El Pollo Loco’s Q2 2026 Call: July Sales Momentum vs. Q3 Guidance, Loco Tenders’ Mixed Signals, and CapEx Timing Discrepancies

Date of Call: Aug 6, 2026

Financials Results

• Revenue: $129.6M, up from $125.8M in Q2 2025
• EPS: GAAP: $0.43 per diluted share, up from $0.24 per diluted share prior year; Adjusted: $0.30 per diluted share, up from $0.28 per diluted share prior year
• Operating Margin: Restaurant-level margin of 19.5%, up from 19.1% in the prior year period

Guidance:

• System-wide comparable store sales growth for full year 2026 expected to be 3.5% to 4.5%.
• Adjusted EBITDA guidance increased to between $68 and $70 million.
• Expected capital spending reduced to between $33 and $37 million.
• Depreciation and amortization expenses expected between $18 and $18.5 million.
• G&A expenses (excluding one-time charges/benefits) expected between $52 and $54 million.
• Effective income tax rate estimated at approximately 29 to 29.5%.
• Plan to open 18 to 20 new restaurants (3-4 company, 15-16 franchise) in 2026.
• Restaurant margins in Q3 2026 expected between 18% and 18.5%, in line with Q3 2025.

Business Commentary:

Sales and Market Expansion:

• El Pollo Loco reported system-wide same-store sales growth of 3.9% for Q2 2026, with company-operated restaurant revenue increasing 3.7%.
• This growth was driven by strategic pillars such as strong brand activation, menu innovation, and operational excellence, with new product launches like loco tenders and loaded quesadillas contributing significantly.

Digital and Loyalty Program Growth:

• Digital sales represented approximately 28% of system sales, up 13% year-over-year, with local rewards members visiting approximately three times more annually than non-loyalty members.
• The growth was supported by targeted loyalty offers and strategic digital marketing, enhancing customer frequency and check growth.

Operational and Financial Performance:

• The company achieved a restaurant-level margin of 19.5%, within the long-term target range of 18% to 20%, despite produce cost pressures.
• This was due to underlying cost discipline, labor productivity improvements, and effective price increases.

New Unit Growth and Franchise Development:

• El Pollo Loco is on track to open 18 to 20 new locations in 2026, with a focus on expanding outside of California.
• The growth confidence stems from strong franchise partner interest and successful openings in new states like Idaho, Washington, and New Mexico.

Remodeling and Technology Initiatives:

• The company completed 24 remodels in the first half of 2026, seeing a mid-single-digit sales lift on average in remodeled locations.
• Progress in modernizing technology and AI tools, led by the new Chief Technology Officer, is enhancing operational capabilities and guest experiences.

Sentiment Analysis:

Overall Tone: Positive

• CEO Liz Williams stated, '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%... 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.' CFO Ira Fills noted sales momentum continued into Q3 with system-wide comparable store sales up 5.8% through July 29 and raised guidance for system-wide comps and adjusted EBITDA.

Q&A:

• Question from Todd Brooks (Benchmark Stonex): ...What are you seeing for kind of continued strength of performance in newer markets?
  Response: Newer markets are opening well, often above system average, with strong sales and confidence leading to additional openings in those states.

• Question from Todd Brooks (Benchmark Stonex): ...can you give us a sense of how far afield the interest in the brand is reaching?...
  Response: Interest is nationwide, not just contiguous; the brand could expand across the country, depending on development conversations.

• Question from Todd Brooks (Benchmark Stonex): ...what are you looking for in that franchisee partner?...
  Response: Partners should have restaurant experience, multi-unit track record, brand enthusiasm, and operational expertise, with existing partners also being considered for expansion.

• Question from Matt Curtis (DA Davidson): ...July accelerated in terms of traffic relative to the second quarter. I just was wondering if you could unpack what drove the sequential acceleration... Given the guidance for the full third quarter on comps, it implies a deceleration...
  Response: July acceleration was driven by loaded quesadilla success, World Cup advertising, brand momentum, and easier comparisons; Q3 guidance midpoint is consistent with Q2, with tougher year-over-year comparisons in Q4.

• Question from Matt Curtis (DA Davidson): ...expand on what you learned from the local tenders... what needs to be true for tenders to return in a more permanent or recurring way?
  Response: Tenders drove new guest acquisition, especially among younger consumers, and increased check sizes; to return permanently, operational tests with holding equipment are being conducted to ensure efficient execution.

• Question from Todd Brooks (Benchmark Stonex): ...If you look at the COGS pressure that you talked about, I guess what proportion of that was related to produce?...
  Response: About three-quarters of the COGS pressure in Q2 was from produce; pressure has since mitigated but other costs like packaging and fuel remain.

