El Pollo Loco Holdings Inc Aktie

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the El Pollo Loco Third Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded today, November 5, 2026.

And now I would like to turn the conference over to Ira Fils, the company's Chief Financial Officer.

Thank you, Operator, and good afternoon. By now, everyone should have access to our third quarter 2026 earnings release, which can be found at www.elpolloloco.com in the Investor Relations section. Before we begin our formal remarks, I need to remind everyone that our discussion today will include forward-looking statements, including statements related to our new products and growth opportunities, strategic and operational initiatives, expectations regarding sales and margins, potential changes to our product platforms, capital expenditure plans, expectations regarding commodity and wage inflation, remodel plans, our restaurant development plans, including new market entry, and our 2026 guidance, among others. These forward-looking statements are not guarantees of future performance, and therefore you should not put undue reliance on them. These statements are also subject to numerous risks and uncertainties that could cause actual results to differ materially from what we currently expect.

For a more detailed discussion of the risks that could impact our future operating results and financial condition, we refer you to our recent SEC filings, including our Form 10-K for the year ended December 31, 2025, as well as our Form 10-Q for the third quarter of '26, which we expect to file tomorrow and encourage you to review at your earliest convenience. During today's call, we will discuss non-GAAP measures, which we use for financial and operational decision-making and as a means to evaluate period-to-period comparisons, and which we believe can be useful to investors in evaluating our performance.

The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP, and reconciliations to comparable GAAP measures are available in our earnings release, which is available in the Investor Relations section of our website. With respect to the adjusted EBITDA and restaurant contribution margin outlook we will be providing on today's call, please note that we have not provided a reconciliation to the most directly comparable forward-looking GAAP financial measure because, without unreasonable efforts, we are unable to predict with reasonable certainty the amount of or timing of non-GAAP adjustments that are used to calculate net income and income from operations as a percentage of total revenue on a forward-looking basis. Now, I would like to turn it over to our CEO, Liz Williams.

Thank you, Ira, and good afternoon, everyone. We are pleased to report another strong quarter for El Pollo Loco. System-wide, same-store sales grew 5%, our 4th straight quarter of positive comps, and restaurant contribution margin came in at 18.4%. What's encouraging is that this growth was a combination of expanding sales layers together with operational improvements that we've focused on over the past 2 years. And that is why we are thrilled with how durable our growth has become. Our positive traffic for the quarter is another proof point that more guests are choosing El Pollo Loco and that our quality chicken at an affordable price is resonating with existing and new guests. I'm proud of this momentum and I'm even more excited about where it takes us next. From our expanding product calendar to our improving operations and expansion to new states, we still have so much ahead for El Pollo Loco. Ultimately, our goals have not changed: drive sustainable traffic growth across our system, hold on to the margin discipline and unit economics we've worked hard to build over the last 2 years, and keep expanding El Pollo Loco thoughtfully across the country.

Let me start with what's driving our sales. Our "brand that wins" pillar is anchored by menu innovation. Q3 featured our loaded quesadillas, available in 2 flavors, queso and street corn, both filled with our citrus-marinated, fire-grilled chopped chicken breast and grilled to order. We designed these for portability and value, giving guests a satisfying eat, even when they're on the go, at a price of less than $10 a la carte or $10.99 for a combo meal. This combination of innovation and value resonated with guests. The loaded quesadillas were incremental to our base quesadilla business and grew check overall. Given the popularity of these quesadillas, they have remained on our menu as a Loco Rewards member exclusive, available in our app. In addition to loaded quesadillas, we also launched our Chata Coffee lineup, featuring our signature horchata iced coffee and cold foam. This was the perfect lead-up to our caramel apple Chata Coffee that launched in late September. These new beverages are accretive to check and also show the potential for incremental afternoon visits. We carried our approach of offering abundant quality at compelling value into the fall as we launched our cheesy enchilada Double Chicken Bowls at the end of September. These bowls feature our fire-grilled chicken, double the cheese, and a choice of red or green chili enchilada sauce. They are delicious and hearty and are incremental to our existing bowl business. We also introduced pumpkin pie mini churros, a seasonal, poppable dessert which has grown our overall churro business. Guest response has been very positive, and we expect to bring back even more dessert and churro innovation in 2027. In terms of what's next, we continue to test exciting new menu items as we plan for 2027, including new crunch salads, deluxe wraps with grilled and crispy chicken, and a line of grilled chicken sandwiches. More than ever, people are looking for protein-forward meals, and fire-grilled chicken is what we do best and fits perfectly. We believe these new items give us even more ways to deliver what new and existing guests are craving.

Turning toward marketing and becoming a nationally recognized brand, nothing captured the energy of the quarter and our "Let's Get Loco" spirit quite like our National Grilled Chicken Day. After a year-long campaign that included a Times Square billboard, petitions, and AI-fueled social contests, the National Day Calendar officially named September 9 National Grilled Chicken Day. We have been celebrating fire-grilled chicken every day for more than 50 years, so it only felt right that we should be the ones to own this holiday. To commemorate the day, we offered a free 2-piece chicken meal with a drink purchase on September 9 to all Loco Rewards members. But the celebration didn't stop there. We kept the party going all month long with our Loco Hall of Flame Music Challenge, where fans dropped their own tracks over a beat inspired by the sound of our grills for a chance to win free chicken for life. Fans jumped in, and the holiday and the challenge drew meaningful earned coverage across social and traditional media. It was a perfect example of how a fun, culturally relevant marketing campaign can bring new energy to the brand and drive traffic at the same time. The results exceeded our expectations. Not only did we attract new guests into the Loco Rewards program, but September 9 was our highest transaction day ever for Loco Rewards, with 56,000 redemptions and 25,000 new signups to Loco Rewards on that same day. It was a clear reminder of how much guests love our bone-in fire-grilled chicken. It's these big brand moments anchored by menu innovation that will continue to drive relevancy and create momentum as we expand nationally.

Turning to our digital business, this expanding channel was a big part of why this quarter was so successful. Traffic growth was led by digital, with our own app and third-party marketplaces both increasing notably. Digital sales, including our app, web, and kiosk, represented 31% of system sales, up from 27% of sales in the same quarter last year. Our Loco Rewards members continue to be our most engaged guests, visiting twice as often as non-members each year. Membership grew almost 11% year-over-year, and our rewards members now account for 14% of all visits. While we are pleased with the results, we believe there is still a lot of runway ahead for growth. Building our loyal fan base in our Loco Rewards program has many benefits from connecting with guests to offering personalized experiences. We are committed to expanding the fan base with big and small moments. In addition to National Grilled Chicken Day this fall, we launched the first-ever Loco Days earlier in the quarter, a 4-week summer celebration just for Loco Rewards members. Guests completed challenges built around activities we love the most in the summer like a pool day, a road trip, or a backyard barbecue, with the chance to win free food and prizes, including a grand prize VIP trip to the iHeartRadio Music Festival. Loco Rewards members earned contest entries by purchasing tostadas, quesadillas, drinks, and other favorites. The engaging summer-themed game was successful in driving over a 40% increase in daily Loco Rewards signups, along with 16% loyalty transaction growth. In this economic environment, guests are looking for deals, and we are building our Loco Rewards program as the place for the best deals. Our weekly Loco Friday drops offering deals on fan favorites like buy 1, get 1 free tostadas, or 3 chicken tacos for $5, and our evergreen 2-for-5 Taco Tuesday promotion are prime examples of how we bring guests in with real value. For the remainder of the year, we will continue to deploy this thoughtful value strategy, and we will keep the momentum going with even more deals as we prepare for our 12 Days of Pollo event this upcoming holiday season. As we look to 2027, we will continue to invest in Loco Rewards and the in-app experience as we work to enhance usability and use data even more to understand our guests. This will help us further tailor our guest experience to be more relevant to each member and give us a real-time opportunity to reach a broader set of guests. In short, we are excited about the opportunity that lies ahead with our digital business, and we are in the early innings of this growth.

Next, I'd like to turn our focus to operational excellence and the guest experience, which starts with our people. During the quarter, we hosted our El Pollo Loco brand conference that brought all of our general managers, above-restaurant leaders, and franchise partners together, and the energy was incredible. Our GMs are the heart of every restaurant, and this was a chance to show them how much we value what they do and our commitment to hospitality, notably through Loco Love, small moments that win our customers' day. From little gestures that delight to fixing a problem to make it right, as we continue to elevate our service, we also celebrated the progress we have made this year on ops metrics. Our overall satisfaction scores are up meaningfully from a year ago, and the key operations measures we track continue to improve. Restaurant leaders and franchise partners left the conference energized and proud to be part of the brand, and we're already seeing that enthusiasm translate in our restaurants as we set bold goals to get even better. Building on that energy and knowing it will take an experienced leadership team to take our operations to the next level, we are thrilled to welcome Damon Thomas as our Chief Operating Officer. Damon has led operations at high-growth brands like Shake Shack and Raising Cane's, and he's already working side-by-side with our SVP of Operations, Rick Pepper, and SVP of Franchise Operations, Christina Camara, who are best-in-class operations leaders. This team is aligned around 1 North Star: a great guest experience delivered consistently. And I believe it's the strongest operations team we've had. We also continue to elevate our training systems and tools to support our field team. We recently upgraded our learning management system, PolloZone, to a modern training platform that makes it easier for our team members to learn the fundamentals and train for new menu items. We know that restaurants that complete the training are more accurate with orders, and we know as we expand our innovation and product pipeline, this will be a huge enabler of operational excellence. In short, operations are a key part to how we grow. Our delicious food brings guests into our restaurant, but accuracy, speed, and value are the basics that bring guests back. And consistent execution in the restaurant turns a first visit into a recurring one. It's central to our goal of driving sustainable traffic growth across the system, and I look forward to talking more about this in upcoming calls.

That focus on execution also supports our unit economics. Restaurant-level margin was 18.4% this quarter, within our long-term target range of 18% to 20%. As we've said this year, our focus at this stage is holding a healthy margin range while we keep investing in things that drive growth, including value, innovation, technology, and new restaurants. Ira will walk you through the details in a moment.

Healthy economics and a proven business model are the foundation for new unit growth, which brings me to our next pillar, development, where the momentum is building fast. In June, we entered our 10th state, Idaho, where our franchise partner opened just outside of Boise in the town of Meridian, followed by their 2nd site in October in Nampa. Sales and guest feedback have been extremely positive in both restaurants. The 1st site in Meridian was an end-cap drive-thru, and the 2nd in Nampa was ground-up development. We also opened 4 restaurants in Q3 in Dallas, Lubbock, Albuquerque, and Ceres, California. All were 2nd-generation conversions. Our pipeline continues to be a healthy mix of ground-up development and 2nd-generation development, which is helping to reduce new-build investment costs and strengthen the overall business model.

In September, we announced our planned entry into New York, a big step in becoming a national brand. Our franchise partners, operated by Al and Liz Amiri and Nina [ Bebooty ], signed a lease for our first restaurant in Queens, which we're targeting to open in mid-2027. And in total, we entered into development agreements with 2 other franchise groups for a total of 15 restaurants in the area over the next 5 years. The group opening our first restaurant in Queens is a long-time franchise partner with restaurants in Southern California and Denver. They know El Pollo Loco extremely well and have experience opening in a new market and delivering excellent service while also building brand awareness. Since the announcement, we've heard from more potential franchise partners interested in joining the El Pollo Loco family. New York is just 1 proof point, and the interest extends beyond it. We have several additional new market development agreements in progress with both new and existing franchise partners. Importantly, all new partners have restaurant backgrounds and are mostly experienced operators from well-known national brands with a few regional concepts. This tells us that our winning economics and brand are resonating with industry veterans who know this business well. We are excited that our existing franchisees are also looking to expand, and a new development incentive we recently put in place for 2027 and beyond is adding to that enthusiasm with existing and new partners, especially in markets outside of California. Our development leader, Tara Hinkle, and her team have been central to all of this. And with Damon on board leading operations, we have the right leadership in place to support our partners as they grow, as well as supporting corporate openings in markets outside of California. Through the end of the third quarter, we've opened 12 new restaurants. Since then, we've opened 2 more, bringing us to 14 new restaurants to date, with additional restaurants for the year under construction. Absent any unexpected delays, we still expect to open 18 to 20 new restaurants this year. Looking ahead to 2027, we are encouraged by our robust pipeline and expect to accelerate our opening cadence further with 25 to 30 new restaurants.

To sum it all up, this quarter was where the individual pieces of our strategy came together. Our menu innovation, our value, our brand building all brought guests in, while our loyalty and our service gave them reasons to come back. With New York on the map and more partners lining up, we're taking the brand into new parts of the country with confidence. As we look forward into 2027, we are focused on the right balance of value and innovation to build traffic that lasts, protecting the margin discipline and strong unit economics that we've worked hard to build, and bringing El Pollo Loco to new communities, 1 great restaurant at a time. I want to thank our restaurant teams, our support center members, and our franchise partners whose hard work has made this quarter possible. With that, I'll turn the call over to Ira to walk you through our third quarter financial results in more detail.

Thank you, Liz, and good afternoon, everyone. For the third quarter ended September 30, 2026, total revenue was $126.3 million compared to $121.5 million in the third quarter of 2025. Company-operated restaurant revenue increased 4.6% to $105.4 million from $100.7 million in the same period last year. A $4.7 million increase in company-operated restaurant sales was primarily driven by 4.4% growth in company-operated comparable restaurant sales, as well as sales from 3 company restaurants opened since the third quarter of 2025, partially offset by the impact of transferring 1 restaurant to a franchisee in the second quarter of 2026. The growth in comparable restaurant sales included a 4% increase in average check size and a 0.3% increase in transactions. During the third quarter, our effective price increase versus 2025 was about 3.9%. Franchise revenue decreased 3% to $12.5 million from the third quarter, driven by franchise IT pass-through revenue in the prior-year quarter related to the new point-of-sale franchise rollout completed in 2025 and a prior-year royalty true-up. This decrease was partially offset by a 5.3% increase in comparable restaurant sales and revenue associated with 14 franchise-operated restaurant openings during or subsequent to the third quarter of 2025. The 5.3% increase in comparable franchise store sales consisted of a 4.4% increase in average check size and a 0.9% increase in transactions. For the third quarter, system-wide, same-store sales were up 5% as system-wide traffic grew 0.7%.

We are very pleased to report that the sales momentum we experienced in Q3 has continued into the fourth quarter. System-wide, comparable store sales for the fourth quarter to date through October 28, 2026, increased 3.6%, consisting of a 3.7% increase in company-operated restaurants and a 3.6% increase in franchise restaurants. Looking ahead, we believe same-store sales for the full year 2026 will finish at approximately 4.5%.

Turning to expenses, food and paper costs as a percentage of company restaurant sales decreased 30 basis points year-over-year to 24.4%, primarily due to higher menu pricing and cost management initiatives, partially offset by approximately 200 basis points of commodity inflation as menu mix shifts. We expect commodity inflation to be a little over 3% for the full year of 2026. Labor and related expenses as a percentage of company restaurant sales was flat year-over-year at 30.4%. Menu price increases and lower health insurance costs were offset by increases in workers' compensation expense, higher incentive compensation, higher wage rates, and higher other direct labor-related expenses. Wage inflation during the third quarter was less than 1% for all company-owned locations. For the full year 2026, we expect wage inflation of approximately 1%. Occupancy and other operating expenses as a percentage of company restaurant sales increased 20 basis points year-over-year to 26.7%, primarily due to an increase in other operating expenses related to higher delivery and mobile order fees, higher utility costs, and an increase in repairs and maintenance expenses, partially offset by lower insurance costs. Our restaurant contribution margin for the third quarter improved slightly to 18.4% compared to 18.3% in the year-ago period. We now expect our restaurant contribution margin for the full year 2026 to be between 18.25% and 18.5%.

General and administrative expenses increased to $14 million compared to $12.3 million in the prior year. The increase was primarily due to higher incentive compensation expense and other labor-related expenses, higher stock compensation expense, and higher other general and administrative expenses, partially offset by lower shareholder activism-related matters. As a percentage of sales, G&A increased to 11.1% or 90 basis points. To enable our continued growth in 2026 and beyond, we continue to strategically invest in resources to drive new store development, operational excellence, and technology that drives improved business performance.

During the third quarter, we recorded a provision for income taxes of $2.8 million for an effective tax rate of 28.6%. This compares to a provision for income taxes of $3 million, or an effective tax rate of 28.8%, in the prior-year period. We reported GAAP net income of $6.9 million, or $0.23 per diluted share, in the third quarter compared to GAAP net income of $7.4 million, or $0.25 per diluted share, in the prior-year period. Adjusted EBITDA for the third quarter of 2026 was $17.1 million compared to $17.4 million in the third quarter of 2025. Adjusted net income for the third quarter was $7.3 million, or $0.24 per diluted share, compared to adjusted net income of $7.8 million, or $0.27 per diluted share, in the third quarter of last year. Please refer to our earnings release for a reconciliation of non-GAAP measures.

In regard to our remodeling efforts, during the third quarter, we completed 10 franchise restaurant remodels and 11 company remodels, bringing our year-to-date completed remodels through the end of the third quarter to 22 franchise restaurant remodels and 23 company remodels. In terms of liquidity, as of September 30, 2026, after a net paydown of $7 million during the third quarter on our revolver, we had $23 million of debt outstanding and $3.4 million in cash and cash equivalents. Subsequent to the end of the third quarter, we borrowed a net additional $4 million on our revolver, resulting in our debt outstanding of $27 million as of November 4, 2026. In addition, during the third quarter, the company repurchased approximately 177,400 shares under the 2026 Share Repurchase Program for approximately $2,655,000, with $37.3 million remaining available for purchase under the authorization.

With that, we would like to provide you with the following updated guidance for 2026. We expect our system-wide comparable store sales growth to be approximately 4.5% for the full year 2026; G&A expenses between $52.5 million and $53.5 million, excluding 1-time charges and including approximately $6.5 million in stock compensation expense; capital spending between $33 million and $35 million. We also maintain the following guidance for the full year: opening of at least 3 to 4 company-operated restaurants and 15 to 16 franchise-operated restaurants. We are reiterating our adjusted EBITDA guidance of between $68 million and $70 million, with the expectation we will finish near the middle of the range based on current trends. And finally, an estimated effective income tax rate of approximately 29% to 29.5% before discrete items.

This concludes our prepared remarks. We'd like to thank you again for joining us on the call today, and we are now happy to answer any questions that you may have. Operator, please open the line for questions.

[Operator Instructions] Our first question comes from the line of Jeremy Hamblin with Craig-Hallum. Please proceed with your question.

