In the latest earnings call, El Pollo Loco's management team provided insights into the company's financial performance and strategic initiatives for the second quarter of 2024. The call, led by Chief Financial Officer Ira Fils and Chief Executive Officer Liz Williams, revealed a number of key themes and trends that shed light on El Pollo Loco's current state and future prospects.
Financial Performance and Strategic Initiatives
El Pollo Loco reported a 0.6% increase in total revenue to $122.2 million, with company-operated restaurant revenue decreasing by 1.5% to $102.3 million. The company attributed this decline to the refranchising of 19 company-operated restaurants to existing franchisees. However, the decrease was offset by a 3.2% increase in company-operated comparable restaurant sales and additional sales from restaurants opened during or subsequent to the second quarter of 2023.
Labor and related expenses increased slightly, with labor wage inflation being a notable concern. The company expects wage inflation to be between 12% and 13% for all its company-owned locations in 2024. Despite these challenges, El Pollo Loco remains optimistic about its cost savings initiatives and expects to offset these investments by improving restaurant-level margins.
Strategic Focus and Growth Opportunities
El Pollo Loco's strategic focus for the second half of 2024 includes five key pillars: brand that wins, hospitality mindset, digital first, delivering winning unit economics, and driving unit growth. The company is focusing on value and affordability, with a renewed focus on everyday value and its iconic Fire-Grilled Chicken. This strategic shift has been well-received by consumers, with El Pollo Loco being named the nation's 1 Best Restaurant for Quick, Healthy Food by USA Today in July 2024.
El Pollo Loco is also exploring digital innovation, including the rollout of kiosks, and is working on reducing the cost of its prototype build to around $1.8 million. The company is also investing in cost savings initiatives across the P&L, with a dedicated team focused on labor productivity, cost of goods sold, and repair and maintenance.
Future Outlook
Looking ahead, El Pollo Loco is optimistic about its future prospects, with plans to drive unit growth and return to historically strong margin performance. The company's focus on value, affordability, and digital innovation positions it well for growth in the competitive quick-service restaurant sector. However, challenges such as labor costs and wage inflation will continue to pose challenges, and the company will need to navigate these effectively to achieve its growth targets.
Conclusion
El Pollo Loco's second quarter earnings call highlighted the company's strategic focus on value, affordability, and digital innovation. Despite challenges in the macroeconomic environment, El Pollo Loco remains optimistic about its future prospects and is committed to driving growth and improving margins. With a renewed focus on everyday value and a digital-first strategy, El Pollo Loco is well-positioned to capture market share and capitalize on growth opportunities in the quick-service restaurant sector.