El Pollo Loco Earnings: Menu Innovation and Margin Gains Offset Choppy Sales
- Hardik Shah
- Jul 31
- 3 min read
TLDR
🔹 Revenue Strength:Q2 revenue rose 3% to $125.8M; company-operated same-store sales grew 1.2%, while system-wide comps dipped 0.3%.
🔹 Margin Trends:Restaurant contribution margin expanded to 19.1%, up from 18.6% YoY, driven by pricing, operational efficiencies, and moderated inflation.
🔹 Forward Outlook:Guidance affirmed despite choppy consumer dynamics; brand relaunch, digital upgrades, and new quesadillas expected to drive H2 momentum.
Business Overview
El Pollo Loco (Nasdaq: LOCO) is the nation's leading fire-grilled chicken restaurant chain, operating over 495 locations across seven U.S. states. Known for fresh, made-daily offerings with a Mexican twist, LOCO serves both company-owned and franchised restaurants. The brand leverages omnichannel reach through in-store, drive-thru, digital ordering, and third-party delivery channels, with digital sales now accounting for 25.5% of revenue.
El Pollo Loco Earnings Q2'25
Revenue:Total revenue reached $125.8M (+3% YoY). Company-operated restaurant revenue grew 2% to $104.3M, driven by a 1.5% increase in average check, partially offset by a slight traffic decline of 0.3%. Franchise revenue grew 14.8% to $13.4M, aided by POS system rollouts and five new units.
Margins:Restaurant contribution margin improved 50bps to 19.1%, aided by menu pricing, 40bps of commodity deflation, and labor productivity improvements. Labor costs fell 130bps YoY to 30.8% of sales.
Profitability:Adjusted net income was $8.2M ($0.28/share) vs. $7.8M last year. GAAP net income was $7.1M. Adjusted EBITDA grew 7% to $18.5M.
Forward Guidance
Management Outlook
Reiterated 2025 guidance for:
10–11 system-wide openings (mostly franchised)
CapEx of $31–34M
G&A expenses of $48–51M
Effective tax rate of ~29–29.5%
Risks & Opportunities
Cautiously optimistic on Q3 and Q4 comps as momentum from quesadilla and bowl launches builds.
Management acknowledged ongoing macro pressure from value-conscious consumer behavior and choppy traffic patterns.
Operational Performance
Menu Innovation:Introduced Fresca Salads & Wraps and new Premium Quesadillas (Creamy Chipotle, Salsa Verde) leveraging its core fire-grilled chicken. Quesadillas launched at $9.99 combo and are outperforming test expectations.
Brand Relaunch:The "Let’s Get Loco" campaign highlights 50 years of fire-grilling heritage, supported by athlete partnerships and mobile food trucks.
Digital Acceleration:Digital sales climbed to 25.5% of total sales, up from 17.1% YoY. App refreshes and loyalty programs (e.g., Loco Friday Drops) boosted reward member frequency by 5.6%.
Labor and Tech Efficiency:Kitchen tech and new routines improved labor utilization, helping preserve margins even amid price moderation and increased discounting.
Market Insights
Competitive Environment:The chain avoided across-the-board discounts, favoring targeted offers via app, coupons, and delivery channels—appealing to a deal-seeking consumer base without eroding base pricing.
Franchise Dynamics:While franchise same-store sales fell 1.1%, traffic rose 1.5%, driven by local promotional experimentation. Franchises are optimistic, with many sites under lease or development for 2026.
Consumer Behavior & Sentiment
Value perception remains paramount. Consumers showed willingness to engage when offered targeted deals.
Notable variation in activity between pay cycles, underscoring economic sensitivity even across income cohorts.
“Consumers want to enjoy our products, but they're limited on what they can spend. Value is even more attractive in that dynamic.”— Liz Williams, CEO
Strategic Initiatives
Remodeling:Targeting 55–65 store remodels in 2025, with 20 completed through Q2. New designs are driving mid-single-digit sales lifts at company stores.
Expansion:Expecting 10+ new units in 2025 and potentially double that pace in 2026. Expansion focused outside of California (AZ, CO, TX, WA, NM, ID).
Innovation Pipeline:Upcoming launches include street corn burrito bowls, cold foam beverages, chicken tenders, and reimagined chicken sandwiches.
Capital Allocation
Debt:Reduced revolver balance to $68M post-Q2.
Buybacks:Repurchased ~3,500 shares for ~$100K; program now terminated.
The Bottom Line
El Pollo Loco’s Q2 showed resilience amid a tough consumer backdrop. While top-line growth remains modest, the company is steadily rebuilding traffic and expanding margins through innovation, branding, and operational discipline.
Investors should watch for:
Sustained traction of new menu items
Acceleration in digital and off-premise
Execution on remodels and new unit openings outside California
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