Just starting with same-store sales here, off to a very strong start. I think you said up 3.6%, which I think is on top of like a plus 2.1% from a year ago. So, it looks like you've got your best 2-year stack of the year here in a somewhat choppy environment. Can you just discuss what you feel like is driving those results here in terms of LTOs? I think it sounded like loaded quesadillas were really good. Can you speak to cheesy enchilada, Double Chicken Bowls? Is it you have more snackable options, more portability in your options, or is this more about having value on your menu?

Yes, thanks for the question, Jeremy. And your math is right, and we're really pleased with the start of the quarter and the trend in the business, particularly in a challenging environment. And as we look forward, we believe the trends are largely consistent with what we've seen all year. We attribute it to that combination where we've had a nice balance of innovation and value. The consumer in this environment is really looking for new, great options. And the fact that our options are high quality and they are a good eat in terms of portion size, and then what they're paying for it is a competitive value-oriented price. We continue to see our value scores versus the competition be very strong. And then also, we're using value in a very targeted way with our loyalty program, so able to offer some of the best deals in the app. As I mentioned in the remarks, loyalty is really important right now for us with just being able to have that value proposition.

Got it. Switching gears, new unit growth, pretty exciting what you laid out for 2027, 25 to 30 units. Can you discuss the cadence that you expect for openings in 2027? What does the mix look like in terms of new markets versus existing markets? And then lastly, what should we anticipate, if any, cannibalization as you think about driving a bit more unit growth than you've had the last few years?

Yes. So we expect as we build through next year, it seems to be the habit oftentimes that things end up going towards the back end of the year, second half of the year. No matter how much we try to bring them in earlier in the year, that pace does sort of occur that way. But as the pipeline gets bigger and bigger, I do think we'll see more the first half of the year. In terms of the markets where we'll see them, about 1/3 will be in our California market, 2/3 outside of California in the 9 to 10 other states that we're operating in or will operate in. And we'll also see that balance in terms of about 1/3 of them will be ground-up first-generation and about 2/3 will be 2nd-generation. And I also think as we look across the franchise system, we'll develop company in proportion to what our company mix is. And we'll see about 1/4 of the new restaurants will be with new franchise partners in the system.

Just a clarifying question on that.

Yes, go ahead.

You mentioned you expect to have more in the first half of the year. You're saying a higher portion than you've had in the past, not more than 50% in the first half of the year. Okay.

Exactly. Yes, that's exactly right. You know, we will try to continue to open more than we historically have in the first half, but the majority of the openings will be weighted towards the second half, as typically is the pattern. And then cannibalization was your other question. We look really carefully as we're planning for new units to make sure there's not too much and there really is a good demand ring around the restaurant that can substantiate that new restaurant. I don't have an exact number for you, but I think that cannibalization will be lower, especially in those markets that have a lot of green space.

Got it. And then just the last 1 on the same topic. You signed some new franchise agreements in the New York market, pretty significant, and especially for the long-term growth potential of the concept. My understanding is 1 of those deals is with an existing franchisee. Assuming things go well in New York, how should we be thinking about geographic expansion in the future? Are you still going to focus maybe on the 10 existing states, or are you thinking about more expansion, let's say, in the Mid-Atlantic and Northeast markets?

Yes, there's a lot of white space in the 10 states that we operate. Even in California, there's still white space, but certainly in the other states. So we will continue to grow there, and we're looking for franchise partners in many of those states as well. We're excited about New York because that really will show that this brand is not a regional brand. I think we've already shown that being in Texas, being in Denver, being up in Washington, in Vegas. But New York is just 1 more proof point. And people love fire-grilled chicken. We think they're going to love it in New York. And then we'll set up the distribution for the New York metropolitan area, but that same distribution can serve up and down the Eastern Seaboard. So we think there's a ton of potential to unlock that.

Thanks so much. Best wishes and I'll hop out of the queue.

Okay. Take care.

Our next question is from Matthew Curtis with Roth Capital Partners. Please proceed with your question.

If we could just start in terms of the sort of traffic durability, I just want to understand a couple of components there. So first, on the last call, you talked about some new customer cohorts kind of coming in, I think that younger customer, and that was maybe around some of the tender innovation. Are you seeing those new customers returning for sort of your broader menu? Or what do you need to do to kind of continue growing frequency with those new customers? And then just on loyalty, great growth there, but I guess as you look into 2027, what's the opportunity still there around loyalty?

Yes, thanks for the question. So we're pleased that both reach and frequency are growing with that younger consumer. We can see that reach among the younger consumer is above last year, and frequency also continues to improve. And I think that is attributed not only to our menu and some of the more portable, delicious, craveable menu items—so whether it was the tenders or the loaded quesadilla. It's both of those and many of the other products, the bowls, they're resonating. Also, the value is resonating with the younger consumer. And then just the brand positioning. We continue to sharpen our brand messaging with our "Let's Get Loco" campaign, and you'll see us do that even more in the next couple months. So all that together, we're feeling really good about our ability to reach that younger consumer. And then moving on to the question of loyalty, that also bodes well with all consumers, but certainly, a younger consumer likes to do a lot of things in their app, and our loyalty program really speaks to them, the deals in the app also as well. But we're seeing just across all age cohorts, there is a lot of growth opportunity with loyalty. Loyalty today is only about 14% to 15% of our transactions. There's a lot of room for growth there, and we're just getting started.

Great. And then you mentioned the development incentives back in place for 2027 and beyond. Just curious if you can touch at all on how those compare to, I think, what was in place for 2025 and '26 unit growth, or sorry, new units, and just, I guess, what that means for your franchisee cash-on-cash returns as they deploy new units.

Yes, so if you think about what we did with our returns, I'm sorry, for the incentives, we're having great success in California, and we're seeing good development there. So we pulled back on the incentives in California. Our franchisees already have great economics, as do we in California. So we were able to pull back on that, and we believe that won't slow any growth. And in the newer markets, because we're seeing good momentum—and I say the developing new markets, but markets that we already have stores in—we pulled back slightly on those incentives. They're still very good incentives, and franchisees will be developing there. Where we got a little more aggressive was in the brand-new markets, i.e., the New York market. We actually increased those incentives as we're looking to set up the brand, all the operating efficiencies needed, and a new distribution center. We got a little more aggressive to get that market up and running.

Okay, great. And 1 last 1, if I could squeeze it in, just understanding that you're now sort of in that 18% to 20% restaurant-level margin target you've talked about, but just any kind of puts and takes as we think about margin heading into next year. I think you've talked about pre-marinating chicken in the past and maybe some of the upstreaming of some salsas or other things, but any just kind of puts and takes as we think about margin for next year?

Sure. I'll start and then Ira can finish. So as we look at margin, finishing out this year and next year, we really do see this as an "and" in terms of wanting to invest in value, invest in the consumer. And some of that does come at the expense of margin, but also continuing to find ways to build back the margin. And so as you thoughtfully pointed out, some of those are finding efficiencies in the kitchen and taking some things upstream that, quite frankly, are a win also for our consistency and our quality of our products. And they also make our team members' jobs easier, and they allow our team members to spend more time with our customers. And so some of those improvements, I'm excited to see those next year. But we're really trying to balance not taking too much back to the margin and making sure we're investing in the consumer and in value.

Yes, and to that point, we're going to be very thoughtful as we move forward. We're always thoughtful. But in this environment, we're going to be even more thoughtful and really balance our taking price next year versus what we're seeing in inflation, just to make sure that we're not overtaxing the consumer, who can be a little stretched right now, and really take advantage of these opportunities Liz is talking about to grow the business through efficiency and grow the margin through efficiency.

Great. Appreciate it and best of luck.

Thank you.

Ladies and gentlemen, we have reached the end of today's question and answer session. I would like to turn the call back over to Liz Williams for closing remarks.

I just wanted to thank everyone for joining us today. We are really excited about the momentum in the business and where the El Pollo Loco brand is going, and we look forward to talking with you next quarter. Thank you.

This concludes today's conference. Thank you for participating. You may now disconnect.

This live transcript is auto-generated without human intervention or review.

Good day, ladies and gentlemen. Thank you for standing by. to the El Pollo Loco Second Quarter 2026 Earnings Conference Call. This time all participants have been placed in listen-only mode and there will be an opportunity to ask questions following the presentation. Please note that this conference is being recorded today, August 6, 2026. And now, I'd like to turn the conference over to Ira Fills, the company's Chief Financial Officer.

Thank you, Operator, and good afternoon. By now, everyone should have access to our second quarter 2026 earnings release, which can be found at www.elpoyoloco.com in the Investor Relations section. Before we begin our formal remarks, I need to remind everyone that our discussions today will include forward-looking statements. including statements related to our new products and growth opportunities, strategic and operational initiatives, expectations regarding sales and margins, potential changes to our product platforms, capital expenditure plans, the ability of our franchisees to drive growth, expectations regarding commodity and wage inflation, remodel plans, and our 2026 guidance, among others. These forward-looking statements are not guarantees of future performance, and therefore, you should not put undue reliance on them. These statements are also subject to numerous risks and uncertainties that could cause actual results to differ materially from what we currently expect. more detailed discussion of the risks that could impact our future operating results and financial conditions, we refer you to our recent SEC filings, including our Form 10-K for the year ended December 31, 2025, as well as our Form 10-Q for the second quarter of 2026, which we expect to file tomorrow and encourage you to review at your earliest convenience. During today's call, we will discuss non-GAAP measures, which we use for financial and operating decision-making and as a means to evaluate period-to-period comparisons, and which we believe can be useful to investors in evaluating our performance. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP and reconciliations to comparable GAAP measures are available in our earnings release, which is available in the investor relations section of our website.

With respect to the adjusted EBITDA outlook, we will be providing on today's call. Please note that we have not provided a reconciliation to the most directly comparable forward-looking gap financial measure because without unreasonable efforts, we are unable to predict with reasonable certainty the amount of or time of non-GAAP adjustments that are used to calculate income from operations and company operated revenue on a forward-looking basis. Now, I would like to turn it over to our CEO, Liz Williams.

Thank you, Ira, and good afternoon, everyone. We are pleased with our second quarter results of system-wide same-store sales growth of 3.9% and restaurant-level margin of 19.5%, which demonstrates the sustainability of the improvements we've made over the past two years. What's more encouraging is that we achieved this performance through a combination of sales layers and operational improvements, which gives us confidence in the long-term sustainability of our group. More specifically, we achieved this performance through a combination of sales layers and More specifically, our top-line performance this quarter was driven by a combination of our strategic pillars. with strong brand activation and menu innovation, a targeted focus on providing value through our digital channels and operational excellence. But let me walk you through our progress across our strategic pillars. Let's start with Brand Not Win, which continues to be anchored by menu innovation. First, our local tenders, which launched at the end of the first quarter, brought new guests to the brand, many of whom who had not considered El Juego Loco before.

And they broadened our appeal beyond our core, Fire Grilled Chicken Loyalists. Notably, our tenders generated significant buzz and excitement. From social media conversation to word of mouth, this craveable product done with our own twist put El Pollo Loco back in the conversation in a way that we haven't seen in years. Our high-quality Mexican-seasoned loco tenders, paired with our new Pollo Loco sauce, drove trial across income and age cohorts, but notably with a new, younger consumer. They were additive to check and popular in snacking and late-evening day parts. As these were always planned as an LTO, we are taking the learnings and already thinking of ways to bring them back in the future. We believe we've only scratched the surface of what is possible with LOCO tenders. tenders in late June we introduced loaded quesadillas available in two flavors queso with our creamy cilantro sauce and street corn with our creamy chipotle sauce both with our citrus-marinated, fire-grilled, chopped chicken breast wrapped in a warm flour tortilla and grilled to order.

We designed these for portability and value, giving guests a satisfying eat, baked to their heart's content. can enjoy on the go at a price of less than $10 a la carte or $10.99 for a combo meal, which includes chips, salsa, and a drink. We also gave our local rewards members early exclusive access ahead of the general launch. The early guest response has been strong, and we believe Loda Quesadillas strengthens our lineup within handheld and on-the-go occasions. We also introduced a new coffee platform to the menu this quarter with our Chata coffee lineup, featuring our signature horchata, iced coffee, and cold foam. We designed our new beverages to capture an afternoon pick-me-up occasion, which we believe is a meaningful and underserved day part for all. our brand. Alongside items like our tenders and quesadillas, we see this as part of a broader snacking occasion that brings guests into our restaurant outside of traditional mealtimes and also helps in building trust. We are just getting started with beverages and look forward to even more innovation in the upcoming quarters.

As we head into the second half of the year, we are encouraged by the strength of our innovation pipeline. Two new double chicken burrito bowls will be coming this fall, as well as a new pumpkin spice churro and caramel apple chata coffee. We also continue to test new salads, wraps, and sandwiches as we prepare for 2027. In short, we remain committed to keeping our menu. craveable, relevant, and fresh, giving guests new reasons to visit. Our Let's Get Loco campaign continues to build momentum and has found new ways to put our new menu items in front of our guests. by showing up where our brand hasn't historically been invited. In late June, around National Go Skateboarding Day, we launched our Case Videos for Kickflips Activation, featuring Olympic skateboarder Paige Haines. This content resonated well beyond our usual audience, drawing praise from from across the skateboarding world, including from the editor-in-chief of Thrasher Magazine, one of the most recognized voices in that community.

We followed that with our Hold It Like It's Hot campaign, which put our new chata coffee, loaded quesadillas, and black beans into real, everyday moments to highlight how portable and delicious these products are. We continue to expand our presence with brand partnerships, working with brands like Igloo Cooler, SandCloud, and Tapatio all throughout the quarter as we were showing up in live sports. From our media presence during the World Cup games to free food giveaways for at-home watch parties, we were there. We believe this combination of timely, culturally relevant marketing and strong menu innovation is exactly the kind of engine that builds lasting brand loyalty and something that we will continue to lean into as we carry the momentum through the rest of the year. Turning to our loyalty and digital business, which continues to contribute to our top line performance. Digital sales, including our app, web, and kiosk channels represented approximately 28% of system sales and were up 13% year over year. and our local rewards members continued to be an important growth driver for the brand. These members visited approximately three times more annually than non-loyalty members.

We use a strategic approach with our loyalty offers based on segmentation and purchase behavior. These targeted offers deployed throughout the quarter, together with more frequent communications, drove not only frequency growth, but also check growth among our loyalty members, outpacing non-loyalty guests by more than double. As a reminder, we center our loyalty program around three things. Giving members everyday value, tailoring offers based on purchase behavior, and giving our most loyal guests access to exclusive experiences. Starting with everyday value, our weekly Loco Friday drops, providing great offers and value each Friday on some of our best menu items, and our Sunday spreads and abundant value on family chicken meals have continued to be consistent performers for the program. These all-member deals, combined with our segmented offers based upon purchase history, have both contributed to the frequency and check growth. In addition to these deals, our exclusive giveaways, early access to menu items and prizes, have created engagement in our loyalty program.

As we look ahead, In early Q3, we launched Loco Days, a summer-themed promotion featuring exclusive prizes, deals, and a grand prize VIP experience at the iHeart Music Festival. Early engagement in the promotion has exceeded expectations, and we look forward to future growth of our loyalty program. Finally, our off-premise digital business, Inclusive of Delivery, continues to gain strength as we have launched segmented deals targeting new customers at the snack and late evening day parts. For lunch, we have expanded our roster of third-party partners focused on groups and catering services. In total, our off-premise digital business represents almost 17% of sales and has increased 12% year-over-year. While we're pleased with the growth, we believe there is still significant opportunity to grow this channel. At the intersection of digital and operational excellence is technology.

We continue to make great progress in modernizing our capabilities. from in-restaurant training to analyzing consumer feedback to a more effective help desk for restaurant general managers. use of technology and AI tools is improving our insights and capabilities. In just a few months, we have made great strides in our capabilities with the addition of Vadim Parajer, who joined us earlier this year as our Chief Technology Officer. His leadership in digital, data, and technology is unlocking opportunity and insights across the business and we look forward to sharing more about our technology advancement in future calls. Moving on to operational excellence and our hospitality mindset, I'm pleased with the continued progress we made this quarter in improving guest experience and overall customer satisfaction. System satisfaction scores continued to move in the right direction on a year-over-year basis, We saw improvement across the board from order accuracy to speed of service to overall friendliness. This kind of consistent incremental progress is exactly what we set out to build and it reflects the discipline our teams have in driving operational excellence every day. As we look forward to national expansion with new restaurant openings, we will continue to build our operational people capability as this is the single most critical item in ensuring consistency and execution across our restaurants.

We know there is room to have even more of a consistent guest experience that builds long-term loyalty, and we are focused on the investment in people, tools, training, and technology to get us there. Shifting to financial metrics, we are proud to have coupled our sales momentum with winning unit economics. In Q2, we delivered another solid restaurant-level margin of 19.5%, comfortably within our 18 to 20% long-term target range. We are pleased with this result. especially in light of the significant cost pressure in produce during the quarter. Even with this headwind, our underlying cost discipline continues, which speaks to the margin focus we've built over the past several years. We will continue to manage the levers within our control closely, including labor productivity, waste reduction, and disciplined menu pricing. And we are watching our key commodities as we move through the back half of the year.

As we said last quarter, we will also balance the goals of driving year-over-year margin expansion with the need for value offers and investment in innovation, technology, and unit growth. We believe we can do all of these and be in the healthy margin range. Let me now touch on our new unit growth pillar. First, we were pleased to welcome Tara Hinkle in late June to the El Pollo Loco family as our new Chief Development Officer. Cara joined us with extensive industry experience and expertise that spans development operations, market planning, franchise recruiting, and finance, with experience from brands like Taco Bell, Starbucks, and Coffee Bean and Chili. We remain confident in our goal of opening 18 to 20 new restaurants system-wide this year, nearly double our 2025 pace. Our new restaurants continue to open with strength, which reinforces our confidence in the appeal for Fire Grilled Chicken and the El Pollo Loco brand as we continue our nationwide expansion.

A good proof point of this progress came at the end of June, when our franchise partner opened our first restaurant in Idaho, making the entry into our 10th state. The Idaho restaurant is run by an experienced franchise group with more than 25 years in the El Pollo Loco system, and we already have a second location. location scheduled to open later this fall, with three to four more planned in the market as it develops. Less than two years ago, Apoyo Loco operated in just seven states. Since then, we've added Washington, New Mexico, and now Idaho, three new states in under 24 months. As we look forward, the vast majority of our openings will continue to be outside of California. Our new unit growth continues to benefit from the second generation sites where we are achieving lower development costs than the typical ground-up bills. Together with our value engineering initiatives, we remain focused on overall new unit economics.

