El Pollo Loco Charts Growth Path Amid Cost Pressures
El Pollo LoCo Holdings ((LOCO)) has held its Q4 earnings call. Read on for the main highlights of the call.
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El Pollo Loco’s latest earnings call struck a cautiously upbeat tone, with management highlighting solid revenue growth, healthier restaurant-level margins, and strong digital and loyalty trends. At the same time, executives acknowledged softer traffic, rising occupancy and G&A costs, and inflationary headwinds, framing the next few years as a balance between disciplined expansion and necessary investment in scale.
Revenue Growth and Sales Drivers
El Pollo Loco posted Q4 revenue of $123.5 million, up about 10% from $114.3 million a year earlier, underscoring clear top-line momentum. Company-operated restaurant revenue rose 7.1% to $102.4 million, supported by a modest 0.4% comp gain and an extra operating week that provided an additional boost to reported results.
Restaurant Margins and EBITDA Trajectory
Restaurant contribution margin improved to 17.5% in Q4 from 16.7%, reflecting operational efficiencies and better cost control at the store level. Adjusted EBITDA climbed to $16.9 million in 2025 from $14.3 million in 2024, and management is targeting 18.0%–18.5% restaurant margins and $66–$68 million of adjusted EBITDA in 2026 as the system scales.
Profitability and EPS Expansion
GAAP net income increased to $6.5 million, or $0.22 per diluted share, versus $6.0 million, or $0.20, in the prior-year quarter, demonstrating steady bottom-line progress. On an adjusted basis, net income rose to $7.3 million, or $0.25 per share, from $5.9 million, driven by higher margins and ongoing operational improvements across the portfolio.
Menu Innovation Fueling Demand
Management credited several menu launches with driving excitement and incremental sales, notably the Double Chicken Street Corn and Queso Crunch Burrito Bowl, which outperformed expectations and are now permanent items. Broader innovation, including FAM Feasts, Double Pollo Salad and the early success of Baja Double Tostadas, sets the stage for the upcoming Loco Tenders launch later this spring.
Digital Channels and Loyalty Momentum
Digital engagement remained a bright spot, with loyalty revenue and participation growing more than 20% year over year as guests increasingly engage via the app and online channels. Delivery sales rose 12% in 2025, while app-focused events like Twelve Days of Pollo helped attract new users and deepen frequency among existing loyalty members.
Unit Growth and Enhanced New-Unit Economics
The chain opened nine new restaurants in 2025, including its 500th unit, marking its strongest systemwide growth since 2022 and validating its development pipeline. New restaurants opened since 2024 are averaging more than $2 million in annualized sales, with seven of nine recent openings leveraging second-generation sites that carry notably lower build costs in the low- to mid-$1 million range.
Operational and Guest-Experience Gains
Customer satisfaction metrics have turned into a competitive advantage, with OSAT scores now outpacing broader QSR benchmarks and improving sequentially across accuracy, quality, friendliness, cleanliness and speed. Labor productivity has also improved as the company sharpened scheduling, deployed new technology and rolled out a cloud-based POS platform across all locations to streamline operations.
Remodel Program Driving Incremental Sales
El Pollo Loco remodeled 69 restaurants in 2025, including 17 company-owned and 52 franchised units, and is seeing consistent mid-single-digit sales lifts in company locations following upgrades. The brand plans an even busier 2026, with 25–35 company remodels and 30–40 franchise remodels slated to further refresh the system and sustain guest interest.
Traffic Softness and Check-Driven Comps
Despite revenue growth, underlying traffic remains a watch point, as company-operated transactions declined 2.3% in Q4 while comps eked out a 0.4% gain on the back of a 2.7% higher average check. For the full year 2025, systemwide transactions slipped 0.6%, signaling that pricing and mix, rather than traffic growth, are carrying much of the sales momentum.
Rising Operating and G&A Costs
Cost pressures are evident, with occupancy and other operating expenses rising 80 basis points to 26.6% of company restaurant sales, driven by higher utilities, software maintenance, rent and liability insurance. G&A expenses climbed to $13.1 million from $11.1 million, reaching 10.7% of sales, as the company absorbed additional labor, severance tied to leadership changes and other overhead.
One-Off Benefits in 2025 Results
Management cautioned that some 2025 metrics benefit from non-recurring factors, including an extra operating week that added roughly $0.77 million to adjusted EBITDA. The year also included about $2.4 million of revenue from terminated franchise development agreements, both of which inflate year-over-year comparisons and should be adjusted for by investors.
Balance Sheet, Leverage and Tax Headwinds
At year-end, El Pollo Loco held $6.2 million in cash against $51.0 million of debt, later trimmed to $48.0 million, highlighting a balance sheet with modest liquidity and leverage that bears watching as capital spending ramps. The effective tax rate rose to 30.0% from 23.5% in the prior-year quarter, which weighed on after-tax earnings and will remain a consideration in modeling future EPS.
Inflation and Planned G&A Investment
Looking ahead, the company anticipates commodity inflation of roughly 1%–2% and wage inflation of 2%–3% at company-owned stores in 2026, pressures that could cap near-term margin expansion despite operational gains. Executives are also intentionally lifting G&A to fund technology, development support and a new CTO hire, accepting elevated overhead through 2026 before expecting better leverage in 2027–2028.
Guidance and Multi-Year Outlook
For 2026, management guided to 2%–3% systemwide comp growth, 18–20 new restaurants, $37–$40 million in capex and G&A of $52–$54 million, excluding one-time items but including stock-based compensation. They also project adjusted EBITDA of $66–$68 million, restaurant-level margins around 18.0%–18.5%, a roughly 29% tax rate, 55–75 remodels and multi-year targets of low-single-digit comp growth, mid-single-digit unit expansion and high-single-digit EBITDA growth into 2027–28.
El Pollo Loco’s earnings call painted a picture of a brand moving in the right direction operationally, with stronger margins, productive new units and a vibrant digital and menu engine offsetting soft traffic and rising costs. Investors will be watching whether management can sustain comp growth, execute an ambitious remodel and development plan and deliver on its 2026–2028 margin and EBITDA targets without overextending the balance sheet.
