Good day, ladies and gentlemen. Thank you for standing by. Welcome to the El Pollo Loco Second Quarter 2026 Earnings Conference Call. This time, all participants have been placed in listen-only mode, and there will be an opportunity to ask questions following the presentation. Please note that this conference is being recorded today, August 6, 2026. And now, I'd like to turn the conference over to Ira Fills, the company's Chief Financial Officer.

Thank you, Operator, and good afternoon. By now, everyone should have access to our second quarter 2026 earnings release, which can be found at www.elpayoloco.com in the Investor Relations section. Before we begin our formal remarks, I need to remind everyone that our discussions today will include statements related to our new products and 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, remodel plans, and our 2020 forward-looking statements, and therefore, these statements are also subject to that could cause actual results to differ materially from what we currently expect for a more detailed discussion of the risks or 1099 for a combo meal the early

we also introduced a new coffee platform to the menu this quarter with our chata coffee lineup featuring our signature for chata i designed our new beverages to capture an underserved day part for napkin occasion that brings guests of traditional mealtime started with beverages and look forward to even more innovation in the upcoming year. As we head into the second half of the year, we are encouraged by the strength of our innovation pipeline. Two new double chicken burrito bowls will be coming this fall, as well as a new pumpkin spice churro and caramel apple chata coffee. We also continue to test new salads, wraps, and sandwiches as we prepare for 2027. In short, we remain committed to keeping our menu craveable, relevant. Our Let's Get Loco campaign continues to build momentum and has found new ways to put our new menu items in Hold It Like It's Hot campaign, which put our new chata coffee, loaded quesadillas, and We continue to expand our presence with brand partnerships showing up in live sports. From our media presence during the World Cup game at home watch parties, we were there. This is exactly the kind of engine that's something that we will continue to lean into. Turning to our loyalty and digital business, which is our top-line performance, is visited approximately three times more annually than non-loyalty members. We use a strategic approach with our loyalty offers. These targeted offers deploy under our loyalty program, giving members' everyday value and giving our most loyal local Friday drops, providing great offers and value each Sunday spread, From in-restaurant training to analyzing consumer feedback to a more effective help desk for our restaurant general managers. In just a few months, his leader is unlocking opportunity and technology advancement. Moving on to operational excellence and our hospitality mindset, I'm pleased with the continued progress we made this quarter. System satisfaction scores continue to move in the right direction on a year-over-year basis. And we saw improvement across the board from order accuracy to speed and incremental progress is exactly what we set out to build our operational people capability, as this is the single most critical. We know there is room to have even more of a consistent guest experience that builds long-term loyalty to financial metrics and unit economics. In Q2, we delivered another solid restaurant-level margin of nearly within our 18% to 20% long-term target range. We are pleased with this result, especially in light of the significant cost pressure in produce during the quarter. Even with this headwind, our underlying cost discipline can change menu prices. As we said last quarter, we will also balance the goals of driving year-over-year margin expansion with the need for value offers. Let me now touch on our new unit growth pillar. Tara joined us with its development operations, market planning, franchise recruiting, and finance at Taco Bell, Starbucks, we remain confident in our goal of opening 18 to 20 new restaurants system-wide this year, nearly double our 2025 pace. Our new restaurants continue to open with confidence in wide expansion, opened our first restaurant in Idaho, making the entry into El Pollo Loco system, and we already have a plan in the market. Let's stand to and now Ida continue to be outside of California our new unit growth continues to benefit from the second-generation sites where we are achieving lower development cost unit economics as we look forward to becoming a national couple of months we put opportunities across us have been positive for details to share on future calls and remain confident that our development pipeline is continued expanding you to see a mid single-digit sales that we've shared on prior calls. Our menu innovations are driving real and our marketing and loyalty engines are amplifying that healthy margin expansion. Let me turn the call over to Ira.

Thank you, Liz, and good afternoon, everyone. For the second quarter ended July 1st, total revenue was $129.6 million compared to $125.8 million in the second 25. Company-operated restaurant revenue increased 3.7% to $108.1 million from $104.3 million in the same period. A $3.8 million increase in company-operated restaurants. We continue our path of restaurant-level margins to be between 18.25% to 15.8% we ran by 25. In addition, we expect our restaurant margins to be between 18% and 18.5%, which is in line with the, in terms of liquidity, to the end of the quarter, million-dollar revolver. With that, we would like to provide you with the following updated guidance. We are increasing our system-wide comparison to now be between three and a half, and we are increasing our adjusted EBITDA guidance to be between 68 and 70 million. We are reducing our expected capital spending to be between 33 and 37 million. In addition, we now expect depreciation and amortization expense $18.5 million. We are maintaining the following guidance. The opening of at least three to four company-operated restaurants and 15 to 16 franchise-operated restaurants. G&A expenses between $52 and $54 million, excluding one-time charges or benefits. And finally, an estimated effective income tax rate of approximately 29% to 29.5% before discrepancy. This concludes our prepared remarks. We'd like to thank you again for joining us on the call today, and we are now happy to answer any questions that you may have. Operator, please open the line for questions.