As we look forward to becoming a national brand, we are encouraged by the discussions and the level of interest with prospective franchise partners. Over the past couple of months, we've hosted discovery days at our restaurant support center with new franchise groups representing opportunities across the country. These visits have been positive and we are in discussions on various development agreements. We expect to have more details to share on future calls and remain confident that our development pipeline is building nicely and supports our continued expansion across the country. On the restaurant refresh initiative, we remain pleased with our results. On average, we continue to see a mid-single-digit sales list in the locations we've refreshed, consistent with what we've shared on prior calls. We'll continue to be thoughtful about pacing this initiative in a way that supports our teams without disrupting the sales list. day-to-day operations.

In summary, we are proud of our quarterly performance and the work we have done over the last two and a half years in transforming the El Pollo Loco brand. Our menu innovations are driving real trial and repeat and our marketing and loyalty engines are amplifying that momentum. Our operations to improve and we are back to healthy margin expansion and unit growth. With that, let me turn the call over to Ira for a more detailed discussion of our second quarter financial results.

Thank you Liz and good afternoon everyone. For the second quarter ended July 1st, 2026, Total revenue was $129.6 million compared to $125.8 million in the second quarter of 2025. Company-operated restaurant revenue increased 3.7% to $108.1 million from $104.3 million in the same period last year. The 3.8 million increase in company-operated restaurant sales was driven by 3% growth in company-operated comparable restaurant sales, as well as sales from the three company restaurants opened since the second quarter of 2025. The growth in comparable restaurant sales increased. included a 4.2% increase in average check size, partially offset by a 1.1% decrease in transactions. During the second quarter, our effective price increase versus 2025 was approximately 3.4%. Franchise revenue decreased 3.8% to $12.9 million during the second quarter, driven by a $1.1 million decrease in franchise IT pass-through revenue related to the franchise rollout of our new point-of-sale system completed in 2025.

Franchise revenue did benefit from a 4.5% increase in comparable restaurant sales and revenue associated with 11 franchise operated restaurant openings. Subsequent to the 2nd quarter of 2025, the 4.5% increase in comparable franchise store sales. consisted of a 5.3% increase in average check size, partially offset by a 0.8% decrease in transactions. For the second quarter, system-wide, same-store sales were up 3.9%, with system-wide transactions down 0.9%. We are very pleased to report that the positive sales momentum we experienced in Q2 has continued into the third quarter. System-wide comparable store sales for the third quarter to date through July 29, 2026, increased 5.8%, consisting of a 4.4% increase in sales. 4% increase in company operated restaurants and a 6.6% increase in franchise restaurants. Looking ahead, we believe same store sales for the third quarter will be in the 3.5 to 4.5% range. Turning to expenses, food and paper costs as a percentage of company restaurant sales increased approximately 90 basis points year over year to 25.4%, primarily due to commodity inflation of 4.1%, primarily produce, combined with increased discounts and menu mix shifts.

These increases were partially offset by higher menu prices. We expect commodity inflation to be in the 2.5% to 3.5% range for the full year 2026. Labor and related expenses as a percentage of company restaurant sales decreased about 90 basis points year over year to 29.9% as we continue to benefit from improvements in operating efficiencies along with lower health insurance and workers' compensation costs. In addition, labor as a percentage of sales benefited from leverage on the 3% company-owned comparable store sales. Wage inflation during the second quarter was under 1% for all our company-owned locations. the full year 2026 we expect wage inflation of between one and a half to two and a half percent Occupancy and other operating expenses as a percentage of company restaurant sales decreased 30 basis points year-over-year to 25.3%, primarily due to lower liability insurance costs, lower utilities, and lower other controllable expenses. offset increases from higher delivery and mobile ordering fees and higher repairs and maintenance Our restaurant contribution margin for the second quarter improved to 19.5% compared to 19.1% in the year-ago period. As we continue our path of margin improvement, we expect our restaurant level margin for the full year 2026 to be between 18.25% to 18.75%, an increase from the 17.8% we ran for the full year of 2020. In addition, we expect our restaurant margins in the third quarter of 2026 to be between 18% and 18.5%, which is in line with the 18.3% we posted in the third quarter of 2025.

General and administrative expenses decreased to $7.1 million compared to $13.5 million in the prior year. decrease was primarily due to $6.3 million received from a legal settlement, lower shareholder activism-related expenses, and lower restructuring and executive transition-related costs. The The decrease was partially offset by higher legal fees, new store pre-opening costs, and other general and administrative expenses. Excluding the impact of the $6.3 million favorable legal settlement as a percentage of sales, G&A decreased to 10.3% or 50 basis points. During the second quarter, we recorded a provision for income taxes of $5.2 million for an effective tax rate of 28.8%. compared in an effective tax rate of 29.6% in the prior year period. We reported GAAP net income of $12.8 million, or $0.43 per diluted share, in the second quarter compared to GAAP net income of $7.1 million, or $0.24 per diluted share, in the prior year period. Adjusted EBITDA for the second quarter of 2026 was $19.1 million compared to $18.5 million in the second quarter of 2025. adjusted net income for the second quarter was $8.9 million, or $0.30 per diluted share, compared to adjusted net income of $8.2 million, or $0.28 per diluted share, in the second quarter of last year. Please refer to our earnings release for a reconciliation of non-GAAP measures.

As Liz mentioned earlier, we are pleased with our increasing pace of new store development as we open five new franchise locations and one new company location in the second quarter. Since the end of the second quarter, we have opened an additional two locations bringing our 2026 year-to-date day new store opening to 10 and we remain on track deliver a total of 18 to 20 new openings in 2026. In regard to our remodeling efforts, during the second quarter, we completed six franchise restaurant remodels and five company remodels, bringing the remodels completed for the first half of the year to 24, consisting of 12 franchise remodels and 12 company remodels. In terms of liquidity, as of July 1st, 2026, after a net pay down of $21 million on our revolver during the preceding 26 weeks, we had $30 million of debt outstanding and $13.3 million in cash and cash equivalents. Subsequent to the end of the quarter, on August 4th, 2026, we amended our $150 million revolving credit facility, extending the term to August 4th of 2031. With that, we would like to provide you with the following updated guidance for 2026. We are increasing our system-wide comparable store sales growth guidance. to now be between 3.5 and 4.5% for the whole year. we are increasing our adjusted EBITDA guidance to be between 68 and 70 million. we are reducing our expected capital spending to be between $33 and $37 million.

In addition, we now expect depreciation and amortization expenses to be between $18 and $18.5 million for the year. We are maintaining the following guidance. The opening of at least three to four company-operated restaurants and 15 to 16 franchise-operated restaurants. G&A expenses between $52 and $54 million, excluding one-time charges or benefits. And finally, an estimated effective income tax rate of approximately 29 to 29.5% before discrete items. This concludes our prepared remarks. We'd like to thank you again for joining us on the call today, and we are now happy to answer any questions that you may have. Operator, please open the line for questions.

Thank you. If you would like to ask a question at this time, you may press star 1 from your telephone keypad and a confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Thank you. And our first question is from the line of Todd Brooks with Benchmark StoneX. Please proceed with your question.

Hey, congrats on another solid quarter and continued momentum into the third quarter. Great to see. Thanks, Todd. If we can talk about franchisees. You gave us some good color last quarter about some of the magnitude of the openings in the Washington and New Mexico, now you've added Idaho on top of it. What are you seeing for... kind of continued strength of performance in newer markets? Yes. Appreciate the question.

Newer markets are opening really well. We're very pleased with the strength of the sales. Most are opening above system average, particularly when it's the first restaurant in the first state or first market. They're opening to just blockbuster lines and quite frankly exceeding our expectations, which is giving us a belief that the fire grilled chicken is resonating and our brand is resonating. It also gives us the confidence to open more units and those franchisees to open more units in those markets. So like I mentioned, Idaho, the second Idaho location is coming on board in the next couple of months. They're already looking for additional sites.

Similarly, up in Washington, we've got just one unit. We have been working on finding additional sites up there. Following on with the rest of the quarter, we'll have restaurants opening in New Mexico, in Colorado, another one in Washington, as I mentioned, and then a few more in California. California and one in New Mexico. So, you know, just really pleased with how these are opening and our franchise partners. It's giving a lot of confidence to them and then additional new partners who are looking at coming into the brand.

And I wanted to follow up on that because I think you used the word national three or four times. during the prepared remarks. These discovery days and the outbound work that you're doing doing to build a pipeline of interest with potential franchisees. Can you give us a sense of how far afield the interest in the brand is reaching? Does it feel contiguous? Are you seeing interest nationwide, which kind of helps prove out that concept of our grilled chicken working anywhere in your mind? I'm just curious how this is developing.

goes? There is nationwide interest. And while we have been rather contiguous over the years, particularly West Coast and down into the South, as we went over to Texas and just a couple in Louisiana, jumping across the country is certainly something that we are considering doing, talking with folks and doing. You know, there's a lot of population on the East Coast and just, you know, throughout different parts of the country. So we don't think it has to be contiguous. We certainly could see a world where, you know, we could go to jump many states and go across the country. It really just depends. on you know how these conversations progress over the next couple months to and hopefully we'll we'll share more in upcoming calls to that that effect that's great and then just final question I'll jump back into you what's.

if you're going to make a jump into non-contiguous and a new territory, new market, what are you looking for in that franchisee partner? And in your outreach, are those type of partners being transparent drawn to the brand, you have to go find them. Just kind of if you give us the criteria and the interest from that type of partner.

Certainly. The partners that we're talking with are partners that have experience in the restaurant space, multi-units. We want partners that are a great fit with the brand, that love the brand, have the enthusiasm for the brand, they believe in the economic story of the brand, but also they have a great a proven track record in the restaurant space, and they're great operators. That's really important to us. They've done this before. They know how to do new store development. They know how to do grand openings. They know how to do just great customer service. We also have the benefit of a fabulous franchise system today and I can't say enough great things about our existing franchise partners.

And we're talking with many of them about their desires to be in additional states. As I mentioned in the remarks, our partner up in Idaho is a partner that's been in the system for many years. And so that's just... been a great opening for many reasons but one of which is he knows the El Pollo Loco system and he has you know just a great team that was was able to get trained and ready to go with great efficiency.

Okay. Thanks, Liz. Yes, thank you. As a reminder, to ask a question, you may press star 1 from your telephone keypad. The next question is in the line of Matt Curtis with DA Davidson. Please proceed with your question.

Hey guys, thanks for taking the question. You know, I want to talk about comp trends. You know, July accelerated in terms of traffic relative to the second quarter. I just was wondering if you could unpack what drove the sequential acceleration. I mean, was it LTO momentum, loyalty activity, comparisons or something else. And then, you know, given the guidance for the full third quarter on comps, it implies a deceleration. Is that just a function of more difficult comparisons in August and September, or is there something else going on we should be aware of?.

Thanks for the question. I'll start and then hand it over to Ira for the back half of that. So I would say all of the above when you gave the list, you know, we were proud of how our loaded quesadilla got off to a great start. It's a nice eat, a great value, combined with just the meat media that we've had behind it and also we wish we could have a World Cup advertising in the month of July every year you know usually people aren't watching live sports in July and you know we think that that certainly got eyeballs on El Pollo Loco also in terms of just the momentum that the brand was experiencing. And then in terms of as we think about the lap from last year as well, you think about with everything going on last year, people weren't coming out of their homes as much, and so some of that certainly has come back as well in fact we're seeing even some trends where people are eating in the dining room more whereas last year if they were coming out maybe they were going through the drive-through so I would say all of those factors you know have played a role and then as we look into the back half of the year.

Yes, as we think about, you know, our full year guidance for the year and even for the quarter, you know, we ran a 3.9% in Q2. And if you think about the midpoint of the guidance for both Q3 and Q4, that's right at 4%. So really consistent with what we, you know, what we ran in Q2. I will tell you there is a little bit of about a 200 basis point change as you go into Q4 versus Q3 in regards to the compares get tougher as you move into Q4, but as you can see by our guidance, we feel great about what's going on from a same-store sales trend, and we're and we really foresee Q3 being pretty much on the same pace as Q2.

Okay, got it. Then separately on local tenders, can you maybe just expand on what you learned from the local tenders? in terms of new guest acquisition, repeat rates, check impact and all of that. And I mean, given that the product brought new guests into the brand, it sounds like, I guess what needs to be true for tenders to return in a more permanent or recurring way?.

Yes, so in terms of what needs to be true, so tenders did great for us and we'll come around to the answers to some of those first questions. On the back half, the tenders, we had always planned as a limited time offer for the main reason of having some of the equipment in the restaurants to be able to hold them. so that we could operate at a higher velocity and just operationally we could execute them for just a better execution. And so we're working with the system now, we're testing holding equipment so that they could be a permanent menu item. What gives us the confidence in earning that spot for a permanent menu item was that tenders drove a lot of incrementality, particularly around a new consumer with that younger consumer, but also that consumer that is wanting something more portable, that consumer that wants them late night. We saw... a higher incidence and a tax rate through delivery, delivery coupled by late night. And when I say late night for us, late night is like eight to 10 o'clock in the evening. We're not even talking true deep into late night.

So just, it was really evident that this fit a needs also in snacking, which was an afternoon as well. We also just were really pleased with how it helped with check across the board all times of the day. So we learned a lot there. The other thing that we're going back into test and we'll learn some more is different ways to enjoy Tender. So we have a great menu item that has the tender in a wrap. That's again, a portable, more robust eat. I personally love the tender chopped up on a salad.

So there's a lot of things that we can do with tenders and I think you'll see a lot more over the upcoming.

quarters. Okay, got it. Thanks very much for your time. Thank you. Our next question is from the line of Todd Brooks with Benchmark Stonex. Please receive your question.

I have one for Ira that I forgot to ask here. Ira, you talked about reduced cost pressure in the quarter and I've heard from a couple of our operators that it was good very spiky, but relatively short-lived. If you look at the... the COGS pressure that you talked about. I guess what proportion of that was related to produce and Are you finding that it is more short-lived and kind of retrenching here as we get into Q3? And if that's the case, just wondering about the 19.1% restaurant-level margin in Q2 versus the 18.25%.

or sorry, the 18 to 18 and a half? Yes, so to answer the first part, about three quarters of the COGS pressure that we did see in Q2 was related to produce in particular. We have seen it mitigate some. There's still a little pressure there, but it has mitigated some, and we're seeing some pressure some other lines, we've seen some pressure in packaging and we've seen some pressure in oil costs, not as significant as what we've seen in produce. So we, and there's been some fuel pressure as well for delivery charges as far as getting things to the restaurant. And we've got all that baked in until we think about our guidance when we think about the balance of the year and margins as we look forward.

Okay, so it's kind of anticipatory based on what you're seeing now, not baking in any relief from these levels currently. We definitely have relief from produce, but there's still some other items where we're feeling pressure on.

Okay, perfect. Thank you. Thank you. The next question is from the line of Jeremy Hamblin with Craig Helm. Please just hear their questions.

Thanks. I'll add my congratulations on the strong results. I just want to come back to the question around the Q3 guide. So if we look back I don't think that the compares actually get tougher in August or September. I think they're pretty similar to what July was. look like just wanted to see if you could confirm that and so you know just maybe some assumption that there's a moderation from the current 5.8% level.

That's exactly right, Jeremy. The balance of the quarter is pretty similar to what July was, and I think – The way to think about it is more about the balance of the quarter being more similar to what Q2 was and that really in July we had some outsized benefit from some things that Liz mentioned. We had some great advertising. and spots and related to the World Cup. It really worked hard for us this year. Live sports is great for us from a media standpoint and we had, and again, played really well for us. So I think July was a little more outsized and as we think about the quarter in a whole, kind of the midpoint of our guide, that's where you think.

about where our trend is. Got it. And have to ask since it's a kind of topical here, you know, some other, you know, kind of Mexican food concepts have been thrown, some curve balls here. With their sourcing, have you scoured your food sourcing to ensure no potential issues with jalapenos, anything like that? And have you seen any impact at all, you know, kind of with those headlines that are reaching consumers?.

Yes, so we take food safety, you know, utmost seriousness and, you know, of course we've scoured every bit of our supply chain and work really closely with suppliers. El Pollo Loco was not involved in any of the lettuce recalls. There was no lettuce product pulled, and no illnesses have been linked to us. and all of our lettuce is currently sourced from the USA. So all of that, and then on the peppers, we don't use jalapeno peppers, we use serrano peppers, and we also don't use the supplier that I know people are talking about right now. So we continue to be vigilant with the supply chain and it's definitely part of the industry and caring deeply about that. In terms of benefit, it's hard to tease out. I think possibly we probably got a little bit of help from it.

I know our salad business, it is a core part of our menu and it remains strong. worries in terms of consumer demand there, particularly in the summertime. They're really popular items and they continue to remain strong.

Got it. And then I want to come to the CapEx for a second. I think you lowered it by about three or four million dollars, but you're maintaining your unit growth. And you might have mentioned it, but can you just talk about... Kind of the lowering of that is there, presumably the new units are coming in at or below budget.

But just color you might be able to share on that yes, great question Jeremy So where we really took the capex tipping down is more just the timing of our needle remodel program We're very happy. We're very pleased with the results of the remodel program. We're continuing to move forward but just as we evaluate a you know, the timing of permits number one and And two, making sure that we're deploying the right resources internally from an operations and from a development standpoint. We've just pulled the timing back a little bit of it, and that's really the first driver of – of the lowered capex. And the second one is a little bit what Liz has mentioned. We're still testing and we're working on holding equipment, which we feel like if the tests go, that's something we're going to move forward with. It's just more of a timing issue than a cancellation of a project.

Got it. One other housekeeping item. With the extension of your credit agreement, what's the interest rate that we should expect? The spread from what we were paying before will be going up by about 50 basis points.

Thank you. Ladies and gentlemen, we've reached the end of today's question and answer session. I'd like to turn the call back over to Liz Williams for closing remarks.

Thanks again everyone for your interest in El Pollo Loco. We look forward to talking to you again next quarter. Have a great evening.

This will conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.

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Good day, ladies and gentlemen, and thank you for standing by. Welcome to the El Pollo Loco First Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded today, May 7, 2026.

And now I would like to turn the conference over to Ira Fils, the company's Chief Financial Officer. Please go ahead.

Thank you, operator, and good afternoon, everyone. By now, everyone should have access to our first quarter 2026 earnings release, which can be found at www.elpolloloco.com in the Investor Relations section.

Before we begin our formal remarks, I need to remind everyone that our discussions today will include forward-looking statements, including statements related to our new products and growth opportunities, strategic and operational initiatives, expectations regarding sales and margins, potential changes to our product platforms, capital expenditure plans, the ability of our franchisees to drive growth, expectations regarding commodity and wage inflation, remodel plans and our 2026 guidance, among others. These forward-looking statements are not guarantees of future performance, and therefore, you should not put undue reliance on them.

