Good day, ladies and gentlemen, and thank you for standing by. Welcome to the El Pollo Loco Holdings, Inc. Fourth Quarter 2025 Earnings Conference Call. At this time, all participants have been placed in a listen-only mode, and there will be an opportunity to ask questions following the presentation. Please note that this conference is being recorded today, 03/12/2026. And now I would like to turn the conference over to Ira M. 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, 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 we have not provided a reconciliation to the most directly comparable forward 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. I would now like to turn it over to our CEO, Elizabeth Goodwin Williams.

Thank you, Ira, and good afternoon, everyone. I am 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 foundations we established in 2024, we made strategic investments and executed with discipline across our five 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 Holdings, Inc. 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 cost with our iconic prototype design, and driving even higher cash-on-cash return 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 have accomplished over the past two years, and to thoughtfully grow El Pollo Loco Holdings, Inc. across the country. We will achieve this by…

Thank you, Liz, and good afternoon, everyone. For the fourth quarter ended 12/31/2025, total revenue was $123.5 million compared to $114.3 million in 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 0.4% 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, 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 $13.0 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, $2.4 million in revenue recognized related to terminated franchise development agreements, and revenue associated with nine franchise-operated restaurant openings subsequent to 2024. The 3.2% increase in comparable franchise store sales consisted of a 2.4% increase in average check and a 0.8% increase in transactions. For the full year of 2025, our systemwide 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. Systemwide comparable store sales for the first quarter to date through 02/25/2026 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…

We will now be conducting a question-and-answer session. If you would like to ask a question, please press star and the number one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star and the number two if you would like to remove your question from the queue. For participants using speaker equipment, please pick up the handset before pressing the star keys. One moment while we poll for questions. And our first question comes from Jake Rowland Bartlett with Truist Securities. You may proceed with your question.

Hi. First question was on the consumer. You guys are in a, I think because of your regional, you may have less weather than we have 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 the underlying demand is out there without weather. So what are you seeing? I know you are doing a lot to influence your results, which is encouraging, but I am hoping you can 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. The consumer is still looking for great food at a great value, 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. We are seeing that we are able to serve that for the consumer. We are seeing increasingly the consumer in Q4 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 have gotten into the beginning of this year, 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 they did not 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. We are not seeing as much of that this year. So the consumer is certainly still looking for a great experience at a great value.

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

Sure. Thoughtfully pacing and sequencing is really key, and doing a lot of testing, which is what we are doing right now. If you think about having also a nice mix of products that we have 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 a Baja Lime element with shrimp and with chicken, whereas in the past, we have done that with Mango Habanero or we have done that without flavoring. The same thing is true with the burrito bowl that we launched in Q4. We have a twist there with the Queso Crunch. We had always had burrito bowls on our menu; however, we innovated on two new flavors. Some have unique ingredients, some use ingredients we already have in the restaurant. 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. In many instances, as we are adding, we are also removing. Or as an example, on 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.

Great. I appreciate it. Thank you.

Thank you.

Our next question comes from the line of Todd Brooks with Benchmark. Please proceed with your question.

Hey, thanks for taking my questions, and 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 franchisee locations in 2026. 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 are ready to give us color into what the franchising pipeline looks like so that we could start to understand what you are building on that to drive that flywheel of longer-term unit growth that you guys guided for for 2027 and 2028?

Sure. As we go along throughout the year, we will 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. We figure at least 20% of those new builds will be with company capital. In terms of the franchise partners, I am excited because it is a lot of our existing franchise partners who have seen the improvement that we have made with the economics, and they have that enthusiasm and love for the brand. 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 are also new franchise partners. As an example, we have 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 are not done. 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 is more interest out there as we tell the story of the brand and we work our way across the United States. So the simple answer is it is a nice combination of new but also existing, complemented by corporate growth.

Okay. Great. And my second one, and I will jump back in after this. I do not ever remember this type of annual guidance in the past, and certainly not a multiyear framework. It is great to get. Thank you for it. What are you seeing in the business that gives you the confidence to actually give us this, given the current consumer environment?

It is a great question. I, now concluding the second year of turnaround heading into year three, have a really terrific leadership team alongside me and also just a team around us. We have all been at this for decades, and we have seen a lot of restaurant growth, turnarounds, turbulent times, and we see in our business that we have worked through so much over the last couple of years. We have gotten this brand to a place that is so much healthier than where it was. We have stabilized and dramatically improved the margins and the profitability of the brand. We have figured out what works in terms of driving sales, what formula works when it comes to innovation or value. Now there is always the consumer element, which is the big surprise, like you mentioned. It is harder to predict what is going on with macros and consumers. But there are some fundamentals that I think I am more comfortable, and our leadership team is more comfortable, knowing the formulas that drive growth. As we look out to a longer term, we are able to make longer-term decisions, such as investing some very thoughtful G&A in places that we know are going to drive growth. When we put that all together, and you have a great CFO like Ira and a team with him, you feel more comfortable being able to articulate that two- to three-year plan.

That is great. Thanks, Liz.

Thank you.

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

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 franchised 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 the franchise operators?

