• Total Revenue: $114.3 million, up from $112.2 million in Q4 2023.
• Company Operated Restaurant Revenue: Increased 1.8% to $95.6 million.
• Comparable Restaurant Sales: Increased 1.6% for company-operated locations; franchise locations saw a 0.1% decrease.
• Average Check Size: Increased by 9%.
• Transactions: Decreased by approximately 6.8%.
• Franchise Revenue: Increased 2.5% to $11.2 million.
• Restaurant Contribution Margin: 16.7%, up from 15.8% in the prior year period.
• Food and Paper Costs: Decreased 180 basis points to 25.1% of company restaurant sales.
• Labor and Related Expenses: Increased 10 basis points to 32.4% of company restaurant sales.
• Net Income: GAAP net income of $6 million or $0.20 per diluted share, compared to $4.4 million or $0.14 per diluted share in the prior year.
• Adjusted Net Income: $5.9 million or $0.20 per diluted share, compared to $5.2 million or $0.16 per diluted share in the prior year.
• Store Count: Total of 498 domestic locations at year-end.
• Debt and Cash: $71 million of debt outstanding and $2.5 million in cash and cash equivalents.
• Share Repurchase: Approximately 104,000 shares repurchased for $1.3 million.

• Warning! GuruFocus has detected 5 Warning Signs with LOCO.

Release Date: March 06, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• El Pollo Loco Holdings Inc (NASDAQ:LOCO) reported a 1.8% increase in company-operated restaurant revenue, driven by a 1.6% increase in comparable restaurant sales.
• The company achieved a 190-basis point improvement in restaurant contribution margins year over year, reaching 17.4% for 2024.
• El Pollo Loco Holdings Inc (NASDAQ:LOCO) introduced new culinary innovations, such as mango habanero flavor, which have been well-received and are driving customer engagement.
• The company plans to open 10 new restaurants in 2025, with a focus on expanding outside of California, indicating growth potential.
• El Pollo Loco Holdings Inc (NASDAQ:LOCO) is implementing a brand transformation, including a new advertising campaign and restaurant remodels, to modernize its image and enhance customer experience.

Negative Points

• Despite revenue growth, El Pollo Loco Holdings Inc (NASDAQ:LOCO) experienced a 6.8% decrease in transactions, indicating potential challenges in customer footfall.
• Labor and related expenses increased slightly, with wage inflation in California impacting overall costs.
• The company faces ongoing commodity inflation, expected to be in the 1.5% to 2.5% range for 2025, which could pressure margins.
• El Pollo Loco Holdings Inc (NASDAQ:LOCO) has not yet provided specific data on the sales lift from its remodel program, creating uncertainty about the financial impact.
• The company's new restaurant prototype build costs are slightly higher than initially targeted, which may affect franchisee demand and unit economics.

Q & A Highlights

Q: Can you provide insights on the expected lift from the remodels and how it might impact same-store sales? A: Elizabeth Williams, CEO: We are excited about our remodel program and have seen positive returns historically. Although we don't have enough data from the recent remodels to provide specific numbers, the consumer reaction has been very positive, and the new design aligns well with a modern brand.

Q: How is the franchisee pipeline developing, especially with the push for growth outside California? A: Elizabeth Williams, CEO: Franchisee interest is growing, with more meetings and franchise days. Conversations with potential partners have resumed, driven by our growth in same-store sales, improved margins, and reduced build costs. While we aren't releasing pipeline data now, we are optimistic about future growth beyond the 10 units planned for this year.

Q: What factors are contributing to your confidence in further margin expansion in 2025? A: Elizabeth Williams, CEO: We are enhancing our cost of goods by optimizing our supply chain and product specifications. Additionally, we are improving labor productivity through new equipment and technology, such as kiosks, which help streamline operations and reduce costs.

Q: Can you explain the variance in the prototype build cost and its impact on franchisee demand? A: Elizabeth Williams, CEO: The $1.8 million build cost is our goal, achievable in markets with moderated construction costs. The prototype in California is slightly more expensive, but we are leaving room for potential cost increases in equipment. Converting existing restaurant locations offers a cost-effective alternative, enhancing returns.

Q: How has the mango habanero flavor been received, and what does it mean for future flavor innovations? A: Elizabeth Williams, CEO: The mango habanero flavor has driven trial among existing and new customers, marking a shift back to bone-in chicken. This success highlights the opportunity for continued flavor innovation, which excites consumers and is operationally simple for our team.

Q: What is driving the increased CapEx guidance, and how is it being allocated? A: Ira Fils, CFO: The increased CapEx is primarily due to our remodel program, with about half of the 60 to 80 planned remodels being company-operated. Each remodel costs around $400,000. We are also investing in digital assets, but the focus is on the remodel program.

Q: How are you balancing innovation and value in your product calendar for 2025? A: Elizabeth Williams, CEO: We are more planful with a robust pipeline and a team focused on innovation. We aim to balance new product introductions with operational consistency. Upcoming products like fresco wraps and quesadillas are designed to meet consumer demand for handheld, high-quality items.

Q: What was the impact of the LA wildfires on your operations? A: Ira Fils, CFO: Fortunately, all team members were safe, and no buildings were lost. There was a temporary impact with some restaurant closures due to power outages, but overall, there was minimal sales impact from the fires.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.