These statements are also subject to numerous risks and uncertainties that could cause actual results to differ materially from what we currently expect. For a more detailed discussion of the risks that could impact our future operating results and financial condition, we refer you to our recent SEC filings, including our Form 10-K for the year ended December 31, 2025, as well as our Form 10-Q for the first quarter of 2026, which we expect to file tomorrow and encourage you to review at your earliest convenience. During today's call, we will discuss non-GAAP measures, which we use for financial and operational decision-making as a means to evaluate period-to-period comparisons and which we believe can be useful to investors in evaluating our performance.

The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP and reconciliations to comparable GAAP measures are available in our earnings release, which is available in the Investor Relations section of our website.

With respect to the adjusted EBITDA outlook we will be providing on today's call, please note that we have not provided a reconciliation to the most directly comparable forward-looking GAAP financial measure because without unreasonable efforts, we are unable to predict with reasonable certainty the amount of or timing of non-GAAP adjustments that are used to calculate income from operations and company-operated restaurant revenue on a forward-looking basis.

Now, I would like to turn it over to our CEO, Liz Williams.

Thank you, Ira and good afternoon, everyone. We are proud of our first quarter results, including system-wide same-store sales growth of 5.8% and restaurant-level margin expansion of 320 basis points year-over-year. As we enter the third year of our brand transformation, El Pollo Loco is building momentum on the strong foundation we've built over the past 2 years. What's particularly encouraging is that this performance reflects strength across multiple fronts. Our innovation pipeline, highlighted by the success of our Baja Double Tostadas, continues to resonate with guests. But equally important is the operational progress we are seeing across every key metric from customer service and accuracy to speed of service. We are also seeing balanced daypart performance with lunch traffic returning, dinner continuing to grow and evening into late night gaining traction. These results demonstrate that our strategy is working. Our momentum is sustainable and we are well-positioned to deliver on our priorities for 2026.

As we look at the remainder of the year, our main goal remains clear: to drive sustainable traffic growth across our system while maintaining the margin discipline and unit economic improvements that we've accomplished over the past 2 years and to thoughtfully grow El Pollo Loco across the country. We recognize that the operating environment for the remainder of the year presents challenges, particularly related to consumer spending pressures from elevated energy and gas prices. While we are monitoring these dynamics closely, we remain focused on what we can control, delivering exceptional value, great customer service and delicious new menu items that resonate with our guests.

As we look to continue this momentum throughout 2026 and beyond, I would like to walk you through our progress and future plans across our strategic pillars. Let's start with the Brand that Wins pillar, which continues to be critical in driving our business. Our culinary innovations during the first quarter delivered exactly what we intended, driving traffic with quality and value proposition that defines El Pollo Loco. We kicked off the year with new Double Pollo Salads in 3 craveable flavors: Street Corn, Mexican Caesar and Bacon Ranch. This lineup added growth to the salad category and delivered value to our customers through a premium salad at an affordable price compared to other fast casual salads. We continued the momentum with the introduction of our Baja Double Tostadas in mid-February, which feature double portion of fire-grilled chicken or seasoned shrimp, both drizzled with a tangy lime crema sauce.

The Baja Tostada lineup exceeded expectations, delivering a record-breaking 8.3% sales mix for our brand with our tostada and salad category peaking at over 20% of our total sales mix. Our guests love the Baja Tostadas so much that we have made a strategic decision to keep the chicken Baja Tostada on the menu in the summer, providing us with some strong check-building opportunities.

Shifting to more affordable options, we launched our Loco Tenders in late April. These all-white meat, boldly seasoned tenders represent our take on America's favorite finger food with a distinctive El Pollo Loco twist through the seasoning and our 3 signature dipping sauces: Baja Lime, House Ranch and Pollo Loco Sauce. We expect tenders to be an important traffic driver, particularly with new consumers who may not yet be familiar with our quality chicken.

To build excitement and generate buzz, we strategically seeded our Loco Tenders into several cultural moments before the Loco Tenders launch. In early April, we brought tenders to the Revolve Festival at Coachella, giving celebrities, VIPs and influencers a sneak peek into our newest innovation.

We also hosted a tender reveal party for media and influencers, offering a firsthand look at our tenders and a chance to meet our executive chefs. Social momentum continued with user-generated content and we generated over 2 billion impressions across social channels leading up to the launch day. We're only 2 weeks into the launch and the tenders are already meeting our expectations.

We believe that the combination of bold flavors and bold activations is a winning equation for us. And you can expect to see additional infusion of buzz-building moments into our product launches as we move forward.

As we look at the balance of 2026, we remain confident in our innovation pipeline. From testing loaded quesadillas to grilled chicken sandwiches to cheesy enchilada bowls and our newest beverage offering, our pipeline is the most robust we have delivered in years.

Beyond menu innovation, our marketing efforts continued to amplify the El Pollo Loco brand through our Let's Get Loco campaign. Our first quarter results have demonstrated that our social media and activation strategy is a powerful driver of brand engagement and cultural relevance. And we will continue to leverage these channels to amplify our menu innovation and to reinforce our fire-grilled chicken differentiation to create the kind of memorable brand moments that turn customers into true fans.

From our Leg and Thigh Day promotion in January to our Loco Moments during the March basketball tournament to our recent festival merch drop, we have shown the power that social presence can have in expanding our audience and brand relevance.

In short, the combination of thoughtful innovation, targeted marketing and our growing social platforms positions us well to continue driving sustainable traffic growth throughout 2026 while maintaining the margin discipline we've established.

Moving to hospitality mindset. I'm pleased with the continued progress we've made in the first quarter to improve guest experience and overall customer satisfaction. Our team's relentless focus on executing the fundamentals is paying dividends and our service consistency is improving. Our overall satisfaction scores continue to outpace the QSR industry as measured by SMG with meaningful sequential improvement across every key metric from accuracy to quality to friendliness, cleanliness and speed.

What's particularly encouraging is that we're not just maintaining the gains we achieved in 2025, we're building momentum that positions us well for continued progress. We are using data to identify our biggest daypart opportunities to drive even greater guest satisfaction and operational throughput. We have deployed new tools and standards to drive speed of service while also focusing on order accuracy. These 2 metrics work hand-in-hand as we believe improving speed and accuracy represents a significant step in enhancing customer satisfaction and overall performance.

As we continue to address this opportunity, we have many initiatives underway to assist our team members. From redesigning how orders are displayed on the kitchen display screens to reconfiguring our point-of-sale keys to streamlining the ordering process, all of these reduce potential errors at the point of entry. Our goal is to make it easier and faster for team members to deliver customer orders accurately and efficiently.

In addition to these initiatives, we are also reinforcing our commitment to speed and accuracy through enhanced training protocols, such as triple checking every order. We're also testing enhanced product labels and testing consumer-facing order confirmation boards. As we work to make speed and accuracy an even more disciplined part of our culture, our teams continue to take tremendous pride in getting orders right every single time. We are confident that the investments we're making in both tools, systems and training will create meaningful improvements to guest experience over time.

Before we move on, I would like to take a moment and recognize our team members and franchise partners who are raising the bar and elevating our service. Their dedication to operational excellence is what will drive our success and I am grateful for their commitment to delivering an outstanding experience for every guest.

Also aiding our operations and customer satisfaction is the continued shift of our business to digital platforms as this part of our business continues to gain momentum. For the first quarter, our total digital business, including kiosks, represented approximately 28% of sales in our corporate restaurants. More importantly, we saw a year-over-year improvement in sales and transactions from our loyalty members, which we believe were a direct result of our more aggressive approach to our app-based promotions and targeted value through our Loco Rewards program as well as the recent enhancements made to the app that improve ordering and give more benefits to our highest frequency members.

Our strategy for loyalty is focused on 3 key areas: providing everyday value, delivering personalized offers and creating exclusive experiences for our members. We deliver on everyday value through our all-member perks, including our Loco Friday Drops, our member boosts and our national food holiday deals. We launched our Loco Friday Drops in 2025 as a tribute to our 50th year. And given its performance, we've decided to keep our Loco Friday Drop perks alive for the remainder of 2026.

Each Friday, we drop an offer that ranges from new innovations to fan favorites. These are typically available only for 1 day. This sense of urgency creates FOMO, or fear of missing out, for our members to drive incremental frequency. To level up our value even more, we introduced boosts recently, which are seasonal, limited-time offers based on membership tiers. The higher the tier, the better the boost.

And lastly, we leverage relevant national food holidays to deliver value. Case in point, our National Burrito Day activation at the beginning of April delivered our single highest loyalty sales day in our company's history. The results speak to both the strength of our menu and the growing engagement with our Loco Rewards program. We achieved a 30% increase in redemptions over last year and generated loyalty sales that significantly exceeded both our prior-year performance and our internal goals.

Our participation rate reached 21%, up from 19% last year and we saw a healthy 7% increase in average check compared to last year. Again, these proof points demonstrate that our loyalty platform is not just driving transactions, but also creating meaningful engagement with our most valuable guests.

During the quarter, we also implemented improved program segmentation, giving our members personalized messaging and offers based upon purchase history as well as launching our member exclusive experiences, which is a platform of exciting perks, including early access to new menu items and access to curated experiences, including tickets to concerts and sporting events. For example, in March, we launched the Coca-Cola x El Pollo Loco Soccer Challenge, a sweepstakes that exemplifies our evolved approach to loyalty. Through our partnership with Coca-Cola, an official partner of Major League Soccer, we gave Loco Rewards members the chance to win a VIP trip to the MLS All-Star Game in Charlotte this July, along with other offers from El Pollo Loco. In totality, our approach to loyalty has returned healthy increases in member frequency, up 13% for the trailing 12-period and member spend is up over 17% year-over-year.

Turning to our Winning Unit Economics pillar. I'm pleased to report that we are now solidly within our 18% to 20% long-term restaurant-level margin target that we set out 2 years ago, including achieving a 19.2% restaurant-level margin in the first quarter. But more importantly, we've built a sustainable margin structure that improves both team member productivity and our guest experience through disciplined cost management, strategic menu pricing and investments in technology. As we look ahead, our focus starts to shift from driving significant year-over-year margin expansion to maintaining our healthy margin range while we invest strategically in other initiatives I've alluded to earlier. We expect restaurant-level margins to remain within the 18% to 20% range as we balance our commitment to operational excellence with continued investments in menu innovation, guest experience and unit expansion. This disciplined approach ensures we can deliver sustainable, profitable growth while maintaining the quality and value proposition that differentiates El Pollo Loco.

For our last pillar, Driving Unit Growth, we remain on track to open 18 to 20 new restaurants this year system-wide. Our pipeline is building momentum with existing franchise partners and new partners while also leveraging our company capital. As a reminder, the vast majority of our openings this year are expected to be outside of California as we continue nationwide expansion. And roughly 75% will benefit from the lower cost of having been a second-generation site. On the restaurant refresh front, we continue to see strong returns from our remodel program.

As we continue to focus on new unit development and ensure flawless execution across all growth initiatives, we will continue to balance our remodel pace in 2026 to ensure we do not disrupt our operations.

In summary, our performance to date and the progress we've made across our strategic pillars gives us confidence that El Pollo Loco is on the right path. As we look ahead, we believe the investments we've made in innovation, operations and technology, coupled with the momentum in our development pipeline, have positioned us well to deliver on our commitments for 2026 and beyond.

With that, let me turn the call over to Ira for a more detailed discussion of our first quarter financial results.

Thank you, Liz and good afternoon, everyone. For the first quarter ended April 1, 2026, total revenue was $126.2 million, compared to $119.2 million in the first quarter of 2025. Company-operated restaurant revenue increased 7.6% to $105.9 million from $98.4 million in the same period last year. The $7.5 million increase in company-operated restaurant sales was driven by 5.4% growth in company-operated comparable restaurant sales, as well as sales from 2 company restaurants opened since the first quarter of 2025. The growth in comparable restaurant sales included a 5.7% increase in average check size, partially offset by a 0.3% decrease in transactions.

During the first quarter, our effective price increase versus 2025 was 4.6%. Franchise revenue decreased 8.8% to $12 million during the first quarter, driven by $1.9 million of franchise IT pass-through revenue in the prior year quarter related to the new point-of-sale franchise rollout completed in 2025. This decrease was partially offset by a 6.1% increase in comparable restaurant sales and revenue associated with 9 franchise-operated restaurant openings subsequent to the first quarter of 2025. The 6.1% increase in comparable franchise store sales consisted of a 4.9% increase in average check size and a 1.1% increase in transactions.

For the first quarter, system-wide same-store sales were up 5.8% as system-wide traffic turned positive to up 0.6%. We are very pleased to report that the sales momentum we experienced in Q1 has continued into the second quarter. System-wide comparable store sales for the second quarter to date through April 29, 2026, increased 4.8%, consisting of a 3.9% increase in company-operated restaurants and a 5.3% increase in franchise restaurants. Looking ahead, we believe same-store sales for the second quarter will be in the 3% to 4% range.

Turning to expenses. Food and paper costs as a percentage of company restaurant sales decreased 30 basis points year-over-year to 24.9% due to higher menu pricing and cost management initiatives, partially offset by approximately 70 basis points of commodity inflation and higher discounts. We expect commodity inflation to be in the 1.5% to 2.5% range for the full year 2026.

Labor and related expenses as a percentage of company restaurant sales decreased about 260 basis points year-over-year to 30.1% as we continued to benefit from improvements in operating efficiencies, along with lower health insurance and workers' compensation costs. In addition, labor as a percentage of sales benefited from leverage on the 5.4% company-owned comparable store sales increase.

Wage inflation during the first quarter was a manageable 0.4% for all our company-owned locations. For the full year 2026, we expect wage inflation of between 1.5% and 2.5%. Occupancy and other operating expenses as a percentage of company restaurant sales decreased 30 basis points year-over-year to 25.8%, primarily due to leverage on the same-store sales increase was able to offset increases from higher delivery fees, higher utilities, higher occupancy costs and higher liability insurance costs. Our restaurant contribution margin for the first quarter improved to 19.2% compared to 16% in the year-ago period.

As we continue our path of margin improvement, we expect our restaurant level margin for the full year 2026 to be between 18.25% and 18.75%, an increase of 25 basis points from our prior guidance. In addition, we expect our margins in the second quarter of 2026 to be between 19% and 19.5%.

General and administrative expenses increased to $12.8 million compared to $11.3 million in the prior year. The increase was primarily due to $0.6 million received from a legal settlement in the prior year, as well as increased legal fees, outside services, software maintenance and other general administrative expenses. These increases were partially offset by lower shareholder activism-related expenses. As a percentage of sales, G&A increased 10.1% or 60 basis points.

To enable our continued growth in 2026 and beyond, we continue to strategically invest in resources to drive new store development, operations excellence and technology. During the first quarter, we recorded a provision for income taxes of $3.3 million for an effective tax rate of 29%. This compares to a provision for income taxes of $2.3 million and an effective tax rate of 29.7% in the prior year period. We reported GAAP net income of $8.2 million or $0.27 per diluted share in the first quarter, compared to GAAP net income of $5.5 million or $0.19 per diluted share in the prior year period.

Adjusted EBITDA for the first quarter of 2026 was $18.2 million compared to $13.9 million in the first quarter of 2025. Adjusted net income for the first quarter was $8.3 million or $0.28 per diluted share compared to adjusted net income of $5.5 million or $0.19 per diluted share in the first quarter of last year. Please refer to our earnings release for a reconciliation of non-GAAP measures.

In regard to our remodeling efforts, during the first quarter, we completed 6 franchised restaurant remodels and 7 company remodels. In terms of liquidity, as of April 1, 2026, we had $44 million of debt outstanding and $3.9 million in cash and cash equivalents. Subsequent to the end of the first quarter, we borrowed a net additional $2 million on our revolver, resulting in our debt outstanding of $46 million as of May 7, 2026.

With that, we would like to provide you with the following updated guidance for 2026. We are increasing our system-wide comparable store growth guidance to now be between 2% and 4% for the full year. We are increasing our adjusted EBITDA guidance to be between $67.5 million to $69.5 million. We are maintaining the following guidance: the opening of at least 3 to 4 company-operated restaurants and 15 to 16 franchise-operated restaurants; capital spending between $37 million and $40 million; G&A expenses between $52 million to $54 million, excluding onetime charges and including approximately $6.5 million in stock compensation expense; and an estimated effective income tax rate of approximately 29% to 29.5% before discrete items.

Finally, given our step-up in capital spending this year, we anticipate depreciation and amortization will also marginally step up to be between $18.5 million and $19 million for the full year.

This concludes our prepared remarks. We'd like to thank you again for joining us on the call today and we are happy to answer any questions you may have. Operator, please open the line for questions.

[Operator Instructions] We take the first question from the line of Jeremy Hamblin from Craig-Hallum.

Congratulations on the really strong results. So I wanted to dig in a little bit. Menu innovation clearly has been a key driver for you. You had the Loco Tenders launch just towards the end of April. And wanted to just get a sense for how customers were responding to that. And in terms of pricing, the price point is a little bit higher than some peers, like Raising Cane's, for example.

But certainly, the reviews that we've seen have been very positive on product taste and the sauces in particular, the Baja Lime and the Loco Sauce. So just a little more color you might be able to share on that launch.

Yes. Thanks for the question. Yes. So innovation, as you heard, really proud of everything we're doing with culinary innovation and the response we're getting from our consumers. In this environment, people want to try new things and there's so much love for our brand. So when we can do that, we're seeing a lot of success.

As you mentioned, Loco Tenders launched in April. We put a lot of social and just traditional marketing, all kinds of marketing behind making it a really prominent and successful launch. And as a result, we're driving a nice amount of trial. And you're right, the sauces really are part of the story. There's 3 sauces. Personally, I love the Pollo Loco Sauce. But they're all really great.

Also, our tenders have a unique spin on them in that they have kind of a kick, a little bit of a spice. You can get them as an original without that. But that really is what's differentiating us from -- there's such a big -- a large amount of tenders out there. So we feel like we're differentiated there.

In terms of pricing, we did a lot of work to make sure we were competitively priced. So I'm curious which Raising Cane's you're going to. But in terms of just looking out across the competitive landscape, we are seeing that we're in the middle of the pack. And we're also seeing nice add-on.

So sometimes you wonder if it's just going to be a meal onto itself or if you'll see consumers add them on to -- onto a bigger order and we're seeing that as well, which is exciting for us. So all in all, I'm proud of -- it's only a few weeks in there, but proud of what we've accomplished.

Fair enough. Fair enough. I'm in the East Coast market, as you know. So maybe a little bit -- usually not lower price, but maybe than Southern California market. So -- and then, Ira, I wanted to ask about menu pricing. So I think you said 4.6% in Q1. Can you give us a sense for how that might play out the remainder of the year?

