El Pollo Loco's Q4 2024: Navigating Contradictions in Remodel Impact, Margin Expansion, and Franchise Growth

These are the key contradictions discussed in El Pollo Loco's latest 2024Q4 earnings call, specifically including: Remodel Program Impact, Margin Expansion Expectations, and Franchisee Pipeline Activity:



Financial Performance and Revenue Growth:
- El Pollo Loco reported total revenue of $114.3 million for Q4 2024, an increase of 1.8% compared to the previous year.
- The growth was primarily driven by a 9% increase in average check size and expansion of restaurant openings.

Restaurant Contribution Margin:
- Restaurant contribution margin for Q4 2024 was 16.7%, up from 15.8% in the same period last year.
- Improvements were due to cost savings and asset modernization initiatives, which were supported by effective pricing strategies.

New Unit Development:
- El Pollo Loco plans to open 10 new restaurants in 2025, with the majority outside of California.
- This expansion strategy is supported by a flexible restaurant format that allows conversions of closed locations, reducing build costs and enhancing returns.

Franchisee Pipeline and Growth:
- There is growing excitement from existing and potential franchise partners due to the brand's improvement and reduced build costs.
- This is reflected in an increased number of meetings and franchise days, which signals potential for further growth in the franchise pipeline.

Menu Innovation and Customer Response:
- The introduction of the Mango Habanero bone-in chicken flavor and its availability on other menu items has driven trial from both existing and new customers.
- This positive response has reinforced the importance of culinary innovation and flavor profiles in El Pollo Loco's growth strategy.