LOCO Filings — El Pollo Loco Holdings, Inc. - FilingSpy
LOCO
El Pollo Loco Holdings, Inc.
A chain of fast-casual chicken restaurants specializing in citrus-marinated, fire-grilled chicken served in bone-in meals and Mexican-inspired burritos, bowls, and tostadas, found mostly in California and several other states. It began in 1975 when Pancho Ochoa opened a ten-table roadside stand in Guasave, Mexico, using a marinade recipe created by his wife, Flérida; he brought the brand to Los Angeles in 1980. The Spanish name translates to "the crazy chicken."
Operating income rose 65% to $18.7M as a $6.3M legal settlement cut G&A expenses in half.
A one-time legal settlement reshaped the quarter. rose 3.0% to $129.6M and reached $0.43, but the $6.3M settlement gain accounted for most of the 80% increase. The underlying restaurant business improved modestly, while the cash windfall accelerated debt paydown.
Key takeaways
rose 80.2% to $12.8M, driven primarily by a $6.3M legal settlement received that reduced general and administrative expenses by 47.9% to $7.1M.
Total grew 3.0% to $129.6M, with company-operated comparable restaurant sales up 3.0% on a higher average check that was partly offset by lower transactions.
Restaurant contribution margin improved as labor and occupancy cost offset higher food and paper costs, with company restaurant expenses falling to 80.6% of company-operated from 80.9% a year ago.
Section summaries
Management's Discussion and Analysis
El Pollo Loco Q2 FY2026 net income rose 80% to $12.8M on 3.9% system-wide comparable sales growth and a $6.3M legal settlement gain.
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Total grew 3.0% to $129.6M, driven by a 3.0% increase in company-operated from higher average check, partially offset by lower transactions.
rose 124.4% to $31.7M, boosted by the higher and a $10.3M increase in other accrued liabilities, while reached $23.3M.
The company paid down $26.0M on its during the first half of the year, reducing to $30.0M from $69.0M a year earlier, and ended the quarter with $13.3M in cash.
What changed
The Q1 FY2026 watch item on transaction count showed the decline continuing: company-operated transactions fell again in Q2 after a 0.3% drop in Q1, failing to stabilize after the brief Q3 FY2025 inflection.
Restaurant contribution margin, flagged after reaching 19.2% in Q1, did not sustain that level as food and paper costs rose, though labor and occupancy kept the overall expense ratio slightly improved.
General and administrative expenses, which rose 13.6% in Q1 on ERP and relocation costs, swung to a 47.9% decline in Q2 solely because of the $6.3M legal settlement; underlying G&A costs excluding this item were not disclosed.
Franchise growth remained strong, but the filing did not break out any one-time IT pass-throughs as seen in FY2025, suggesting the Q2 increase was organic from refranchised stores and new openings.
What to watch
Restaurant contribution margin in Q3 FY2026 after the Q2 decline from the 19.2% Q1 peak, to see if food and paper cost pressures persist or if pricing and efficiency can restore the higher level.
Company-operated transaction count in Q3 FY2026 to see whether the traffic decline stabilizes or widens further after two consecutive quarters of erosion.
General and administrative expense run-rate in Q3 FY2026, excluding the one-time legal settlement, to gauge the underlying cost base after ERP implementation and office relocation.
and balance after the $26.0M paydown, with only $30.0M drawn and $13.3M in cash, to see if the company continues to prioritize debt reduction or shifts capital to buybacks or growth.
Company restaurant expenses as a percentage of company-operated improved to 80.6% from 80.9%, as labor and occupancy cost offset higher food and paper costs.
General and administrative expenses fell 47.9% to $7.1M, primarily due to a $6.3M legal settlement received, net of legal expenses, and lower shareholder activism costs.
increased 80.2% to $12.8M, benefiting from the legal settlement, lower , and improved operating margins.
rose to $44.7M from $18.9M, driven by higher and favorable changes in , including a $10.3M increase in other accrued liabilities.
The company opened 2 new company-operated restaurants and franchisees opened 6, ending the quarter with 511 system-wide locations.
Quantitative and Qualitative Disclosures About Market Risk
Interest-rate risk from variable-rate debt is quantified; commodity and inflation risks are managed through pricing and purchasing but not financial hedges.
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A 1.0% rise in would increase annualized by $0.3 million on the $30.0 million drawn under the 2022 .
The 2022 carries a -based rate plus a margin of 1.25%–2.25%, with the current applicable margin at 1.25%.
During the first half of FY2026, the company borrowed $5.0 million and paid down $26.0 million on the , ending with $30.0 million outstanding.
Inflation in food, labor, and other costs has been substantially offset by menu-price increases and productivity, but future offsets are not assured.
The company does not use financial instruments to hedge commodity price risk, relying instead on purchasing commitments and menu-price adjustments.
See discussion under Note 8, “Commitments and Contingencies,” to the Condensed Consolidated Financial Statements included in Part I, Item 1, Financial Statements, of this Quarterly Report on Form 10-Q, which is incorporated herein by reference.
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See discussion under Note 8, “Commitments and Contingencies,” to the Condensed Consolidated Financial Statements included in Part I, Item 1, Financial Statements, of this Quarterly Report on Form 10-Q, which is incorporated herein by reference.
There have been no material changes from the risk factors previously disclosed in Part I, Item 1A, Risk Factors, of our Annual Report on Form 10-K for the year ended December 31, 2025.
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There have been no material changes from the risk factors previously disclosed in Part I, Item 1A, Risk Factors, of our Annual Report on Form 10-K for the year ended December 31, 2025.