El Pollo Loco Holdings, Inc. - Q1 2026 Filing Summary
Business Context and Reporting Period
This Form 10-Q covers the thirteen-week period ended April 1, 2026. El Pollo Loco Holdings, Inc. operates and franchises quick-service restaurants specializing in fire-grilled citrus-marinated chicken. As of the period end, the system comprised 505 locations (176 company-operated and 329 franchised) across nine U.S. states, with an additional eight licensed restaurants in the Philippines.
Key Financial Metrics
| Metric | Q1 2026 | Q1 2025 |
|---|---|---|
| Total Revenue | $126.2 million | $119.2 million |
| Net Income | $8.2 million | $5.5 million |
| Diluted EPS | $0.27 | $0.19 |
| Operating Cash Flow | $13.0 million | $4.7 million |
| Adjusted EBITDA | $18.2 million | $13.9 million |
| Restaurant Contribution Margin | 19.2% | 16.0% |
| Cash and Equivalents | $3.9 million | $4.3 million |
| Debt (Revolver Outstanding) | $44.0 million | $51.0 million |
Material Changes vs. Prior Period
- Revenue Growth: Total revenue increased 5.9% year-over-year, driven by a 7.7% increase in company-operated restaurant revenue. This was supported by a 5.4% increase in comparable restaurant sales (driven by a 5.7% increase in average check size).
- Profitability Expansion: Net income rose 48.8% to $8.2 million. Operating income increased 36.2% to $12.2 million, reflecting improved margins.
- Expense Management: Labor and related expenses decreased 1.1% despite revenue growth, aided by improved efficiencies and lower insurance claims. Food and paper costs as a percentage of revenue improved to 24.9% from 25.2%.
- Franchise Revenue: Franchise revenue declined 8.8% primarily due to the absence of a $1.9 million one-time IT pass-through revenue item recorded in the prior year.
- Capital Deployment: Investing cash outflows increased significantly to $10.2 million (from $3.4 million) due to accelerated restaurant remodeling and new development.
Outlook, Risks, and Management Commentary
- Guidance & Strategy: Management continues to execute five key strategies: Brand That Wins, Hospitality Mindset, Digital First, Winning Unit Economics, and National Expansion. The company plans 25-35 company-operated and 30-40 franchise-operated remodels in fiscal 2026.
- Liquidity: The company maintains $95.7 million in borrowing availability under its $150 million revolver. Management believes cash flow from operations and revolver availability are sufficient for the next 12 months.
- Risks:
- Cost Pressures: Ongoing inflationary pressures on food, labor, and construction costs remain a risk, though partially offset by menu price increases.
- Geographic Concentration: Approximately 71.9% of total revenue is generated in the Greater Los Angeles area.
- Trade Policy: Potential tariffs on imported goods (produce, packaging) could adversely impact costs.
- Unusual Items: General and administrative expenses increased 13.6% due to legal fees, corporate office relocation costs, and ERP implementation, partially offset by a legal settlement received in the prior year.
Investor Verification Checklist
- Verify the sustainability of the 5.4% comparable restaurant sales growth given the reliance on check size increases rather than transaction volume.
- Monitor the impact of the new ERP system implementation and corporate office relocation on future G&A expenses.
- Assess the company's ability to maintain labor cost efficiencies amidst California's rising minimum wage legislation.
- Review the $10.2 million capital expenditure run rate to ensure it aligns with long-term remodeling and expansion plans without straining liquidity.
- Confirm compliance with the 2022 Credit Agreement covenants, specifically the lease-adjusted consolidated leverage ratio, given the high level of operating lease obligations ($187.5 million).