El Pollo Loco Holdings, Inc. - 10-Q Summary (Q2 2026)
Business Context and Reporting Period
This report covers the quarterly period ended July 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 511 locations (175 company-operated and 336 franchised) across ten U.S. states, with eight licensed restaurants in the Philippines.
Key Financial Metrics
| Metric | 13 Weeks Ended July 1, 2026 | 26 Weeks Ended July 1, 2026 |
|---|---|---|
| Total Revenue | $129.6 million | $255.8 million |
| Net Income | $12.8 million | $21.0 million |
| Diluted EPS | $0.43 | $0.70 |
| Operating Cash Flow (YTD) | $44.7 million | |
| Cash and Equivalents | $13.3 million (as of July 1, 2026) | |
| Debt (Revolver Outstanding) | $30.0 million | |
| Restaurant Contribution Margin | 19.5% | 19.4% |
Material Changes vs. Prior Period
- Revenue Growth: Total revenue increased 3.0% quarter-over-quarter (QoQ) and 4.4% year-to-date (YTD). Company-operated revenue rose 3.7% QoQ, driven by a 3.0% increase in comparable restaurant sales.
- Profitability Surge: Net income increased 80.2% QoQ and 66.5% YTD. This significant improvement was primarily driven by a $6.3 million legal settlement received in the current period, which reduced General and Administrative (G&A) expenses by 47.9% QoQ.
- Comparable Sales: System-wide comparable restaurant sales increased 3.9% QoQ and 4.9% YTD. Company-operated same-store sales grew 3.0% QoQ, while franchise-operated sales grew 4.5% QoQ.
- Cost Management: Food and paper costs as a percentage of company-operated revenue increased slightly to 25.4% (from 24.5% prior year) due to commodity costs and menu mix shifts. Labor costs as a percentage of revenue decreased to 29.9% (from 30.8%) due to leverage on higher sales and reduced insurance costs.
Outlook, Risks, and Unusual Items
- Unusual Items: The primary driver of improved earnings was a one-time legal settlement of $6.3 million (net of expenses). Additionally, the company recorded a $0.2 million non-cash impairment charge related to a restaurant in Nevada.
- Debt and Liquidity: The company maintains a $150 million revolving credit facility. As of July 1, 2026, $30 million was outstanding with $109.7 million in availability. Subsequent to quarter-end, the company paid down an additional $4 million and amended the credit facility on August 4, 2026, extending the maturity to August 4, 2031.
- Share Repurchases: A new $40 million share repurchase program was authorized on May 28, 2026. No shares were repurchased under this program during the quarter; only 19,878 shares were withheld for employee taxes.
- Risks: Management highlights ongoing inflationary pressures on food and labor costs, potential impacts from new U.S. tariffs on imports (effective July 24, 2026), and California legislation regarding wages and packaging. The company remains heavily concentrated in the Greater Los Angeles area, which generated approximately 71.5% of total revenue.
Investor Verification Checklist
- Verify the sustainability of net income growth excluding the $6.3 million legal settlement.
- Monitor the impact of new tariffs (effective July 2026) on food and paper costs, particularly for imported goods.
- Review the execution of the new $40 million share repurchase program and its impact on liquidity.
- Assess the performance of new market expansions (Colorado, Texas, Arizona) versus the core Los Angeles market.
- Confirm compliance with the lease-adjusted consolidated leverage ratio covenant (max 4.25x) following the debt amendment.