I would not read too much into it, as it does go back and forth from time to time or quarter to quarter. Sometimes some of the factors—we do pick it apart and look at it—can be geographies, but they also could be lapses 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 that has some of the weather implications as well. 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 would not say in this case it is any one of those as the defining reason. It is 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 has changed on that front? And in terms of thinking about what your pipeline looks like—right, you have had a lot of exciting launches and successful launches here—should we expect this type of innovation in the number of new products to continue here as you go into 2027 and 2028 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. Some of the things that we have done 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 do not do it well, and operationally, it just breaks the restaurant. Some of the things that we have put in place: we have an Op Services team that we did not have a couple of years ago, led by Rick Pepper—an outstanding team. They really work closely with our operations team to field test. I have talked many times about our culinary team led by Chef Rene. He does a fabulous job on the innovation side. That team was not as robust a couple of years ago. I spoke briefly in the prepared remarks about having a culinary kitchen. We recently moved our corporate headquarters after twenty years, and our number one priority in looking for space was having a culinary kitchen at the center—the heartbeat, really—of the support center. 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, the rollout of that.

We will see our tenders later this spring. We have not released the exact date yet, but later this spring. We are really excited. The sandwich is still in test, and we are testing other types of sandwiches. That is something we are 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. And you are 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, any insight you might be able to share into the multiyear plan on that?

That is a great question, Jeremy. Thanks. As we move into 2026, the good news of us being able to have so much cash available—we are turning around and investing that as we move into 2026. As Liz talked a lot about, we are increasing our pace of new unit development on the corporate side. We are investing as we are in this second year of our image and look and feel of the brand. We are upping the pace of our remodels. We are taking these dollars, and we are investing it into operational improvements in the restaurant to help us drive both sales and margins. We are going to spend a little more in CapEx this year, as we talked about, in 2026. That is one thing we are doing with it. 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. We are comfortable with our level of debt, but we are also looking for ways to take those dollars and invest it in the business to continue to drive profit growth over time.

Great. Thanks so much, and best wishes this year.

Thank you.

Our next question comes from Andy Barish with Jefferies. Please proceed.

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

Thanks for the question, Andy. Surprisingly, we have not. We are all very familiar that typically QSR and fast casual are tightly correlated with gas prices, so we watch closely, but I would not say we have seen anything of note as of late.

Good to hear. I know if it ever trickled through, or if it does, people adjust hopefully fairly quickly and get back to prior spending path, which I guess has been what we have seen historically, at least in terms of food away from home. On the same-store sales composition, can you go through that with us? I know traffic is a focus, but I am assuming pricing is going to be in line with inflation, which looks like it is two to three when you combine commodities and labor. Any more color on price? And then is the goal to get traffic positive this year?

That is always our number one goal, to drive traffic positive. We feel good so far about our trend that we have seen in the quarter. We were a little soft that first week of the quarter with some holiday timing and some weather issues, but we have been very pleased with the way the quarter has played out for us so far. To the second half of your question, we are going to keep pricing similar to last year. We were, I think, at about 3.5% last year, and our pricing will be similar to that as we move forward into 2026, obviously subject to how the year plays out. We feel that with a combination of the innovation that we have going and the products that we are bringing to bear and where the business is right now, we have the ability to take a little bit of pricing as we move forward this year.

Got it. And then on the assumption, starting in 2027, it looks like adjusted EBITDA growth will be higher than revenue growth on a high level. Is that still moving restaurant-level margins, or do you expect G&A to start to lever a little bit maybe in 2027 again after the spend in 2026?

Great question. We have always said we believe this business can get into the 18% to 20% range from a store-level margin standpoint. This year, we are guiding 18% to 18.5%. We believe we have continued opportunities to drive our margins higher, and that is reflected as we think about the 2027 and the 2028 guidance. That, in concert with making a lot of G&A investments this year, we will start to see some G&A leverage as we move into 2027 and 2028 as well.

Some of those G&A investments, as we remarked, are across the business in things like new unit development. As we are 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. These are things that are very laser focused that, over time, have a strong return.

Great. Thanks for the color.

Absolutely. Thank you.

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

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

The great news is we have already got two open so far this year. As we move forward through the year, it will be not as back-loaded as we had our openings last year, but typically, as you move forward, they will be a little back-loaded as we move through the year. We are excited. We have eight 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 input and COGS initiatives that were going to happen this year. Can you talk about any specifics there?

This has been a multiyear project for us in regards to leveraging what we are buying to improve margins. As we think about the focus for 2026, it is taking things and having the supplier do some of the prep. 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. The combination of that will drive efficiency and margin for us. These are the main focus of our initiatives this year to help us drive the margin improvement.

Okay. Thank you.

Thank you.

Our final question comes from Matthew James Curtis with D.A. Davidson. Please proceed.

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

Great. Thanks for the question. We are really proud of these new openings, in particular Washington. In Kent, Washington, this unit has exceeded every expectation—well above our system average. Lines to the point where we have had to dial back some of our hours so that we could make sure we had chicken for everyone. We have not 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. This is the first unit in the state, but it shows you how much pent-up demand there is for El Pollo Loco Holdings, Inc. When we support the restaurant well and we find great franchise partners, it is a magical combination. The training that we are doing is many months in advance. We spend a lot of time with folks training. We send teams up to these restaurants, and there is 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. I think that is the very testament that one unit is not enough; they want to do several in the DMA. To me, it is a testament of growing outside our home market.

Okay. That is 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? 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 is certainly not enough—as many people as might have left California, I do not think there is enough to substantiate all this demand. I think it is the fact that we really do not have a true national competitor. 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. The same consumer type that loves the food, whether they are in California or Arizona or Nevada, they love it in New Mexico and Washington and eventually across the country. Back to your other part of the question in terms of how we are marketing things: we are using local marketing, we are using digital marketing—all different types of marketing tools—to drive awareness.

Okay. Interesting. Thanks very much.

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 Elizabeth Goodwin Williams for closing remarks.

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