If you'd like to ask a question at this time, you may press star 1 from your telephone keypad, and a confirmation tone will indicate your line is in the question queue. Let me press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Thank you, and our first question is from the line of Todd Brooks with Benchmark Stonex. Please proceed with your question.

Hey, congrats on another solid quarter and continued momentum into the third quarter. Great to see you.

Thanks, Todd.

If we can, Liz, if we can talk about franchisees. You gave us some good color last quarter about some of the magnitude of the openings in Washington and New Mexico. Now you've added Idaho on top of it. What are you seeing for kind of continued strength of performance in newer markets?

Yes, appreciate the question. Our newer markets are opening really well. We're very pleased with the strength of the sales. Most are opening above system average, particularly when it's the first restaurant in the first state and or first market. They're opening to just blockbuster lines and quite frankly, exceeding our expectations, which is giving us a belief that the fired grilled chicken is resonating and our brand is resonating. It also gives us the confidence to open more units and those franchisees to open more units in those markets. So like I mentioned, Idaho, the second Idaho location is coming on board in the next couple months. They're already looking for additional sites. Similarly, up in Washington, we've got just one unit. We have been working on finding additional sites up there. Following on with the rest of the quarter, we'll have restaurants opening in New Mexico, in Colorado, another one in Washington, as I mentioned, and then a few more in California, and one in New Mexico. So, you know, just really pleased with how these are opening, and our franchise partners, it's giving a lot of confidence to them, and then additional new partners who are looking at coming into the brand.

And I wanted to follow up on that, because I think you used the word national three or four times during the prepared remarks. These discovery days and the outbound work that you're doing to build a pipeline of interest with potential franchisees, can you give us a sense of how far afield the interest in the brand is reaching? Does it feel contiguous? Are you seeing interest nationwide, which kind of helps prove out that concept of fire grilled chicken been working anywhere in your mind? I'm just curious how this is developing as it goes.

There is nationwide interest. And while we have been rather contiguous over the years, particularly West Coast and down into the South, you know, as we went over to Texas and just a couple in Louisiana, you know, jumping across the country is certainly something that we are considering doing talking with folks and you know there's a lot of population in in on the East Coast and just you know throughout different parts of the country so we don't think it has to be contiguous we certainly could see a world where you know we could go to jump many states and and go across the country it really just depends on you know how these conversations progress us over the next couple months to, and hopefully we'll share more in upcoming calls to that effect.

That's great. And then just a final question, I'll jump back in queue. What's, if you're going to make a jump into non-contiguous and a new territory in your market, what are you looking for in that franchisee partner?

And in your outreach, are those type of partners being drawn to the brand you have to go find them just kind of if you give us the criteria and the interest from that type of partner thanks certainly the partners that we're talking with our partners that have experience in the restaurant space multi-units we want partners that are a great fit with the brands that love the brand have the enthusiasm for the brand they believe in the economic story of the brand but also they have a proven track record in the restaurant space, and they're great operators. That's really important to us. They've done this before. They know how to do new store development. They know how to do grand openings. They know how to do just great customer service. We also have the benefit of a fabulous franchise system today, and I can't say enough great things about our existing franchise partners. and, you know, we're talking with many of them about their desires to be in additional states. As I mentioned in the remarks, our partner up in Idaho is a partner that's been in the system for many years and so that's just been a great opening for many reasons, but one of which is he knows the El Pollo Loco system and he has, you know, just a great team that was able to get trained and ready to go with great efficiency.

Okay. Thanks, Liz.

Yeah, thank you.

As a reminder, to ask a question, you may press star 1 from your telephone keypad. The next question is in the line of Matt Curtis with DA Davidson. Please receive your question.

