El Pollo Loco's Q1 2025: Key Contradictions in Sales Impact, Pricing Strategy, and Menu Innovation

Sales impact of remodels, menu price increase outlook, labor cost inflation and moderation, menu innovation and consumer response are the key contradictions discussed in El Pollo Loco's latest 2025Q1 earnings call.



Sales and Consumer Trends:
- El Pollo Loco reported total revenue of $119.2 million for Q1 2025, up 1.3% from Q1 2024.
- The increase in sales was driven by a 0.6% increase in company-operated comparable restaurant sales, despite a 3.8% decrease in transactions.
- The consumer pullback and economic uncertainty were key reasons for the sales decline, despite successful product launches like Mango Habanero.

Unit Development and Expansion:
- El Pollo Loco plans to open 10-11 new restaurants in 2025, expanding its footprint in emerging markets.
- The expansion is supported by a transition to a new distribution partner and a new prototype design aimed at reducing build costs and improving efficiencies.
- Recent closures in the industry provide opportunities for conversions at reduced build costs, further enhancing growth potential.

Margin Trends and Cost Controls:
- El Pollo Laco's restaurant contribution margin for Q1 2025 was 16%, down from 17.6% in the prior year.
- This decrease was due to a mismatch in pricing and labor inflation, particularly from California's minimum wage increase.
- The company remains confident in achieving a full-year margin range of 17.25% to 17.75% through additional margin-enhancing opportunities identified by its teams.

Menu Innovation and Strategic Initiatives:
- El Pollo Loco introduced Mango Habanero and Fresco wraps and salads, with quesadillas slated for June.
- These innovations aim to drive trial, diversify consumer offerings, and cater to portable, affordable options.
- The company is focused on improving operations through customer feedback systems and operational efficiency initiatives, supported by back-to-basics programs to enhance service quality.