El Pollo Loco (NASDAQ:LOCO) reported second-quarter results marked by higher same-store sales, improved restaurant-level margins and continued expansion outside California, while raising its full-year sales and adjusted EBITDA outlook.
For the quarter ended July 1, 2026, total revenue rose to $129.6 million from $125.8 million a year earlier. Company-operated restaurant revenue increased 3.7% to $108.1 million, driven by 3% comparable restaurant sales growth and contributions from three company-operated restaurants opened since the prior-year quarter.
Sales Momentum Continues Into Third Quarter
Chief Financial Officer Ira Fils said systemwide comparable sales increased 5.8% through July 29, including a 4.4% increase at company-operated restaurants and a 6.6% gain at franchise locations. The company expects third-quarter same-store sales growth of 3.5% to 4.5%.
Chief Executive Officer Liz Williams attributed July’s performance to several factors, including the launch of Loaded Quesadillas, advertising tied to the World Cup and broader brand momentum. Fils said July received an “outsized benefit” from the live-sports media activity, while the company expects the full-quarter trend to be more consistent with its second-quarter performance.
The company raised its full-year 2026 systemwide comparable-store-sales outlook to 3.5% to 4.5%, and increased its adjusted EBITDA guidance to $68 million to $70 million.
Menu Innovation, Digital and Loyalty Efforts
Williams said recent menu launches helped attract new customers and support higher checks. Loco Tenders, introduced at the end of the first quarter as a limited-time offer, brought in younger consumers and customers who had not previously considered the brand, according to Williams. The product was particularly popular in snacking, delivery and evening occasions.
Management is testing holding equipment that could support a more permanent role for tenders on the menu. Williams said the company is also exploring other potential uses for the product, including wraps and salads.
In late June, El Pollo Loco introduced Loaded Quesadillas in queso and street-corn varieties. The company priced the items at less than $10 a la carte or $10.99 as a combo meal. It also launched its Chatacoffee beverage platform, featuring horchata iced coffee and cold foam, aimed at capturing afternoon and snacking occasions.
Looking ahead, the company plans to introduce double-chicken burrito bowls, a pumpkin spice churro and caramel apple Chatacoffee during the fall. It is also testing salads, wraps and sandwiches for potential 2027 introductions.
Digital sales, including app, web and kiosk orders, represented about 28% of system sales and increased 13% from the prior year. Off-premise digital sales, including delivery, accounted for nearly 17% of sales and grew 12% year over year.
Williams said Loco Rewards members visit about three times more frequently annually than non-members. Targeted loyalty offers and more frequent communications helped loyalty-member frequency and check growth exceed that of non-loyalty customers by more than double, she said.
Margins Improve Despite Produce Inflation
Restaurant contribution margin improved to 19.5% from 19.1% in the prior-year quarter. Food and paper costs increased 90 basis points to 25.4% of company restaurant sales, primarily due to 4.1% commodity inflation, particularly in produce, as well as increased discounts and menu mix shifts.
Fils said roughly three-quarters of the food-cost pressure in the quarter was related to produce. While produce costs have moderated, the company continues to face pressure in packaging, oil and fuel-related delivery costs.
Labor and related expenses declined 90 basis points to 29.9% of company restaurant sales, helped by operating efficiencies, lower health insurance and workers’ compensation costs, and sales leverage. Wage inflation was below 1% during the quarter for company-operated restaurants.
The company expects full-year commodity inflation of 2.5% to 3.5% and wage inflation of 1.5% to 2.5%. It maintained its full-year restaurant-level margin outlook of 18.25% to 18.75%, compared with 17.8% for full-year 2025.
GAAP net income increased to $12.8 million, or $0.43 per diluted share, from $7.1 million, or $0.24 per diluted share, a year earlier. The result included a $6.3 million favorable legal settlement that contributed to lower general and administrative expenses. Adjusted EBITDA increased to $19.1 million from $18.5 million, while adjusted net income rose to $8.9 million, or $0.30 per diluted share, from $8.2 million, or $0.28 per diluted share.
Expansion Extends to Idaho
El Pollo Loco opened five franchise locations and one company-operated location during the second quarter. It opened two additional locations after quarter-end, bringing year-to-date openings to 10. The company continues to expect 18 to 20 systemwide openings in 2026, including three to four company-operated restaurants and 15 to 16 franchise-operated restaurants.
The company entered Idaho in late June, its 10th state, and expects a second location in the state to open in the fall. Williams said newer markets, including Washington, New Mexico and Idaho, have generally opened above the system average, with first locations in new markets producing particularly strong initial demand.
Management said it is considering non-contiguous expansion opportunities as it engages prospective franchisees nationwide. Williams said the company is looking for partners with multiunit restaurant experience, development capability, operational expertise and enthusiasm for the brand.
El Pollo Loco completed 11 restaurant remodels in the second quarter, bringing first-half remodels to 24. The company said refreshed restaurants have continued to generate an average mid-single-digit sales lift. It reduced expected 2026 capital spending to $33 million to $37 million, primarily due to the timing of remodel work and continued testing of equipment related to menu initiatives.
As of July 1, the company had $30 million of debt outstanding and $13.3 million in cash and cash equivalents after paying down $21 million on its revolving credit facility during the preceding 26 weeks. On Aug. 4, El Pollo Loco extended its $150 million revolving credit facility through Aug. 4, 2031. Fils said the borrowing spread under the amended agreement will increase by about 50 basis points.
About El Pollo Loco (NASDAQ:LOCO)
El Pollo Loco (NASDAQ: LOCO) is a fast-casual restaurant chain specializing in Mexican-style fire-grilled chicken and complementary menu offerings. The company’s signature product is its marinated, flame-grilled chicken, which is prepared in an open-flame rotisserie and served in a variety of formats including tacos, burritos, bowls and salads. In addition to its core chicken offerings, El Pollo Loco menu items feature fresh-made salsas, guacamole, sides such as charro beans and fresh tortillas, as well as a selection of beverages and desserts.
Founded in 1975 in Guasave, Sinaloa, Mexico, by Juan Francisco Ochoa, the concept expanded into the United States in 1980 with its first U.S.
