El Pollo Loco Holdings, Inc. Q2 FY2025 earnings call

• Brand relaunch and menu innovations: Introduced Fresca Wrap, Salads, and premium chicken quesadillas; new "Let's get Loco" brand campaign launched in May. - Digital-first pillar: Improved app experience, increased value proposition for Loco rewards members, digital business grew to 25.5% of sales. - Operational excellence: Focus on standards, customer service, and recovery; used SMG data to track feedback. - Unit growth: Opened 5 new franchise units in last 12 months, plan to open 10-11 system-wide restaurants in 2025, 500th restaurant to open in 2025, remodeling 55-65 system-wide restaurants with positive feedback.

For the second quarter ended June 25, 2025, total revenue was $125.8 million compared to $122.2 million in the second quarter of 2024. Company-operated restaurant revenue increased 2% to $104.3 million from $102.3 million in the same period last year, driven by a 1.2% increase in company-operated comparable restaurant sales and additional sales from new restaurants. Franchise revenue increased 14.8% to $13.4 million, driven by IT pass-through revenue from POS system rollout and new franchise openings, but offset by a 1.1% decrease in comparable restaurant sales. Food and paper costs as a percentage of company restaurant sales decreased 70 basis points year-over-year to 24.4%. Labor and related expenses as a percentage of company restaurant sales decreased 130 basis points year-over-year to 30.8%. Occupancy and other operating expenses as a percentage of company restaurant sales increased 150 basis points year-over-year to 25.6%. Restaurant contribution margin for the second quarter improved to 19.1% compared to 18.6% in the year ago period.

For 2025: Open 10-11 system-wide restaurants (9-10 franchise, up to 1 company-owned); capital spending $31-34 million; G&A expenses $48-51 million; estimated effective income tax rate 29%-29.5% before discrete items.

• Macroeconomic environment and consumer behavior posing challenges. - Commodity and wage inflation risks. - Local permitting issues affecting remodeling projects delaying some initiatives.

Q: Could you provide more detail on the challenging macro environment and how initiatives counteract it?

A: Innovation like Fresca salads/wraps, targeted value offers (app-only, delivery, coupons) help; consumer headwinds across income groups, choppy industry with payday effects.

Q: Explain franchise traffic and check dynamics.

A: Franchise traffic up 1.5% in Q2, but check drag due to lapped CA minimum wage increase last year, franchisees taking less price, some family meal discounts.

Q: Discuss unit growth confidence and franchisee motivation.

A: Healthy average unit volumes ($2.2 million), improved unit profitability/margins, cost savings in restaurant builds, inspiring franchise partners to grow with signed leases/under development sites.

Q: Talk about same-store sales trends and Q3 outlook.

A: Sequential improvement in Q2, choppy July, confident in back half due to brand relaunch, innovation, and easier comps.

Q: Details on new menu items' transaction lift and average ticket.

A: Increased frequency from existing customers, new customers attracted by innovation, hard to tease apart drivers but seeing positive impact.

Q: Pricing, margins, and back half confidence.

A: Moving up price increases earlier, Q3 pricing ~2.5%, Q4 ~2.7%, margin target 17.25%-17.75% still realistic with visibility on commodities and limited international exposure.