El Pollo Loco Holdings, Inc. Q3 FY2025 earnings call

• Brand that wins through marketing and menu innovation: Accelerating menu innovation with new items like quesadilla combos, burrito bowls, and planned 2026 innovations including Double Pollo salads, flavor innovations, Loco Tenders, and barbecue chicken. Let's Get Loco brand campaign driving brand awareness.
• Hospitality mindset through operational excellence: Reinforcing standards, using tools/systems/training, leveraging data for customer feedback, with improved customer engagement metrics and Loco Love service model.
• Digital-first approach: Loyalty transactions up 28% YOY, digital business including kiosks growing to 27% of system sales, third-party delivery up 9% YOY, and kiosk rollout nearly complete with 50% of system having kiosks.
• Winning unit economics: Delivered 160 basis point year-over-year growth in restaurant-level operating profit margins to 18.3% in Q3, with full-year 2025 restaurant-level contribution margins expected at 17.5% to 17.75%.
• Driving new unit growth: Opened 500th restaurant, plan to open at least 10 system-wide restaurants in 2025, with strong pipeline for 2026, and completed 34 remodels in 2025 with plan to do at least 55, seeing mid-single-digit sales lift from remodels.

For the third quarter ended September 24, 2025, total revenue was $121.5 million compared to $120.4 million in the third quarter of 2024. Company-operated restaurant revenue decreased 0.5% to $100.7 million from $101.2 million in the same period last year, driven by a 1.1% decrease in company-operated comparable restaurant sales, partially offset by additional sales from new openings. Franchise revenue increased 13.5% to $12.9 million, driven by IT pass-through revenue, new franchise-operated restaurants, and royalty rate true-up, but offset by a 0.6% decrease in comparable restaurant sales. System-wide comparable store sales for the fourth quarter to date through October 22, 2025 increased 2.2%, with company-operated restaurants up 1.5% and franchise restaurants up 2.5%. Food and paper costs as a percentage of company restaurant sales decreased 40 basis points to 24.7% due to menu pricing and commodity deflation. Labor and related expenses as a percentage decreased about 200 basis points to 30.4% due to operating efficiencies. Occupancy and other operating expenses as a percentage increased 70 basis points. Restaurant contribution margin improved to 18.3% in Q3, with Q4 expected to be in the 16.75% to 17.25% range, bringing full-year 2025 margin to 17.5% to 17.75%.

For 2025: Opening of at least 10 system-wide restaurants; capital spending of between $28 million to $30 million; G&A expenses of $47.5 million to $49.5 million, excluding onetime charges; and an estimated effective income tax rate of 29% to 29.25% before discrete items.

Forward-looking statements are not guarantees of future performance and are subject to numerous risks and uncertainties that could cause actual results to differ materially from expectations. Refer to recent SEC filings for detailed discussion of risks impacting future operating results and financial condition.

Q: How does El Pollo Loco perform relative to peers, especially in California market?

A: In California market, El Pollo Loco is outperforming peers on both sales and transactions, attributed to value positioning, innovation, and operational enhancements.

Q: What are the tactics near term to offset incremental pressure and confidence in market share gains?

A: Over past year, made adjustments in menu value, positioning, and operations. Consumer softness seen last year, but consumer isn't worse than all year, and as of October, sales momentum is positive with easier lap compared to others.

Q: How much left in tank on efficiencies for 2026?

A: Believe there is still opportunity to gain efficiencies on labor side and through input side from COGS, aiming to reach 18% to 20% target.

Q: Level set on mainstream menu items in test like tenders and sandwiches?

A: Loco Tenders and sandwich in operations testing in local markets, about to go into broader market testing, potentially ready for next year, with barbecue chicken planned for summer and black beans to be tested.

Q: Where is El Pollo Loco on chicken contracting for next year?

A: In good shape, awarding contracts this week, with some pressure in dark meat chicken but offset in other areas of chicken buy.

Q: Margin outlook in Q4 and pressure on food costs?

A: Q4 restaurant-level margin expected in 16.75% to 17.25% range, with some pressure on food costs due to sales volume differences between quarters.

Q: How marketing efforts are playing out, impact on average check?

A: Let's Get Loco campaign driving awareness, new menu items like quesadilla (entry-level) and burrito bowl (higher price point) helping with transactions and check protection, combining to be powerful.

Q: How is quesadilla mixing now versus introduction?

A: Quesadilla has dropped a couple of percentage points from peak but still an incremental product on menu, solving entry-level price point critical in economic environment.

Q: Impact of immigration policies on traffic?

A: Immigration policies still persist, more noticeable in lunch than dinner, though hard to quantify.