaurant revenue increased 1.8% to $95.6 million, driven by a 1.6% increase in company-operated comparable restaurant sales (with a 9% increase in average check size and ~6.8% decrease in transactions). Franchise revenue increased 2.5% to $11.2 million, driven by 4 new franchise restaurant openings and 1 refranchised restaurant, partially offset by a 0.1% comparable restaurant sales decrease. The restaurant contribution margin for the fourth quarter was 16.7% compared to 15.8% in the prior year. For full-year 2025, restaurant contribution margin is expected to be in the 17.25% to 17.75% range.

• 2025 opening: 1 to 2 company-owned restaurants and 8 to 9 franchise restaurants. - Capital spending: $30 million to $34 million. - G&A expenses: $48 million to $51 million, including ~$5 million in stock compensation expense. - Estimated effective income tax rate: 27.5% to 28.5%.

• Risks related to forward-looking statements, including uncertainties in growth opportunities, strategic initiatives, sales/margins, commodity/wage inflation, and remodel plans. - Potential deviations from expected performance due to various risks outlined in SEC filings.

Q: Congratulations on 2024 progress, thoughts on remodel lift?

A: Excited about remodel program, directionally positive but no specific lift number yet as dataset is limited. Consumer reaction to revised design is great.

Q: Franchisee pipeline update?

A: Franchise partner interest growing, meetings and franchise days trending up; many prior pipeline conversations reignited but no specific pipeline data released.

Q: Margin expansion confidence?

A: Confidence comes from cost of goods supply chain improvements (sourcing efficiency) and labor productivity efforts (equipment upgrades, labor deployment improvements).

Q: CapEx guidance?

A: Incremental CapEx is primarily for remodel program, around $400k per company-operated remodel for the ~40 company-operated remodels in 2025.

Q: Mango Habanero reception?

A: Driving trial across existing and new customers, mix shift back to bone-in chicken, and excitement from new news.

Q: Innovation frequency?

A: Continued flavor innovation planned, with balance between new news and operational consistency; testing multiple options for future innovations.