Yes, sure. Thanks for the question, Jeremy. So we will see a step down in the pricing that we're carrying as we think about the balance of the year. It'll step down to about 3%, 3.5% in Q2 and then just a little above 3% as we go into Q3 and Q4. And implicit in that is we do have another menu -- a small menu price increase scheduled for midyear of about 1.5%.

Perfect. And then last one for me. So a big year with the acceleration here in unit growth. And in terms of a lot of those stores, as you said, the majority are going to be outside of some of your core markets and outside of California.

But I wanted to get a sense for -- you already have some of those markets where you're building out great franchise partners. Can you give us a sense for the performance of those new stores versus kind of your new unit algo and what you might be expecting?

Yes. So I'll start and then I can have Ira wrap it up there. Proud of what we're seeing with new restaurant development. Really a wide variety of all positive results, but some extreme high sales volumes, particularly when it's the first store in a state, a lot of pent-up demand. But then you're seeing many other openings that are opening at average, a few below our system average, but with the full confidence that over time, they will grow to system average. So seeing just across the board there.

Yes. I completely agree. We're excited about what we're seeing. We are seeing a range. But I think really in totality, what we are seeing are volumes that give us confidence that they make sense for us to continue to deploy capital. It makes sense for franchisees to deploy capital and we expect to continue to grow in these markets.

We take the next question from the line of Todd Brooks from The Benchmark Company.

Congrats on the eye-opener of a good quarter. So well done. A few quick questions here. One, you talked about tenders and you talked about it meeting expectations. But what I'd love to drill down in, what is the expectation at the launch? Was there a mix target you were hoping to hit? Or any color you could give us around the performance from a quantified standpoint?

When we look at mix targets, we've got a range in terms of what we see when we devote a promo panel and we put a lot of marketing effort behind a new product. And we'd say that this product is right in line with what we traditionally see. Because we're just in the first couple of weeks, that's building. And so as an example, media just turned on in the last week. And so that we'll continue to see it build.

So not really releasing exact numbers at this point, but proud of how they're doing. And a couple more weeks, we'll get a lot more information on the mix between how much is being eaten as an entree versus being added on to an existing meal.

Okay. Great. I was wondering and -- I mean, it sounds like with the April commentary, the question may be redundant, but things obviously changed a bit for the consumer come March, April. And with your concentration in California, obviously, gas prices are even more of a headline issue there. If you look at progression across the quarter and into April, did you see a downshift at all from the consumer? Or did you guys power through it with the momentum you have in the business?

No, the consumer has remained steady. We're pleased with that. And we think that's a function of we're continuing to perform. We're continuing to improve with the operations and the value. And our consumer is remaining steady.

In terms of the progression as we went through the quarter and Ira, you might comment on this.

Yes. We -- as you can -- we announced our quarter-to-date -- quarter on the last call and we were in the low 2% range, 2.4% and obviously, putting up a 5.8% for the quarter. We had a big step-up in March, which was driven -- honestly, we had some weather benefits, which helped us. But we did feel the strength in the consumer as well and the business.

And I think as you move into April and we see the 4.8% that we put up in April, speaks to how we feel a little -- a lot of momentum in the business and we really have not seen that impact from the consumer of what you're talking about in regards to the increased inflationary pressures as well as driven by gas prices.

Okay. Perfect. And then one more from me. Liz, as you're thinking about franchising as a growth engine, I'm not going to ask the pipeline question. For once this quarter I'm going to ask a different question. How aggressive are you being as far as exploring territories that you're looking for partners? And what are you willing to do as far as proving out Loco East Coast or even working your way a little bit more aggressively towards the East Coast to start to put that patina of Loco truly being a national brand versus a super-regional brand?

So simply put, very aggressive. And I just actually had the Board in this week and we had a robust conversation around what's the right combination of company and franchise development. Company will continue to develop. But the good news is there's a lot of franchise partners that also want to develop alongside us. Some are in our system today and then some are those that we're getting to know or we haven't met yet.

So with the addition of a new recruiter on our franchise development side, she's having some great conversations with franchise partners in new markets, some very far away from California. And I think there's going to be good demand to be able to grow in those markets without even having to go deploy company capital in some of those further afield markets.

But then there's plenty of places where company is operating. So take Dallas, for example, where we just opened our first company restaurant in Dallas at the beginning of the year. And we did that alongside -- we have a franchise partner in that market. So we're developing there. The franchise partner is developing in Texas. So that's an example of moving several states away and putting company capital to work in a way that we're all going to grow that Texas market.

So long story short, it's a combination of both. And the magic will really be in unlocking even more franchise partners across the country.

We take the next question from the line of Matthew Curtis from D.A. Davidson.

I got a question on throughput. It seems like you're driving improvement in speed of service, order accuracy. Liz, I heard your comments about part of this being reconfiguring display screens, et cetera, to help with that. But I'm just wondering what you have planned going forward to continue driving the improvement there. And how much actual improvement on speed of service have you seen so far, either in store or via the drive-thru?

Thanks for the question. I'm very pleased with the improvements we're making operationally. Before we even got to speed, we all aligned that the first thing we needed to do was make sure we were improving our performance with things like accuracy and service and standards because I think we all can agree and we've seen a lot of data, if you're fast, but the order is wrong and you get home and you don't have what you want, that's a terrible experience and you would have preferred to have waited that extra -- make it up a couple of seconds for your order to be right. And so the primary focus the last couple of months has been on the standards, the service and really the accuracy.

And so that's where we've made the most meaningful improvements when you look both at the SMG data, when you look at just more broadly talking to consumers. So that's where we're really proud. Speed, on the other hand, in different pockets of the organization, especially where we're testing different things, we're seeing some improvements in speed. I think that's still an area where we have opportunity. And over the next couple of months, all of those items I mentioned on the call, these operational enhancements are exactly what is going to underpin us improving speed. So the simple things like making it easier to make our food because the team member can read the description on the kitchen display system in just a faster format, that's going to help, as one example.

So lots of progress we're proud of, but still, I think, a lot of upside as we continue to focus on it.

Okay. Great to hear. Then I guess another question, a different question on the traffic improvements you've seen relative to the fourth quarter. I was wondering if you could talk about how broad-based this improvement has been demographically and if any particular groups in terms of age, income, or other factors are really leading the improvement. And I ask because I think on the last call, you mentioned early data suggesting improved momentum with younger consumers in particular.

Yes. So we're seeing the improvement broadly across all, which is nice to see. So whether it's incomes or ages, seeing improvements across the board. That younger set is a little bit higher in terms of the growth, which is a great indicator, we think and also just signals that the work we're doing on some of these new menu items that are just more relevant for that crowd, along with how we're communicating with our brand voice is resonating. So we're excited about that.

It's also nice. I've seen data that shows we're seeing frequency increase with our existing consumers. So the consumers that are heavier users, they're coming more frequently, which is also great. And then also with new consumers, we see when we put new innovation out there, as you would expect, it brings in new consumers. So it's kind of -- it's across the board that we're seeing the improvements.

Ladies and gentlemen, we have reached the end of today's question-and-answer session. I would like to turn the call back over to Liz Williams for her closing comments.

Thanks again, everyone, for your interest in El Pollo Loco today. We look forward to talking to you again next quarter. Have a wonderful evening.

Thank you. Ladies and gentlemen, the conference of El Pollo Loco has now concluded. Thank you for your participation. You may now disconnect your line.

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the El Pollo Loco Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded today, March 12, 2026.

And now I would like to turn the conference over to Ira Fils, the company's Chief Financial Officer.

Thank you, operator, and good afternoon. By now, everyone should have access to our fourth quarter 2025 earnings release, which can be found at elpolloloco.com in the Investor Relations section.

Before we begin our formal remarks, I need to remind everyone that our discussions today will include forward-looking statements, including statements related to our growth opportunities, strategic and operational initiatives, expectations regarding sales and margins, potential changes to our product platforms, capital expenditure plans, the ability of our franchisees to drive growth, expectations regarding commodity and wage inflation, remodel plans and our 2026 guidance, among others.

These forward-looking statements are not guarantees of future performance, and therefore, you should not put undue reliance on them. These statements are also subject to numerous risks and uncertainties that could cause actual results to differ materially from what we currently expect. We refer you to our recent SEC filings, including our Form 10-K for a more detailed discussion of the risks that could impact our future operating results and financial condition. We expect to file our 10-K for 2025 tomorrow and encourage you to review that document at your earliest convenience.

During today's call, we will discuss non-GAAP measures, which we use for financial and operational decision-making and as a means to evaluate period-to-period comparisons and which we believe can be useful to investors in evaluating our performance. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP and reconciliations to comparable GAAP measures are available in our earnings release, which is available in the Investor Relations section of our website.

With respect to the adjusted EBITDA outlook we will be providing on today's call, please note that we have not provided a reconciliation to the most directly comparable forward-looking GAAP financial measure because without unreasonable efforts, we are unable to predict with reasonable certainty the amount of or timing of non-GAAP adjustments that are used to calculate income from operations and company-operated restaurant revenue on a forward-looking basis.

Now I would like to turn it over to our CEO, Liz Williams.

Thank you, Ira, and good afternoon, everyone. I'm pleased to report strong fourth quarter results that cap off a transformative second year in our brand turnaround journey. In Q4, we delivered a positive quarter of same-store sales growth, including stable traffic despite the ongoing macroeconomic challenges that persisted across the industry. This top line momentum, combined with our team's relentless focus on operational excellence also enabled us to achieve better-than-expected restaurant level margins.

Before we move on, let me quickly recap what we accomplished in 2025. Building on the foundation we established in 2024, we made strategic investments and executed with discipline across our 5 pillars, achieving meaningful results that we believe position us for accelerated growth in 2026 and beyond. What began as a transformation effort has now evolved into sustained momentum that validates our long-term growth strategy for El Pollo Loco.

During the year, we successfully expanded our restaurant level contribution margins again, demonstrating our ability to drive profitability even while investing in customer value and traffic-driving initiatives. We accomplished this through a methodical approach to cost savings and enhanced labor productivity, including leveraging technology and industry best practices. We are also encouraged by the operational transformation that took hold in 2025, allowing our team members to focus more on guest serving activities. In addition, we made substantial progress improving our unit economics by successfully reducing our new build costs with our iconic prototype design and driving even higher cash-on-cash returns by utilizing second-generation sites where available.

As we look ahead, our priorities for 2026 are clear: to drive sustainable traffic growth across our system while maintaining the margin discipline and unit economic improvements we've accomplished over the past 2 years, and to thoughtfully grow El Pollo Loco across the country. We will achieve this by continuing to execute against our 5-pillar strategy. Ultimately, we believe our focused approach will accelerate our growth trajectory and further strengthen El Pollo Loco's position as the nation's favorite fire-grilled chicken restaurant.

With that, let me provide you details on our pillars. At the heart of brand that wins is a breakthrough culinary innovation. Together with value, innovation is critical in driving transaction growth, and I am thrilled to share the exciting momentum in our culinary pipeline. Leveraging our unique fire-grilled chicken platform that showcases premium quality at accessible price points, we are able to satisfy our legacy guest preferences while also introducing El Pollo Loco to entirely new consumers across multiple occasions. Over the last 18 months, we have identified the opportunities to bring more portable and craveable options to our menu. This is translating to improvements in our core customer feedback scores when asked questions regarding menu variety and have innovative foods I want to try.

Before I discuss how we capitalize on this opportunity further in 2026, I want to take a moment to celebrate the success of our Double Chicken Street Corn and Queso Crunch Burrito Bowls that we launched in late September. These bowls were instrumental in driving our fourth quarter performance, exceeding our expectations in both guest response and sales contribution. The popularity of these hearty, value-driven, high-quality offerings was so positive that we made the strategic decision to keep both bowls as permanent menu items. This success continues to validate our approach to creating a menu that delivers superior value and portability while maintaining the bold flavors and premium ingredients that differentiate El Pollo Loco. During the quarter, we also launched our $29.99 Fam Feast, an 8-piece fire-grilled chicken meal with 5 tortillas, salsas and churros, providing quality and value for families and groups.

Turning to 2026. We are pleased with the momentum from our Double Pollo Salad that launched in January with fresh options to meet new year resolutions. Featuring Street Corn, Mexican Caesar and Bacon Ranch options, each salad delivers over 50 grams of protein with a double portion of our signature fire-grilled chicken. Given the consumer appeal of Street Corn and Mexican Caesar Salads, both have earned a permanent placement on our menu and continue to resonate well with our guests, seeking nutritious and craveable options with fresh ingredients.

Building on our salad success, in mid-February, we launched Baja Double Tostadas, reimagining our beloved tostada with bold new flavors and notably a seasonal seafood option. Our Baja Double Tostadas featuring chicken and shrimp demonstrate our willingness to innovate across the core platform while maintaining our commitment to quality and flavor. While still early, the initial response has been very encouraging with guests embracing both the limited time seafood protein and enhanced flavor profile delivered through our Lime Crema Sauce. In addition to new salads and tostadas, we also continue to promote our core fire-grilled chicken on the bone with the return of Mango Habanero Chicken, which was available for a short time and also the continuation of our $29.99 Fam Feast.

Turning to protein. We are proud of our position as a true protein leader. We further capitalized on the macro trends by launching our version of a protein menu, which is a collection of menu items with more than 20 grams of protein. We did this with a playful nod to the fact that we have been the legitimate place for protein for over 50 years. The February launch culminated with social media content illustrating a drumstick in a protein bar wrapper, messaging that our chicken is the original protein bar, a clever way to connect with today's youthful and protein-focused consumer mindset. The best part of our protein menu is it requires no new operational lift. Rather, it simply showcases what we are known for, high-quality, delicious chicken packed with protein.

As we look toward our future innovation pipeline, we are excited about our upcoming Loco tenders launch in a few weeks. Our all-white meat boldly seasoned tenders feature our signature dipping sauces, Pollo Loco Sauce, Baja Lime and House Ranch. They also represent our entry into the rapidly growing chicken tender category. Loco Tenders provide a unique El Pollo Loco twist on a classic tender, which we believe will make them a standout and have strong appeal for new and existing customers.

We are currently in the final stages preparing for this launch. We are also testing new loaded quesadillas and a crispy grilled chicken sandwich that delivers all the crunch and flavor of a fried sandwich, but it is grilled, not fried. Both entrees are flavorable, portable and under $10. Also in test are beverages with Horchata iced coffee featuring our delicious Horchata with notes of cinnamon and vanilla and cold foam coolers, which are Aguas Frescas topped with sweet creamy cold foam. Both beverages are planned to launch later this year. These are just a few of the products across our innovation pipeline, which is the most robust we have delivered in years.

To support all of this menu innovation and growth, we have implemented an internal process with several stage gates to ensure our restaurant operations are minimally impacted and that we can deliver the quality that defines El Pollo Loco. Best of all, our ability to foster innovation has been enhanced recently by our new culinary kitchen at the heart of our restaurant support center.

Our menu innovation strategy works hand-in-hand with our targeted marketing efforts to further amplify the El Pollo Loco brand and drive meaningful guest engagement. By emphasizing our unique heritage of fire grilling chicken and actually cooking in our restaurants, we believe we have a true competitive advantage in the QSR landscape that few brands can claim. We stand firmly behind our commitment to quality. And while others might think our dedication to fire-grilled chicken is Loco, we believe this passion is exactly what sets us apart. We are proud of what our Let's Get Loco campaign accomplished in 2025. From a distinct tone and look in our advertising to leveraging our passion to build brand affinity, Let's Get Loco positions us as an authority in authenticity.

Beyond advertising, this came to life through our brand activations like our Loco AI challenge, which invited fans to create chicken-centric content using AI or our December 12 Days of Pollo activation, where we introduced fans to our Chicken in the Kitchen, which was our version of Elf on the Shelf. The momentum continued as we kicked off the new year where we officially declared Monday as Leg and Thigh Day, a fun play on a leg day at the gym. We did this by providing gymgoers and Loco Rewards Members free Leg and Thigh Meals for the perfect post-workout meal. These buzz-building moments amplify our brand beyond the menu and create moments for real fandom and loyalty.

In addition to larger brand activations, we have also shifted our local marketing approach to include more grassroots efforts to support our fundraising and catering program. This has been especially beneficial in new and growing markets and will become increasingly important part of our marketing toolkit as we expand. We are focused on growing reach and frequency across all consumer groups. And while it's still early, the data suggests that we are seeing momentum with the younger consumer, particularly the 25 to 34 age bracket, driven by our brand relaunch and marketing efforts. There is still much work to do, but this is an early indicator our initiatives are gaining traction.

Looking ahead, our integrated marketing and menu innovation strategy will continue to focus on our passion for chicken and our commitment to showcasing quality and affordability across multiple consumer occasions in a relevant way. Whether we're launching new menu innovations, creating memorable brand moments or taking a local approach in new markets, our marketing will consistently reinforce our differentiator of fire-grilled chicken while meeting the evolving consumer demand for portable, flavorable and protein-rich options.

Shifting to hospitality mindset. I want to highlight the immense focus we have placed on operational excellence to drive sustainable traffic growth. In 2025, we recognized an opportunity to invest in driving standards and accountability through third-party measurement and direct customer feedback and benchmarking. The investments we've made are being noticed by customers. Our overall satisfaction, or OSAT scores are now outpacing the QSR industry as measured by SMG. And we have shown improvement across all measures from accuracy to quality, friendliness, cleanliness and speed. While this sequential improvement has continued into the first quarter, I do believe we still have room for improvement, which will drive additional future growth.

I want to give special recognition for the improvement we saw in friendliness, which was the largest sequential increase. This was made possible by our team members embracing our opportunity and delivering excellent service each and every day. I want to take a moment to say thank you to our restaurant team members and our franchise partners. We are excited about the opportunity to continue raising the bar. El Pollo Loco is consistently recognized for our exceptional food. We are motivated to earn that same recognition for our operational excellence. With our focus on operational excellence and fundamentals, we are combining innovative tools and AI applications to further drive team member efficiency and customer experience.

Throughout the year, we will continue to deploy tools, systems and new ways of training that help us deliver robust culinary calendar while also elevating customer service. I would like to note that these strategic investments in operations and technology will naturally translate to an elevated G&A in the near term, on which Ira will provide further detail in a moment. However, we view this investment as a critical foundation that will allow our brand to scale efficiently and maintain our high standards as we expand.

