El Pollo Loco (LOCO) Q2 2026 Earnings Call Summary

1Key Financial Results and Metrics

Total Revenue: $129.6 million, up from $125.8 million in Q2 2025.

Company Operated Restaurant Revenue: Increased by 3.7% to $108.1 million.

System-wide Same Store Sales Growth: 3.9%, with a 4.2% increase in average check size but a 1.1% decrease in transactions.

Restaurant Level Margin: 19.5%, within the long-term target range of 18% to 20%.

GAAP Net Income: $12.8 million ($0.43 per diluted share), compared to $7.1 million ($0.24 per diluted share) in Q2 2025.

Adjusted EBITDA: $19.1 million, up from $18.5 million in the prior year.

Franchise Revenue: Decreased by 3.8% to $12.9 million due to IT pass-through revenue decline.

Cash and Cash Equivalents: $13.3 million, with $30 million in debt outstanding.

2Strategic Updates and Business Highlights

Menu Innovations: Successful launch of local tenders and loaded quesadillas, driving customer engagement and sales.

Digital Sales: Represented 28% of system sales, up 13% year-over-year, with loyalty members visiting three times more than non-members.

New Unit Growth: On track to open 18-20 new restaurants in 2026; opened 5 new franchise locations and 1 company location in Q2.

Operational Improvements: Continued enhancements in guest experience, reflected in improved satisfaction scores.

Technology Investments: Progress in modernizing capabilities, including AI tools and consumer feedback analysis.

3Forward Guidance and Outlook

System-wide Comparable Store Sales Growth: Increased guidance to 3.5% - 4.5% for the full year.

Adjusted EBITDA Guidance: Raised to $68 million - $70 million.

Capital Expenditures: Reduced guidance to $33 million - $37 million.

Expectations for Q3: Same-store sales growth projected to be in the 3.5% - 4.5% range.

4Bad News, Challenges, or Points of Concern

Franchise Revenue Decline: Decreased due to IT-related revenue drop, which could impact franchisee support.

Commodity Inflation: Food and paper costs increased by 90 basis points due to produce inflation, although some relief is expected.

Transaction Declines: System-wide transactions fell by 0.9%, indicating potential challenges in customer traffic.

Labor Costs: While labor as a percentage of sales decreased, wage inflation is expected to be between 1.5% - 2.5% for the year.

5Notable Q&A Insights

Franchise Performance: Newer markets are performing well, with franchisees exceeding expectations, particularly in Idaho.

National Expansion: There is interest in expanding beyond contiguous states, indicating potential for broader market penetration.

LTO Success: Local tenders drove significant trial and repeat business, with plans to explore making them a permanent menu item.

Supply Chain Vigilance: The company has ensured no impact from recent food safety issues affecting competitors, maintaining strong sourcing practices.

CapEx Timing: The reduction in capital spending is primarily due to timing of remodels and not indicative of project cancellations. Overall, El Pollo Loco demonstrated solid financial performance and strategic growth initiatives in Q2 2026, while also facing challenges related to commodity costs and transaction trends. The company remains optimistic about its future growth trajectory and operational improvements.