• Question from Jeremy Hamblin (Craig Helm): ...just maybe some assumption that there's a moderation from the current 5.8% level.
  Response: The Q3 guidance midpoint reflects a balance similar to Q2, not July's outsized benefit from specific events like World Cup advertising.

• Question from Jeremy Hamblin (Craig Helm): ...have you kind of scoured your food sourcing to ensure no potential issues with jalapenos...?
  Response: El Pollo Loco was not involved in any lettuce recalls; all lettuce is sourced from the USA, and they use serrano peppers, not jalapenos, from a different supplier.

• Question from Jeremy Hamblin (Craig Helm): ...can you just talk about kind of the lowering of [CapEx]...?
  Response: The reduction is due to timing adjustments for the remodel program and tests for holding equipment, not cancellation of projects.

• Question from Jeremy Hamblin (Craig Helm): ...With the extension of your credit agreement, what's the interest rate that we should expect?
  Response: The spread will increase by about 50 basis points from the previous rate.

Contradiction Point 1

Comparison Environment and July Performance

Contradiction on whether July's strength was an outlier versus reflective of underlying trend.

Does the company have comments on Matt Curtis's (DA Davidson) input? - Matt Curtis (DA Davidson)

2026Q2: The July acceleration was driven by... and a recovery from last year's softer comparisons... It also reflects the brand's overall momentum. - [Liz Williams](CEO)

What factors drove the sequential acceleration in comp trends in July, and does the implied deceleration in Q3 guidance reflect tougher comparisons? - Jeremy Hamblin (Craig Helm)

2026Q2: July benefited from outsized factors like World Cup advertising. The midpoint of the Q3 guide reflects a trend more similar to Q2, not the exceptionally strong July. - [Ira Fills](CFO)

Contradiction Point 2

Loco Tenders Product Performance and Pricing Assessment

Inconsistent evaluation of the product's market reception and competitive positioning.

Matt Curtis (DA Davidson) - Matt Curtis (DA Davidson)

2026Q2: Loco Tenders drove significant incrementality... To return, the company is testing holding equipment... - [Liz Williams](CEO)

What insights did the Loco Tenders limited-time offer provide regarding new guest acquisition, repeat rates, and check impact, and what conditions must be met for it to return permanently? - Jeremy Hamblin (Craig-Hallum)

2026Q1: The product's performance is right in line with traditional expectations... It's meeting expectations. - [Liz Williams](CEO)

Contradiction Point 3

CapEx Guidance and Timing

Contradiction on the primary reason for lowering CapEx guidance.

Jeremy Hamblin (Craig Helm) - Jeremy Hamblin (Craig Helm)

2026Q2: The reduction is due to the timing of two initiatives: 1. The METAL remodel program timing... 2. The test and potential rollout of holding equipment for Loco Tenders... - [Ira Fills](CFO)

Why was the CapEx guidance lowered by about $3-4 million despite maintaining unit growth, and could this be due to under-budget new units? - Jeremy Hamblin (Craig Helm)

2026Q2: The reduction is primarily due to the timing of the remodel program, not a cancellation. - [Ira Fills](CFO)

Contradiction Point 4

Impact of Inflation and Consumer Spending

Contradiction on whether inflationary pressures, specifically gas prices, are affecting consumer behavior.

Matt Curtis (DA Davidson) - Matt Curtis (DA Davidson)

2026Q2: The July acceleration was driven by... a recovery from last year's softer comparisons (e.g., more dining room vs. drive-through). It also reflects the brand's overall momentum. - [Liz Williams](CEO)

What factors contributed to the sequential acceleration in comp trends in July, and does the Q3 guidance imply a deceleration due to tougher comparisons? - Todd Brooks (Benchmark Company)

2026Q1: The consumer has remained steady. The company feels strong momentum... They have not seen an impact from inflationary pressures or gas prices on consumer spending. - [Liz Williams](CEO)

Contradiction Point 5

Nature of Traffic Trend Gap

Explanation shifts from being a temporary anomaly to a reflection of operational strength.

Matt Curtis (DA Davidson) - Matt Curtis (DA Davidson)

2026Q2: The company feels great about the sales trend... The guidance for Q3 (midpoint 4%) and Q4 are both consistent with the current momentum, indicating a sustained trend. - [Liz Williams](CEO) & [Ira Fills](CFO)

What drove the sequential acceleration in comp trends in July, and does the Q3 guidance imply a deceleration due to tougher comparisons? - Jeremy Hamblin (Craig-Hallum)

20260313-2025 Q4: The gap is not indicative of operational issues. It is typically due to a multitude of factors like geography, timing of prior pricing actions, weather, and natural quarter-to-quarter variability. - [Liz Williams](CEO)