This brings us to our next pillar, enhanced capabilities with our digital-first mindset. We are pleased that our digital business continued to gain momentum during the fourth quarter. Our more aggressive approach offering app-based promotions and targeted value through our Loco Rewards program drove significant engagement and transaction growth. As an example, our 12 Days of Pollo campaign in December exemplifies this strategy perfectly, delivering exclusive daily deal. This limited time promotional event not only generated immediate sales lift, but it also attracted new app users and increased the frequency among existing loyalty members, demonstrating the power of creating urgency and exclusivity within our digital ecosystem. We are pleased with the increased engagement as both loyalty revenue and participation rate grew by more than 20% year-over-year.

In January, we launched a program refresh that introduced boost or seasonal offers exclusive to rewards members. We believe that these types of enhancements to the program will help us maintain our strong momentum in 2026. We have also continued to grow our reach and frequency through our third-party delivery partners, expanding our digital offers and utilizing paid advertising with these platforms. We successfully grew delivery by 12% year-over-year in 2025, and we will continue to focus on offers and advertising in 2026 as our data suggests that these transactions are incremental and do not cannibalize existing traffic.

We also made several substantial technology investments in our restaurants in 2025 that will continue to enhance customer and team member experience in addition to productivity. As an example, in the last few weeks, we completed a project to upgrade all of our company and franchise restaurants to a cloud-enabled point-of-sale platform that is easier and faster for team members to use, and it unlocks insightful reporting capabilities.

The importance of technology and AI is rapidly increasing across all facets of our business. Just about every project team depends increasingly on technology for a program success. With this rapid increase in technological needs and importance to operational excellence, we are investing in technology leadership with the addition of a new Chief Technology Officer, Vadim Parizher. Vadim joins us with a rich background from Taco Bell, Allergan and Amgen. Together with a strong tech team already in place, Vadim will shape our technology investment to provide a powerful foundation to support our growth.

As we pivot now to growth through new development, 2025 proves that we are a brand that is ready to grow again with a business model that supports sustainable expansion. We achieved our goal of opening 9 new restaurants in 2025, including our 500th El Pollo Loco restaurant in Colorado Springs. As a reminder, this is the largest system-wide unit growth since 2022, and we are just getting started. More importantly, we aren't just opening restaurants. We are opening successful ones. The restaurants we've opened since 2024 are averaging over $2 million annually, driven by our strong franchise partners and our new restaurant training teams who bring our refined brand positioning to life for our customers every single day.

In 2025, we opened restaurants in 2 new states, Washington and New Mexico, bringing our footprint to 9 states in total. Of the 9 restaurants opened, 6 were outside of California and 7 of the 9 were built leveraging second-generation restaurant assets with significantly lower build costs than traditional ground-up units.

Let me highlight a few standout locations that showcase the breadth of our success across the country. In Dallas, we opened a company-owned location in the former Arby's site with a build cost of $1.4 million with early sales results in line with our expectations. This is a perfect example of how we are derisking our capital outlay through second-generation sites. Our franchise partners have also delivered exceptional recent openings with strong performing locations in Colorado, Texas and Washington. These second-generation site construction costs were typically in the low to mid million dollar range and all have been averaging above $2 million in annualized sales volume.

These successes reinforce our confidence as we look towards 2026, where we are targeting approximately 18 to 20 new restaurant openings with 3 to 4 being company-owned locations. Similar to last year, the vast majority of the 18 to 20 new openings in 2026 are expected to be outside of California. This growth trajectory is being supported by key organizational enhancements, including our new VP of Franchise Recruiting, who will help accelerate our franchise development efforts and our robust investments in incremental field training and new store opening teams.

Turning to our restaurant remodeling program. We continue to progress as planned. For the year, we completed the 69 planned remodels, and we continue to see consistent mid-single-digit sales lift in company-operated locations. For 2026, we plan to remodel 25 to 35 company-operated restaurants and 30 to 40 franchise-operated remodels, putting us on track to meet our goal of updating approximately half of our total system over 4 years. The combination of successful remodeling program and the strong performance of recent openings has positioned us well for continued expansion in 2026 and beyond. We remain focused on disciplined growth that delivers strong returns while building lasting brand presence in new markets across the country.

Before I turn the call over to Ira, let me provide you with one more update that is more long term in nature. In addition to the day-to-day hires we've made, we've also materially reshaped our Board with substantial industry expertise over the past 2 years with the addition of 4 new Board members with extensive restaurant experience. These industry leaders are not only strengthening our corporate governance, but also providing valuable best practice sharing and guidance on all topics from marketing to operations and development strategies. With the support of our Board and the momentum we've built across our strategic drivers, we have tremendous confidence in our ability to accelerate growth over the next several years.

With that, let me turn the call over to Ira for a more detailed discussion of our fourth quarter financial results.

Thank you, Liz, and good afternoon, everyone. For the fourth quarter ended December 31, 2025, total revenue was $123.5 million compared to $114.3 million in the fourth quarter of 2024. Company-operated restaurant revenue increased 7.1% to $102.4 million from $95.6 million in the same period last year. The $6.8 million increase in company-operated restaurant sales was driven by a 0.4 percentage growth in company-operated comparable restaurant sales as well as $5.3 million of sales from the additional operating week in 2025. As a reminder, our fourth quarter of 2025 included 14 weeks compared to 13 weeks in the same period last year.

The growth in comparable restaurant sales included a 2.7% increase in average check size, partially offset by a 2.3% decrease in transactions. During the fourth quarter, our effective price increase versus 2024 was about 3.2%. Franchise revenue increased 15.5% to $13 million during the fourth quarter, driven by a 3.2% increase in comparable restaurant sales, $0.5 million from the additional operating week in 2025, $0.4 million in revenue recognized related to terminated franchise development agreements and revenue associated with 9 franchise-operated restaurant openings subsequent to the fourth quarter of 2024. The 3.2% (sic) [ 3.3% ] increase in comparable franchise store sales consisted of a 2.4% (sic) [ 2.5% ] increase in average check and a 0.8% increase in transactions.

For the full year 2025, our system-wide comparable store sales increased 0.1%, driven by a 0.7% increase in average check, which was partially offset, including Q3 true-ups by a 0.6% decrease in transactions. As we move into 2026, we are pleased that our sales momentum has continued into the first quarter. System-wide comparable store sales for the first quarter to date through February 25, 2026, increased 2.4%, consisting of a 1.8% increase in company-operated restaurants and a 2.8% increase in franchise restaurants.

Turning to expenses. Food and paper costs as a percentage of company restaurant sales decreased 70 basis points year-over-year to 24.4% due to higher menu pricing and approximately 100 basis points of commodity deflation during the fourth quarter, which was partially offset by higher discounting. We expect commodity inflation to be in the 1% to 2% range for the full year 2026. Labor and related expenses as a percentage of company restaurant sales decreased about 90 basis points year-over-year to 31.5% as we continue to benefit from improvements in operating efficiencies, primarily driven through enhancements in labor deployment and scheduling, combined with continued use of technology and equipment to simplify team member roles along with menu price increases. Wage inflation during the fourth quarter was 0.6% for all our company-owned locations. For the full year 2026, we expect wage inflation of between 2% to 3% for all our company-owned locations.

Occupancy and other operating expenses as a percentage of company restaurant sales increased 80 basis points year-over-year to 26.6%, primarily due to higher utilities, software maintenance fees related to our kiosk and new POS rollouts and higher rent and higher liability insurance costs, partially offset by lower repairs and maintenance expense. Our restaurant contribution margin for the fourth quarter improved to 17.5% compared to 16.7% in the year ago period. As we continue our path of margin improvement, we expect our restaurant level margin for the full year 2026 to be between 18% and 18.5%. In addition, we expect our margins in the first quarter of 2026 to be between 17.5% and 18%.

General and administrative expenses increased to $13.1 million compared to $11.1 million in the prior year. The increase was primarily due to $1.2 million in incremental labor and related costs, $0.7 million in severance and executive transition costs, $0.8 million in other general and administrative costs, partially offset by $0.7 million in lower management bonus expense. As a percentage of sales, G&A increased to 10.7% or 100 basis points. As we move into 2026 to achieve our accelerating new store growth objectives, we are continuing to strategically invest in resources to drive new store development, operations excellence and technology to enable our growth in 2026 and beyond.

During the fourth quarter, we recorded a provision for income taxes of $2.8 million for an effective tax rate of 30%. This compares to a provision for income taxes of $1.8 million and an effective tax rate of 23.5% in the prior year period. We reported GAAP net income of $6.5 million or $0.22 per diluted share in the fourth quarter compared to GAAP net income of $6 million or $0.20 per diluted share in the prior year period.

Adjusted EBITDA for the fourth quarter of 2025 was $16.9 million compared to $14.3 million in the fourth quarter of 2024. Results for 2025 included 14 weeks of operation compared to 13 weeks in 2024. The impact of the extra week of operation increased adjusted EBITDA by approximately $770,000. Adjusted net income for the fourth quarter was $7.3 million or $0.25 per diluted share compared to adjusted net income of $5.9 million or $0.20 per diluted share in the fourth quarter of last year. Please refer to our earnings release for a reconciliation of non-GAAP measures.

In regard to our remodeling efforts, during the fourth quarter, we completed 25 franchise restaurant remodels and 10 company remodels, bringing our total completed remodels for the year to 17 company and 52 franchised remodels. In terms of liquidity, as of December 31, 2025, we had $51 million of debt outstanding and $6.2 million in cash and cash equivalents. Subsequent to the end of the fourth quarter, we paid down an additional $3 million (sic) [ $5 million ] on our revolver, resulting in our debt outstanding of $48 million (sic) [ $46 million ] as of March 12, 2026.

With that, we would like to provide you with the following guidance for 2026. System-wide comparable store sales growth of 2% to 3%, the opening of 3 to 4 company-operated restaurants and 15 to 16 franchise-operated restaurants, capital spending between $37 million to $40 million; G&A expenses between $52 million to $54 million, excluding onetime charges and including approximately $6.5 million in stock compensation expense. Adjusted EBITDA between $66 million and $68 million and an effective income tax rate of approximately 29% before discrete items. In addition to our guide for 2026, we are introducing the following guidance for 2027 and 2028. System-wide comparable restaurant growth percent in the low single digits, system-wide restaurant growth percent in the mid-single digits and adjusted EBITDA growth percent in the high single digits.

This concludes our prepared remarks. We'd like to thank you again for joining us on the call today, and we are now happy to answer any questions that you may have. Operator, please open the line for questions.

[Operator Instructions] And our first question comes from Jake Bartlett with Truist Securities.

First question was on the consumer. You guys are in a -- I think, because of your regional or less weather than we've had on the East Coast. And one of the phrases that we talk about these days is underlying demand. And I think you guys might be in a good position to tell us about what you think kind of the underlying demand is out there without weather. So what are you seeing? I know you're doing a lot to influence your results, which is encouraging, but I'm hoping you can kind of talk about your confidence in the consumer, which direction you think the consumer has been moving in the last few months and few quarters?

Thanks for the question. So the consumer is still looking for great food at a great value. So wanting to have a meal that is healthy, better for them, quality ingredients, all indulgent at times, but wanting to do it within their budget, so certainly more budget conscious. So we're seeing that we're able to serve that for the consumer. We are seeing increasingly the consumer -- in Q4, we saw the consumer responding to value, particularly with our Burrito Bowls and with some of our offers in our app and then also with third-party delivery.

And then as we've gotten into the beginning of this year, the consumer where we are predominantly on the West Coast, we are lapping some of the activity from last year where the consumer stayed home more, whether it was because of they didn't have the money to come out as much, but then there were also some of the events going around with just [ ice ] and everything else out there. So not seeing as much of that this year. So the consumer is certainly still looking though for just a great experience at a great value.

Great. That's good to hear. The other question was, it sounds like you're doing a lot. You're testing a lot. You're coming up with some nice menu innovation. You're adding a lot of items or a number of new items to the permanent menu, adding a little complexity. So I'm wondering whether -- what you're taking off the menu, for instance, but also how you're going to market all this effectively? It seems like there's a lot to talk about and you have a limited -- maybe a limited voice. So what's the approach to marketing in terms of trying to accomplish all that you're trying?

Sure. Thoughtfully pacing and sequencing is really key. And doing a lot of testing, which is what we're doing right now. And if you think about having also a nice mix of products that we've had before that consumers love and then just doing a twist on some of those menu items, as an example, our tostadas that are wildly popular. The twist right now is the Baja Lime element with shrimp and with chicken, whereas in the past, we've done that with Mango Habanero where we've done that without flavoring. Same thing is true with the Burrito Bowl that we launched in Q4. We had a twist there with the Queso Crunch.

We had always had Burrito Bowls on our menu. However, we innovated on 2 new flavors. And those -- some have unique ingredients, some use ingredients we already have in the restaurant. And so when we made the decision to keep those on the permanent menu, what we did is we looked at the Burrito Bowl lineup and said, does this replace a Burrito Bowl on there? And indeed, it did. And so in many instances, as we're adding, we're also removing or as an example, on the Pollo -- the Double Pollo Salad, we made an update to one of the salads where we made a small enhancement, but it was one in, one out in that sense.

Our next question comes from the line of Todd Brooks with Benchmark StoneX.

Congrats on really strong results and solid momentum carried here into the new year. So congrats on that. Two questions, if I may. One, you talked about work in getting the prototype cost down and the success with the second-generation locations, and you gave guidance for -- I think it implies 14 to 17 new franchise locations in '26. Can -- Liz, can you talk about the mix of growth with existing franchisees versus new-to-brand partners? And are we to the point yet that you feel like you're ready to give us color into what the franchising pipeline looks like so that we can start to understand what you're building on to drive that flywheel of longer-term unit growth that you guys guided for, for '27 and '28?

Sure. And as we go along throughout the year, we'll certainly provide more detail in the richness of that pipeline in terms of where those units are and with different franchise partners and company units. So we figure at least 20% of those new builds will be with company capital. And in terms of the franchise partners, I'm excited because it's a lot of our existing franchise partners who have seen the improvement that we've made with the economics, and they have that enthusiasm and love for the brand, and they know how to grow with the brand. They have the infrastructure to grow with the brand.

So we have a healthy pipeline of existing franchise partners, but then there's also new franchise partners. So as an example, we've got new partners up in Washington that are driving growth, new partners in New Mexico, as an example. So it really is a mix. And then we're not done. We -- as I mentioned, we just brought on a new leader guiding our new franchise recruitment. And we have a good amount of interest, but I think there's more interest out there as we tell the story of the brand and we work our way across the United States. So simple answer is it's a nice combination of new but also existing complemented by corporate growth.

Okay. Great. And my second one, and I'll jump back in after this. I don't ever remember this type of annual guidance from Loco in the past and certainly not a multiyear framework. It's great to get. Thank you for it. But what are you seeing in the business that gives you the confidence to actually give us this given the current consumer environment?

It's a great question. I now are going in -- or concluding the second year of the turnaround, heading into year 3, have a really terrific leadership team alongside me and also just team around us. And we've all been at this for decades. And we've seen a lot of restaurant growth turnarounds, turbulent times. And we see in our business, we've worked through so much over the last couple of years. We have gotten this brand to a place that's so much healthier than where it was. We've stabilized and improved -- dramatically improved the margins and the profitability of the brand. We've got -- we figured out what works in terms of driving sales, what formula works when it comes to innovation or value.

Now there's always the consumer element, which is the big surprise, like you mentioned, it's harder to predict what's going on with macros and consumers. But there's just some fundamentals that I think I'm more comfortable and our leadership team is more comfortable knowing that formulas that drive growth. And so now as we look out to a longer term, we're able to make longer-term decisions such as investing some very thoughtful G&A in places that we know is going to drive growth. And so when we put that all together and you've got a great CFO like Ira and team with him, you feel more comfortable being able to articulate that 2- to 3-year plan.

Our next question comes from the line of Jeremy Hamblin with Craig-Hallum.

Congratulations on a really strong year and the momentum you have in the business. I thought I would start by just understanding in terms of the system, really strong results from the franchise business in Q4, but about a 300 basis point difference between your company-operated locations and franchise on traffic. And wanted to get a sense for why you think that difference exists. It does sound like in Q1, that gap has closed, but likely still some sort of a gap there given that franchise is trending a bit higher. Any color you might be able to share and what you might be able to learn from kind of the franchise operators?

Yes. So I wouldn't read too much into it as it does go back and forth from time to time and quarter-to-quarter. Sometimes some of the factors, we do pick it apart and look at it. Some of the factors can be geographies, but they also could be lapse in terms of amount of pricing that either franchise or corporate might have taken and then lapping that and implications that has with transactions. It also, at times, can be -- the geography piece has some of the weather implications as well.

And then in addition, it can occasionally be operationally driven. I do think our franchise partners are terrific operators. And in some instances, they have operated more strongly than corporate restaurants. But I wouldn't say in this case, it's any one of those, like that's the defining reason. It's usually a multitude of factors.

Understood. And then coming back to the point about menu innovation, that really stands out where it looks like you guys are testing more and more frequently. In terms of what is in place from a corporate level to drive that type of innovation, what's changed on that front? And in terms of thinking about what your pipeline looks like, right, you've had a lot of exciting launches and successful launches here. Should we expect this type of innovation and the number of new products to continue here as you go into '27 and '28 as well?

I think we should expect that. We have a belief that the category loves innovation. The consumer loves to try new things, and we think that our brand leans into that exploration. And some of the things that we've done on -- from the restaurant support center standpoint is to build back that muscle of being able to do innovation and do it well and within our operational footprint. Because the worst thing is when companies go and try to do innovation, they don't do it well. And operationally, it just breaks the restaurant.

And so some of the things that we've put in place, we have an op services team that we didn't have a couple of years ago, led by Rick Pepper, outstanding team. They really work closely with our operations team to field test. I've talked many times about our culinary team led by Rene, Chef Rene, he does a fabulous job on the innovation side. That team was not as robust a couple of years ago. And then I spoke briefly in the prepared remarks about having a culinary kitchen. We recently moved our corporate headquarters after 20 years and our #1 priority in looking for space was having a culinary kitchen at the center, the heartbeat really of the support center. And even little things like that signal to the organization how much we care about culinary and about innovation.

Follow-on to that question. Just to confirm, you said that the full launch of tenders is coming in a few weeks. And then I wanted to get that confirmed. And then just thinking about when with the chicken sandwich, kind of the rollout of that.

Yes. So we'll see our tenders later this spring. I haven't released the exact date yet, but later this spring, we're really excited. And then the sandwich is still in test, and we're testing other types of sandwiches. So that's something we're looking at later this year, so in the second half of the year.

Got it. Last one for me. The balance sheet really improved in 2025, right? I think your net debt now is down to like $45 million. Is -- and you're continuing to build cash or cash flow, I should say, -- is the plan to get that down to no debt? And then after that point, as you have a bigger system in total as you grow units, thinking about other things that you might be able to do with that cash flow on a go-forward basis? Or any insight you might be able to share into the kind of the multiyear plan on that?

Yes. I think that's a great question, Jeremy. Thanks. So as you move into 2026, the good news of us being able to have so much cash available, we are turning around and investing that in the business as we move into 2026. We -- as Liz talked a lot about, we are increasing our pace of new unit development on the corporate side. We are investing it as we're in this kind of second year of our image and look and feel of the brand. We're upping the pace of our remodels. We're taking these dollars, and we're investing it into operational improvements in the restaurant to help us drive both sales and drive margins.

And so we're going to spend a little more in CapEx this year as we talk about in '26. And so that's one thing we're doing with it. And as we continue to move forward, we will also be evaluating ways how we can -- from a capital allocation standpoint, potentially return that to shareholders as well. So I think we are comfortable with our level of debt, but we're also looking for ways to take those dollars and invest it in the business to continue to drive profit growth over time.

Our next question comes from Andy Barish with Jefferies.

You guys are kind of in the, I guess, enviable position of having reported after the Middle East stuff has erupted. Have you seen sort of a consumer reaction with gas prices above $5 in California? Just kind of wondering sort of what you're willing to discuss there, just given you guys have been one of the few if only reporters since everything sort of started up.

Yes. Thanks for the question, Andy. Surprisingly, we haven't. We're all very familiar that typically, QSR and fast casual are tightly correlated with gas prices. So we are watching closely, but haven't -- I wouldn't say we've seen anything of note as of late.

Good to hear.

I don't know if it trickled through.

Or if it does, people adjust hopefully fairly quickly and get back to prior spending patterns, which I guess has been sort of what we've seen historically, at least in terms of food away from home. On the comp -- the same-store sales composition, can you kind of go through that with us? I know traffic is a focus, but I'm assuming pricing is going to kind of be in line with inflation, which looks like it's kind of 2% to 3% when you combine commodities and labor. Just any more color on price? And then is the goal to get traffic positive this year?

Yes. Well, that's always our #1 goal, is to drive traffic positive. And we feel good so far about our trend that we've seen in the quarter. We were a little soft that first week of the quarter with -- we had some holiday timing and some weather issues. But we've been very pleased with the way the quarter has played out with us so far.

And again, to the second half of your question, we are going to keep pricing similar to last year. We were -- I think we came in at about 3.5% last year, and our pricing will be similar to that as we move forward into '26, obviously, subject to how the year plays out. But we feel a combination of the innovation that we have going and the products that we're bringing to bear and where the business is right now, we feel like we do have the ability to take a little bit of pricing as we move forward this year.

Got you. And then on -- just on the assumption kind of starting in '27, it looks like adjusted EBITDA growth will be higher than revenue growth just on a high level. So is that still kind of moving restaurant level margins? Or do you expect G&A to start to lever a little bit maybe in '27 again after the investment spend in '26?

Yes. No, great question. We've always said we believe this business can get into the 18% to 20% range from a store level margin standpoint. And this year, we're guiding 18% and 18.5%. So we believe we have continued opportunities to drive our margins higher, and that is reflected as we think about the '27 and the '28 guidance. That in concert with -- we are making a lot of G&A investments this year, and we'll start to see some G&A leverage as we move into '27 and '28 as well.

And some of those G&A investments, as we remarked, are across the business and things like new unit development. So as we're building corporate restaurants and also all the training to make sure franchise restaurants open successfully, we see those investments as having a direct payback. Technology, things that drive not only innovation, but productivity are also areas of investment. So things that are very laser-focused that over time, have a strong return.

Our next question comes from the line of Tania Anderson with William Blair.

I was just wondering if you could talk about the cadence of the openings this year.

We've got a couple of open. The great news is we've already got 2 open so far this year. And as we move forward through the year, it will be not as backloaded as we've had our openings last year. But typically, as you move forward, they will be a little backloaded as we move kind of through the year. But we're excited. We have -- I think we have 8 stores under construction right now. So we feel really good about our new unit development this year.

Okay. And then previously, you talked about having some like input and COGS initiatives that were going to happen this year. Can you talk about any specifics there?

Yes. No, we -- this has been a multiyear project for us in regards to leveraging what we're buying to improve margins. And as we think about the focus for 2026, it's taking things and having the supplier do some of the -- we do a lot of prep today in our restaurants and having our suppliers do some of that prep for us, taking some of that labor and complexity out of the restaurant and the combination of that will drive efficiency and margin for us. And so that's our big -- these are the main focus of our initiatives this year to help us drive the margin improvement.

Our final question comes from Matt Curtis with D.A. Davidson.

I just wanted to ask some questions about the new markets you've entered recently like Washington and New Mexico as well as some of the other openings outside of California. I was just wondering if you could share what initial sales volumes have been like and what you've been doing to support these new openings, either in terms of marketing support or in other areas?

Great. Thanks for the question. We're really proud of these new openings, in particular, the Washington -- so in Kent, Washington is where this unit is, and it has just exceeded every expectation more -- well, well, well above our system average, lines to the point where we've had to dial back some of our hours so that we could make sure we had chicken for everyone. We haven't turned on -- this will tell you something. We haven't turned on the third-party delivery partners because we have so much demand in the restaurant. We want to serve the customers that are in front of us rather than even turning on delivery.

Now this is the first unit in the state, but it just shows you how much pent-up demand there is for El Pollo Loco. And when we support the restaurant well and we find great franchise partners, it's a magical combination. And so the training that we're doing is many months in advance. We spend a lot of time with folks training. We send teams up to these restaurants, and there's a lot of ongoing support.

New Mexico, also a new franchise partner also performing really well, above average, so much so that the franchise partner has been looking for additional sites in the market because they have so much excitement and are very pleased with the results. So I think that's the very testament that one unit isn't enough. They want to do several in the DMA to me is a testament of growing outside our home market.

Okay. Well, that's certainly encouraging to hear. So I guess the next obvious question is, where do you think the pent-up demand is coming from, given that these are your initial sites in those states? I mean would this be basically demand coming from California expatriates or something else?

I think that certainly helps with the familiarity of the brand, but there's certainly not enough. As many people as might have left California, I don't think there's that enough to substantiate all this demand. So I do think it's the fact that we really don't have a true national competitor.

And when you think about fire-grilled chicken, when we open in these markets, we serve our chicken in the delicious way that everyone knows and loves it. There's just the same consumer type that loves the food, whether they're in California or Arizona or Nevada, they love it in New Mexico and Washington and eventually across the country. So back to your other part of the question in terms of how we're marketing things, we're using local marketing. We're using digital marketing, all different types of marketing tools to drive awareness.

Ladies and gentlemen, we have reached the end of today's question-and-answer session. I would like to turn the call back over to Liz Williams for closing remarks.

Thanks again, everyone, for your interest in El Pollo Loco. We look forward to talking to you again next quarter. Have a great evening.

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the El Pollo Loco Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded, October 30, 2025.

And now, I would like to turn the conference over to Ira Fils, the company's Chief Financial Officer. Please go ahead, sir.

Thank you, operator, and good afternoon. By now, everyone should have access to our third quarter 2025 earnings release, which can be found at www.elpolloloco.com in the Investor Relations section.

Before we begin our formal remarks, I need to remind everyone that our discussions today will include forward-looking statements, including statements related to our growth opportunities, strategic and operational initiatives, expectations regarding sales and margins, potential changes to our product platforms, capital expenditure plans, expectations regarding kiosk rollouts, the ability of our franchisees to drive growth, expectations regarding commodity and wage inflation, remodel plans and our 2025 guidance, among others. These forward-looking statements are not guarantees of future performance, and therefore, you should not put undue reliance on them. These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we currently expect. We refer you to our recent SEC filings, including our Form 10-K for the year ended December 25, 2024, as well as our Form 10-Q for the third quarter to be filed, for a more detailed discussion of the risks that could impact our future operating results and financial condition. We expect to file our 10-Q for the third quarter of 2025 tomorrow and would encourage you to review that document at your earliest convenience.

During today's call, we will discuss non-GAAP measures, which we believe can be useful in evaluating our performance. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP. And reconciliations to comparable GAAP measures are available in our earnings release, which is available in the Investor Relations section of our website. With respect to the restaurant contribution margin outlook we will be providing on today's call, please note that we have not provided a reconciliation to the most directly comparable forward-looking GAAP financial measure because without unreasonable efforts, we are unable to predict with reasonable certainty the amount of or timing of non-GAAP adjustments that are used to calculate income from operations and company-operated restaurant revenue on a forward-looking basis.

Now, I would like to turn it over to our CEO, Liz Williams.

Thank you, Ira, and good afternoon, everyone. I am excited about the momentum in our business and very proud of our team and franchise partners as I share third quarter results that clearly reinforce the strength of our strategy. Our third quarter results delivered across 3 of our core financial priorities, including positive traffic growth, accelerating unit growth and margin expansion at both the restaurant and corporate level. From menu innovations to improvements in operational excellence to our robust development pipeline, our team is executing across many strategic fronts as we continue to deliver sustainable, profitable growth.

We are particularly pleased with our positive system-wide traffic growth during the third quarter as we implemented targeted innovation and value offerings, beginning with our $9.99 quesadilla combos, which have a good balance of innovation and value. Throughout the quarter, we also increased our app-only promotions, our targeted couponing and our third-party delivery promotions. Together, these actions successfully drove traffic, while also enhancing brand equity and importantly, without jeopardizing our margins.

At the same time, our ongoing focus on operational excellence and efficiency optimization delivered year-over-year profitability improvement, both on a dollar and margin basis. These results only reinforce my confidence in the strategy that we've put in place. We remain laser-focused on executing against our 5 strategic pillars: brand that wins through marketing and menu innovation; hospitality mindset through operational excellence; our digital-first approach; our winning unit economics; and driving new unit growth.

Now, let me provide more details on how these strategic pillars are driving our results, starting with our brand that wins pillar. Our marketing and menu innovation strategy continues to be anchored by what we believe makes El Pollo Loco truly differentiated, quality chicken served fast and easy. Chicken is our signature protein and the foundation that enables us to innovate across multiple platforms, while staying true to our brand promise. To capitalize on our positioning, we are accelerating our menu innovation strategy to address the evolving needs of today's consumers and expand our accessible customer [ size ]. We believe we have a unique opportunity to offer portable, flavorful, affordable and quality chicken that is in the bullseye of consumer demand.

Building on the success of our Fresca wraps and salads from the second quarter, in late June, we launched our premium Creamy Chipotle and Salsa Verde quesadillas. Featuring our citrus-marinated all-white meat fire-grilled chicken with 100% Jack cheese and our signature sauces, they were served with handmade guacamole at no extra cost. Notably, these quesadillas continued to mix well within our menu even after the incremental media and marketing support has ended, as they have filled the gap and earned a spot on our permanent menu. We expect the category to continue to build over time. This sustained demand demonstrates that our menu innovation genuinely resonates with our customers, and it validates our strategic approach to creating products that deliver both value and quality.

To build upon this momentum, we recently introduced our new Double Chicken Street Corn and Queso Crunch burrito bowls, both featuring a double portion of our citrus-marinated fire-grilled chopped chicken, layered with slow-simmered, seasoned rice, Jack cheese and freshly made guacamole and salsa. These hearty bowls are strategically priced below comparable offerings from our fast casual competitors, delivering superior value for a high-quality, big eat. They are also yet another example of how we're expanding our portable offerings, while maintaining the bold flavors and premium ingredients that differentiate El Pollo Loco.

Looking ahead to 2026, we have an exciting pipeline of innovation and value that will further strengthen our competitive positioning. We will begin 2026 with a focus on our Double Pollo salads, including 2 new options, Mexican Caesar and Bacon Ranch, alongside the fan favorite, Street Corn. These salads feature double portions of our premium fire-grilled chicken, fresh super greens and are bursting with delicious flavor. These are salads that you will actually look forward to eating.

In addition to these new salads, we have several flavor innovations planned across our signature tostadas, bowls, quesadillas that all leverage sauces and toppings to deliver unique flavor in 2026.

We are also excited to bring more portable options through new forms of chicken to our menu in 2026. We are currently testing Loco Tenders, which are all-white meat, boldly-seasoned tenders with 2 new signature dipping sauces, Baja Ranch and Pollo sauce, as well as testing a new fire-fried chicken sandwich. This sandwich has all of the delicious crunch and flavor of a fried sandwich, but it is grilled, not fried. Both the Loco Tenders and the fire-fried chicken sandwich bring unique and differentiated twists to these growing categories. We look forward to sharing more in future calls.

Beyond these innovative products, we are also supporting our core chicken on the bone. After popular demand, we are bringing back Mango Habanero just in time for the Big Game in February. And in the summer of 2026, we will launch our version of barbecue chicken to our family chicken lineup.

Beyond chicken, we also look to capture additional sales occasions with our comprehensive beverages platform in 2026. We believe beverages represent a significant opportunity for El Pollo Loco as an add-on to increased check average and also to fulfill multiple daypart needs for our customers and drive relevance. We have several drinks in tests and look forward to sharing more in upcoming calls.

In summary, we are excited about our menu and our innovation pipeline. We are using our core differentiator of quality chicken to expand into new consumer occasions and address specific market opportunities. Most importantly, as we execute this road map, we will remain focused on operational excellence to ensure consistent execution across our system.

Turning to our brand transformation. It continues to gain momentum as we execute against our Let's Get Loco brand campaign that we launched in May. What began as an advertising campaign has fully evolved into a complete brand experience, both inside and outside our restaurants. As I've said in the past, at the core of our brand identity is our passion for quality, and this passion is at the center of the Let's Get Loco campaign. For us, passion is our commitment to quality, marinated and grilled in-house over an open flame. Beyond this emotional connection to passion, the Let's Get Loco message also acts as a functional call to action, which we believe is critical in driving sales overnight, while we build our brand over time.

And the great news is that this framework, which guides our brand expression, is resonating with our customers. One example of this is our recent social media campaign, the AI Chicken Challenge. The AI Chicken Challenge invited fans to show us their Loco passion for chicken by submitting chicken-inspired AI-generated videos for a chance to win free chicken for life. This campaign created a tremendous buzz and engagement across social media, further amplified by social influencers, including Fluffie the Pom, an AI influencer, who has worked with major brands like FedEx and Sephora, as well as garnered recognition from [ Ad Age ], which named El Pollo Loco as one of the 8 marketing campaigns to watch.

We have coupled our Let's Get Loco campaign with our iconic restaurant design, which is being executed on our new-builds and remodels. With our signature vibrant colors and our beloved logo, together with some modern updates, consumers are noticing the glow up of El Pollo Loco. Legacy brands have to strike a balance to honor the generation who put them on the map, while evolving to be relevant for the next one. I believe our approach has put us on the right track, and I'm excited for our future and look forward to sharing more on upcoming calls.

Moving to operations. Our hospitality mindset pillar remains central to our transformation effort. Our goal is to have quality of service match that of our food quality at all times, which ultimately will allow us to build lasting customer loyalty. With this, we have several initiatives underway. These include reinforcing standards and accountability, deploying tools, systems and training to simplify operations for our team members, leveraging data to better listen and respond to customer feedback, and improving customer experience with our Loco Love service model.

Our focus on standards and accountability over the past several quarters is beginning to pay off. This is demonstrated by our improved customer engagement metrics. Our customer complaints are at the lowest point in 3 years, and our overall satisfaction scores continue to rise. We are now utilizing an industry-leading customer feedback system with clear benchmarks, together with an AI tool that provides instant feedback from common review sites. We believe this data-driven approach, together with our Loco Love service recovery model, will be instrumental in identifying specific opportunities and providing actionable insights for our team members.

While we acknowledge that our service consistency still has room to improve to reach the top tier, we are proud of the substantial progress we have made in the last few years. As we look forward, we have a talented team in place to help accelerate our next phase of operational improvement, and I look forward to working more closely with this team as we elevate our focus over the upcoming months.

In terms of our digital-first pillar, I am thrilled with the continued momentum during the third quarter across our app, web, kiosk and loyalty. Loyalty transactions are up 28% year-over-year with frequency of this customer up 15%. For the quarter, our digital business, including kiosks, grew to 27% of system sales compared to 20% in the same period last year, which further validates our focus on meeting our customers where they are and how they want to engage with our brand.

We've made meaningful improvements to our app and kiosk experiences, making it easier for Loco Rewards members to add points to their orders, to customize their meals and easily find add-ons that enhance check averages, all while providing more frequent and personalized offers to our most loyal guests. Our app remains the #1 place to find the best deals for El Pollo Loco, and the digital growth we're seeing validates our strategy.

Beyond our owned digital channels, our third-party delivery business also continues to grow with all app, web and marketplace sales representing 15.1% of our business compared to 13.8% last year, or a 9% year-over-year increase. We believe that the third-party marketplace channel gives us the ability to reach new customers who aren't familiar with El Pollo Loco, and we aim to further drive this behavior through targeted offers for net new customers within the delivery platforms. We view marketplace delivery as a guest acquisition tool for our business, and we continue to test new offers within the various delivery platforms to further drive customer adoption.

In addition, we have completed the kiosk rollout for company-owned restaurants. And together with our franchise partners, roughly 50% of our system have kiosks installed. All in all, we believe our robust digital infrastructure, growing loyalty base and innovative customer engagement creates a powerful foundation for sustainable growth.

Turning to our winning unit economics pillar. We are pleased to have delivered 160 basis point growth year-over-year in restaurant-level operating profit margins to 18.3% during the third quarter. From our methodical approach to cost savings in our supply chain to our enhanced labor productivity through better use of technology and kitchen equipment, our team members are putting more into customer service, while also delivering cost efficiencies. We are proud to have delivered this expansion even as we offer more deals and value for our customers. For the full year 2025, we expect restaurant-level contribution margins of 17.5% to 17.75%. In the long term, we continue to expect that the brand will return to the 18% to 20% range over time.

Lastly, as we continue to build momentum in our unit growth pillar, I'm excited to announce that we successfully opened our 500th El Pollo Loco restaurant in Colorado Springs earlier this month, a remarkable achievement that speaks to the strength and the enduring appeal of our brand and a testament to the hard work and dedication of our franchise partners and team members. After the end of the third quarter, we opened a new restaurant in El Paso, Texas, yet another new market for us, showing the expansion beyond our California roots. Roughly 3/4 of our new openings in 2025 will be outside of California.

Importantly, we're not just opening new restaurants, we're opening successful ones. Our increased focus on standards, training and systems is making a difference from growth efforts in the past. Both our Colorado Springs and El Paso locations are off to extremely strong starts within the first few weeks. Volumes are well above the system average. In fact, all new restaurants we opened in 2024 and 2025 are averaging $2 million on an annualized basis.

These successes have been driven by our strong franchise partners and our new restaurant training teams who bring our refined brand positioning to life for our customers every single day. In addition, approximately half of our recent openings are utilizing second-generation sites, allowing us and our franchise partners to achieve substantially lower investment costs and deliver an outsized return relative to a new ground-up build. We expect the second-generation sites will continue to be a significant part of our unit development going forward, aided by our flexible unit design. Together with the cost reduction we have achieved with our ground-up new builds, we believe that our formula for winning economics only gets stronger.

For the remainder of the year, we plan to open 1 new restaurant in November with multiple openings in December to end the year with at least 10 new restaurants in 2025, all of which are already under construction. While we remain confident in achieving this milestone, the nature of construction projects means that permitting and other external factors could shift one of these openings into early 2026. Nevertheless, this continues to represent the largest system-wide unit growth since 2022. More importantly, we are positioned to almost double our development pace in 2026 with a strong pipeline that builds every week, reflecting both the strength of our franchise partnerships and the robust demand we're seeing for the El Pollo Loco brand in new markets.

In addition to the investment from franchise partners, we will also be leveraging company capital to increase development in 2026 in the California, the Las Vegas markets where we currently operate, and also in the Dallas and Denver markets, alongside our franchise partners. Following the work we've completed over the past year on build costs, margin improvements and top line sales drivers, we are confident this is an efficient use of company capital. We believe these investments will allow us to accelerate brand awareness in these markets, creating a platform for system-wide unit growth and further cementing the brand's long-term opportunity.

To complement our new unit growth, we continue to make progress in modernizing our existing restaurants through our remodeling program. Through the end of the third quarter, we've completed 34 system-wide remodels with a plan to complete at least 55 remodels for the full year. Looking ahead to 2026, we anticipate remodeling approximately 35 company-operated restaurants, putting us on track to meet our goal of updating approximately half of our total system over 4 years. The remodeled restaurants look fresh and modern, and our team has done a tremendous job balancing our nostalgia, our history and charm with an updated look and feel. The customer feedback we are getting on the remodels remains very positive with a mid-single-digit sales lift from these remodels on average. With significant demand for the remodels, the only constraint is team member bandwidth and being thoughtful about sequencing when the remodels are completed. There's a healthy battle internally with our company operators who are all jockeying to get to the front of the line for a remodel.

Before I wrap up, I want to mention one other highlight from the quarter that embodies the progress we are making in transforming El Pollo Loco and our unique culture. In September, we held our franchise conference with the theme for this year, No Limits, Just Loco. In this meeting, we talked about the opportunities for growth ahead with our franchise partners and suppliers. And we also celebrated our 50th anniversary year, paying tribute to many employees that have had significant tenure with El Pollo Loco. Alongside our founder, we honored 36 employees that are still serving El Pollo Loco after 35-plus years. It was a true testament to the thousands of men and women in our restaurants that deliver for our customers every single day. It was also a reminder of why we have some of the lowest turnover in the industry. Our culture is special and something I have never seen in this industry. We have a passion that you can feel. It is this culture that is fueling results.

In closing, our third quarter results demonstrate the progress we are making across all aspects of our business. We are innovating on food, innovating on our brand and our restaurants. We look forward to a strong finish in 2025 and furthering our position as the nation's favorite fire-grilled chicken restaurant.

With that, let me turn the call over to Ira for a more detailed discussion of our third quarter financial results.

Thank you, Liz, and good afternoon, everyone. For the third quarter ended September 24, 2025, total revenue was $121.5 million compared to $120.4 million in the third quarter of 2024. Company-operated restaurant revenue decreased 0.5% to $100.7 million from $101.2 million in the same period last year. The $0.5 million decrease in company-operated restaurant sales was driven by a 1.1% decrease in company-operated comparable restaurant sales, partially offset by additional sales from the opening of 2 restaurants during or subsequent to the third quarter of 2024. The decrease in comparable restaurant sales included a 1.3% decrease in average check size, partially offset by a 0.1% increase in transactions. During the third quarter, our effective price increase versus 2024 was about 2.8%.

Franchise revenue increased 13.5% to $12.9 million during the third quarter, driven by a $900,000 in IT pass-through revenue related to the franchisee rollout of our new point-of-sale system, which is offset by a corresponding increase in franchise expenses, combined with an increased revenue, driven by the opening of 5 new franchise-operated restaurants subsequent to the third quarter of 2024 and a true-up of royalty rates. The increase in franchise revenue was partially offset by comparable restaurant sales decrease of 0.6%. Nonetheless, we are very encouraged to see franchise traffic growth continue to accelerate with traffic up 2.5% in the third quarter for our franchise system, which drove the positive system-wide traffic of 1.6% that Liz alluded to earlier.

We are extremely pleased with how the fourth quarter has started with sales turning positive on continued strength in transactions. System-wide comparable store sales for the fourth quarter to date through October 22, 2025 increased 2.2%, consisting of a 1.5% increase in company-operated restaurants and a 2.5% increase in franchise restaurants. While we are mindful that we are rolling over softer results in October of 2024 and the macro consumer environment remains challenged, we are pleased with the sales momentum that we are seeing in our business to start the fourth quarter of 2025 and our return to positive comparable sales growth.

Turning to expenses. Food and paper costs as a percentage of company restaurant sales decreased 40 basis points year-over-year to 24.7% due to higher menu pricing and approximately 100 basis points of commodity deflation during the third quarter, which was partially offset by higher discounting. We expect commodity inflation to be flat for the full year 2025. As a reminder, our commodity base is largely domestic with chicken being the largest component. Internationally, our largest exposures include avocados, tomatoes and packaging.

Labor and related expenses as a percentage of company restaurant sales decreased about 200 basis points year-over-year to 30.4% as we continue to benefit from improvements in operating efficiencies, primarily driven through enhancements in labor deployment and scheduling, combined with the continued use of technology and equipment to simplify team member roles, along with menu price increases and lower workers' compensation expense. Wage inflation for the third quarter was 0.6% for all our company-owned locations. For the full year 2025, we expect wage inflation of between 3% and 3.5% for all our company-owned locations.

Occupancy and other operating expenses as a percentage of company restaurant sales increased 70 basis points year-over-year to 26.5%, primarily due to higher third-party delivery-related expenses, software maintenance fees related to our kiosk and new POS rollouts and higher rent and CAM, partially offset by lower repairs and maintenance expense.

Our restaurant contribution margin for the third quarter improved to 18.3% compared to 16.7% in the year-ago period. As we continue our path of margin improvement, for the fourth quarter, we expect our restaurant-level margin to be in the 16.75% to 17.25% range as compared to 16.7% in the fourth quarter of 2024, which would bring our margin for the full year 2025 to between 17.5% to 17.75%.

General and administrative expenses increased to $12.3 million compared to $11.4 million in the prior year. The increase was primarily due to an increase of $0.3 million in stock compensation expense, $0.2 million in legal and professional fees related to shareholder activism and related matters, and $0.2 million in restructuring and executive transition costs, as well as $0.2 million in expenses related to the implementation of a new ERP system and our corporate office relocation. As a percentage of sales, G&A increased to 10.2% or 70 basis points.

During the third quarter, we recorded a provision for income taxes of $3 million for an effective tax rate of 28.8%. This compares to a provision for income taxes of $2.4 million and an effective tax rate of 28.1% in the prior year period.

We reported GAAP net income of $7.4 million or $0.25 per diluted share in the third quarter compared to GAAP net income of $6.2 million or $0.21 per diluted share in the same prior year period. Adjusted income for the quarter was $7.8 million or $0.27 per diluted share compared to adjusted net income of $6.3 million or $0.21 per diluted share in the third quarter of last year. Please refer to our earnings release for a reconciliation of non-GAAP measures.

In regard to our remodeling effort, during the third quarter, we completed 11 franchise restaurant remodels and 3 company remodels, bringing our total completed remodels for 2025 to 34 through the end of September. For the full year, we expect to remodel at least 55 restaurants, of which approximately 1/3 will be company-operated locations. As Liz mentioned earlier, we remain pleased with the results of our new iconic remodel image, and we continue to see, on average, a mid-single-digit uplift in sales, which is in line with our expectations.

In terms of liquidity, as of September 24, 2025, we had $61 million of debt outstanding and $10.9 million in cash and cash equivalents. Subsequent to the end of the third quarter, we paid down an additional $6 million on our revolver, resulting in our debt outstanding of $55 million as of October 30, 2025.

Finally, based on our results to date, we would like to provide you with the following guidance for 2025: the opening of at least 10 system-wide restaurants; capital spending of between $28 million to $30 million; G&A expenses of $47.5 million to $49.5 million, excluding onetime charges; and an estimated effective income tax rate of 29% to 29.25% before discrete items.

This concludes our prepared remarks. We'd like to thank you again for joining us on the call today, and we are now happy to answer any questions that you may have. Operator, please open the line for questions.

[Operator Instructions] The first question comes from Jake Bartlett with Truist Securities.

My first was about your performance relative to peers. And in terms of -- we can see what your same-store sales were in the quarter. My impression or I think it's been kind of known for a couple of quarters now that California, the markets that you're exposed to the most have been the weakest. So I imagine actually, with your results, you might be actually gaining some share, maybe outperforming peers. If you can give us any sense for that, that would be helpful.

Thanks for the question. Yes. So when we do look at ourselves in the California market versus peers, we are pleased to see that we are indeed outperforming on both sales and transactions. So, that would indicate that we are taking some share, which I think is -- we can attribute to getting positioned right on value, on innovation and the brand positioning really starting to resonate. So nice to see. Also, I would add is operational, all of the enhancements we're making operationally. I think, consumers are seeing that better service.

Got it. And then, I think related to that question, your quarter-to-date nicely positive. And I think on a 2-year basis, it roughly holds the line at roughly about 2%. But we've heard from others in this earnings season so far, a real deceleration in October. So maybe the government shutdown impacts, or it's, I think, somewhat uncertain, but a pretty significant deceleration and you haven't seen it. So I think maybe building on that, what were your tactics near term to offset incremental pressure? Are you seeing those market share gains accelerate near term, and I guess, the level of confidence you have that, that will continue?

Yes. So, as we look over the past year, we saw a lot of the customer softness. Really it was last year this time that we started to see that. We saw the customer pulling back and the consumer, for all the reasons, having some trepidation in terms of spending. And we made a lot of adjustments, and we've made them really throughout the year in terms of bringing more value to the menu, our positioning, getting our operations improved so that when they did come in, they had a really great experience. And so, as we sit here today, I would say that the consumer isn't any worse than they've been really all year. I think we're figuring out how to maneuver and how to just give a great experience, given that they are just so stretched. So, as Ira mentioned, as we have seen in October, it is an easier lap. So we will acknowledge that. But even on a 2-year basis, we're proud of what we're accomplishing.

Great. And then, the last question, you've had some -- your margins have been solid, especially relative to your same-store sales in '25. And you talked about the initiatives you've had in place and the efficiencies you're driving. My question is, how much you have left in the tank on those efficiencies? Should we expect incremental cost saves efficiencies in '26 as we kind of look forward?

Yes. Great question. We believe we're not done yet. We still have a lot of opportunity as we continue to gain efficiencies on the labor side. And we have multiple projects that we're working from an input side from COGS where we believe that these things will put us on our path as we move forward to that 18% to 20% target that we always mentioned.

The next question comes from Andy Barish with Jefferies.

It is nice to hear about some decent October numbers for a change. Can you sort of level set on sort of these more mainstream menu items that you're in test on with tenders and sandwiches? Sort of where -- what's the goal? Where in the testing process are you? Kind of how does that find its place on to the menu board as we look out to next year?

Yes. So we have a lot in the pipeline. The culinary innovation team has been really busy and working together with operations, getting these in front of customers and in test. And this comes from -- a couple of years ago, we made the realization that as the consumer is gravitating to handheld, portable, also a lower ticket, so as much as consumers love our family chicken and chicken on the bone, they want to be able to take a burrito or a bowl. And so, we've migrated to making sure we have that. So these new products that we're excited about, things like the Loco Tenders and a sandwich, as an example, both of those now are in operations testing in the local markets here, and they're about to go into broader market testing so that they could be ready for next year. So, one, probably we're looking at where we would slot them in on the calendar, but could be as early as Q2 and then, of course, into Q3 and Q4. We also -- even though we are doing so much innovation around the more portable single customer, great delicious eats, we're also -- we love our chicken on the bone, and we are bringing new flavors there.

I talked about the barbecue chicken that we're really excited about. That will be something -- there's no better season than summertime for barbecue chicken. So we're thinking that's probably a summer addition. And then, the most requested item that I hear about from consumers are our black beans. Years ago, we had black beans, and it does make sense to have barbecue chicken and black beans with our coleslaw, so again, something that we're about to test with so that we have it ready for the summer.

Got it. And then just, Ira, over on the cost side, where are you on kind of chicken contracting for next year? Are you in pretty good shape? And is there anything sort of unusual we should be aware of in that market?

No. So we're in good shape. We are in the process actually this week of awarding our contracts for next year. And we're pleased with how it's come out. We -- there's a little pressure in the dark meat chicken, but we've been able to offset that in other areas of our chicken buy. So we are very -- we feel very good about our chicken buy for next year.

Yes. And then, just finally, anything new sort of on supply chain with like pre-marinade as something you guys have looked at or anything we should be aware of like as next steps on the equipment side for '26 to continue to help the labor efficiencies?

Yes. So we're testing on many different ideas. We love the cost improvement, but even more so, we love the consistency and the quality improvements that some of the work with our suppliers, our chicken partners have brought to us, so things like how we marinate our chicken so that it is the most juicy chicken in every single experience and really consistent. And we're seeing great results, and we'll have some of that as early as Q1. So in terms of supply chain and doing innovation, not only on bringing new things to the menu, also making the product better, the food better, the quality better and also realizing some cost savings. And really, like you said, the cost savings comes primarily with labor, just making the preparation in our restaurants easier so that our team members really can focus on the cooking that happens over our grill versus some of the activities that just aren't as necessary.

[Operator Instructions] Our next question comes from Jeremy Hamblin with Craig-Hallum.

Congrats on good execution here in a pretty tough backdrop. I wanted to start with just kind of the margin outlook here in Q4. And just to get a sense, there is a little bit of pressure on food costs. But just in terms of -- I think what you indicated was a midpoint of about a 17% restaurant-level margin in Q4 versus the 18.3% in Q3. And I wanted to just see if you could kind of walk us through where you expect a little bit of that pressure in the fourth quarter.

Yes, a couple of things. I think when you look, first of all, quarter-to-quarter sequentially from Q3 to Q4, a lot of the variance there is driven by the sales volumes. Q2 is actually our highest sales volume quarter, but Q3 is the next highest sales volume and Q4 is the lowest. So just the sales volume difference puts a little pressure on the store-level margins. I think if you look back to where we finished Q4 of last year, our guidance shows us that we will be growing margins year-over-year in the fourth quarter.

Got it. And then, I just want to come back to your marketing efforts here. And in terms of how you feel like the new tagline is playing out, again, it's -- my peers have noted, it's been a bit of a tough couple of months here in the restaurant industry. You are holding in pretty nicely. But I wanted to get a sense for how you feel like that messaging is resonating in a predominantly value environment. And if you can give us a sense for how you're thinking about some of these new menu items to come here in '26 from a kind of a price point perspective of whether or not they're going to be adding to your average check or potentially lowering your average check?

Yes. So we can see in our credit card data that the things we're doing are resonating and bringing in new and lapsed consumers. And I attribute that to not one thing, but many things. And starting with the repositioning with the Let's Get Loco campaign, that certainly has driven awareness and is reaching new consumers, coupled with even better when they can drive by and see a remodeled restaurant. And then, as we shift to the menu and just having things on our -- food on our menu that has a much wider aperture for all consumers, that's helping as well.

When we look at the different price points, doing something like quesadilla this summer, that was an entry-level price point that we haven't seen in years. So $7.49 a la carte, $9.99 as a combo, and that combo and even a la carte had a side of guacamole with it. So, so many of our competitors, they charge extra, a couple of dollars for guacamole. So it was a great value. And we saw that in terms of growing transactions. It brought new consumers in that had a very limited price point. And what I love about that product, we've been able to find a way to keep it on our menu. So consumers that have found that can still enjoy it. But as we brought in the burrito bowl, the burrito bowl is at a higher price point. So we're $10 -- upper $10 in some restaurants, $11. And what that's doing, like you pointed out, it's really helping protect check. So what we saw in Q3 was, we drove a lot of transactions, but we did see a check decline. And it was one of those moments where we had to realize this check decline is not going to be forever.

We're driving transactions, and it's healthy transactions. We also did do some discounting, which in this environment, we had to do, which also put pressure on check. But when we are able to combine it with something like the burrito bowls a couple of weeks later and still keep that quesadilla under it, together, it's a really powerful combination, and I think it's helping us. So, as we go into next year, we're looking for ways to balance both the value but also the check protection, which -- I'm excited about our beverages. That's a great check protector. Desserts: we launched flan earlier just in the last couple of months. We had so much innovation. We didn't even talk about flan, but we launched flan. It's a great check protector as well. And it reminds us we need to have additional desserts. Churros do well for us. There's a lot we can do to protect check all over the place.

And as a follow-up, just on the quesadilla, you noted it's now on the regular menu. How is it mixing today, let's say, over the last 3 or 4 weeks versus when you introduced it, in terms of percent of sales?

Yes. So it's dropped down a couple of percentage points, which is typical, given that it was featured so prominently on the menu. So any time we have the main product of the marketing module, it gets the promotional panel, and that promotional panel always drives a lot of mix. And so quesadilla was right in line a little bit -- some weeks, a little bit over what a promotional panel would drive. And then, as we've taken it off, it drops, but it's still -- I'm pleased with how it's mixing. It is still an incremental product on our menu. And like I mentioned earlier, it's solving an entry-level price point that I think is so critical in this economic environment.

Got it. Last one for me real quick. You've probably had a bit of an outsized impact on kind of a hot button topic here in restaurant land of immigration policies. In particular, Southern California saw a bit of a bigger presence. I wanted to just get a sense from what you're seeing with traffic. Is that issue still a fairly significant obstacle for the business? Do you feel like it's settled down a little bit? Any color you might be able to share on that would be great.

Yes. I think it still persists. We see it a little bit more in lunch than dinner. It still persists. Hard to quantify, but it's still there.

Ladies and gentlemen, we have reached the end of today's question-and-answer session. I would like to turn the call back over to Liz Williams for closing remarks.

Yes. Thank you again, everyone, for your interest in El Pollo Loco. We look forward to talking to you again next quarter. Have a wonderful evening.

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a great day.