Hey, guys. Thanks for taking the question. You know, I want to talk about comp trims. You know, July accelerated in terms of traffic relative to the second quarter. I just was wondering if you could unpack what drove the sequential acceleration. I mean, was it LTO momentum, loyalty activity, easier comparisons or something else? And then, you know, given the guidance for the full third quarter on comps, it implies a deceleration. Is that just a function of more fiscal comparisons in August and September, or is there something else going on we should be aware of?

Thanks for the question. I'll start and then hand it over to Ira for the back half of that. So I would say all of the above when you gave the list. You know, we were proud of how our loaded quesadilla got off to a great start. It's a nice eat at a great value combined with just the media that we've had behind it. And also, we wish we could have a World Cup advertising in the month of July every year. You know, usually people aren't watching live sports in July. And, you know, we think that that certainly got eyeballs on El Pollo Loco. Also, in terms of just the momentum that the brand was experiencing, and then in terms of as we think about the lap from last year as well, you think about with everything going on last year, people weren't coming out of their homes as much, and so some of that certainly has come back as well. In fact, we're seeing even some trends where people are eating in the dining room more, whereas last year, if they were coming out, maybe they were going through the drive-through. So I would say all of those factors, you know, have played a role. And then as we look into the back half of the year.

Yeah, as we think about, you know, our full year guidance for the year and even for the quarter, you know, we ran a 3.9% in Q2. And if you think about the midpoint of the guidance for both Q3 and Q4, that's right at 4%. So really consistent with what we, you know, what we ran in Q2. I will tell you there is a little bit of about a 200 basis point change as you go into Q4 versus Q3 in regards to the compares get tougher as you move into Q4. But as you can see by our guidance, you know, we feel great about what's going on from a same-store sales trend, and we really foresee Q3 being pretty much on the same pace as Q2.

Okay, got it. Then separately on local tenders, can you maybe just expand on what you learned from the local tenders in terms of new guest acquisition, repeat rates, check impact? and all of that. And I mean, given that the product brought new guests into the brand, it sounds like, I guess what needs to be true for tenders to return in a more permanent or recurring way?

Yeah. So in terms of what needs to be true, so tenders did great for us, and we'll come around to the answers to some of those first questions. On the back half, the tenders, We had always planned as a limited time offer for the main reason of having some of the equipment in the restaurants to be able to hold them so that we could operate at a higher velocity and just operationally we could execute them for just a better execution. And so we're working with the system now. We're testing holding equipment so that they could be a permanent menu item. What gives us the confidence in earning that spot for a permanent menu item was that tenders drove a lot of incrementality, particularly around a new consumer with that younger consumer, but also that consumer that is wanting something more portable, that consumer that wants them late night. We saw, you know, a higher incidence and attach rate through delivery, delivery coupled by late night. And when I say late night for us, late night is like, you know, 8 to 10 o'clock in the evening. We're not even talking, you know, true deep into late night. So just it was really evident that this fit a need state also in snacking, which was, you know, an afternoon as well. We also just were really pleased with how it helped with check across the board all times of the day. So we learned a lot there. The other thing that we're going back into test and we'll learn some more is different ways to enjoy tenders. So we have a great menu item that has the tender in a wrap. That's, again, a portable, more robust eat. I personally love the tender chopped up on a salad. So there's a lot of things that we can do with tenders, and I think you'll see a lot more over the upcoming quarters.

Okay, got it.

Thanks very much for the time.

Thank you. Our next question is from the line of Todd Brooks with Benchmark Stonex. Please proceed with your question.

I don't think I've heard of me yet. I have one for Ira that I forgot to ask here. Ira, you talked about how do you pass pressure in the quarter and I've heard from a couple of other operators that it was very spiky but relatively short-lived. If you look at the COGS pressure that you talked about, I guess what proportion of that was related to produce and are you finding that it is more short-lived and kind of retrenching here as we get into Q3 And if that's the case, just wondering about the 19.1% restaurant level margin in Q2 versus the 18 and a quarter. Sorry, the 18 to 18 and a half.

Yeah. So answer the first part. About, you know, three quarters of the COGS pressure that we did see in Q2 was related to produce in particular. We have seen it mitigate some. There's still a little pressure there, but it has mitigated some. And we're seeing, you know, some pressure on some other lines. We've seen some pressure in packaging, and we've seen some pressure in oil costs. Not as significant as what we've seen in produce. So we – and there's been some fuel pressure as well for delivery charges as far as getting things to the restaurant. on. And we've got all that baked in. Do we think about our guidance when we think about the balance of the year and margins as we look forward?

So it's kind of anticipatory based on what you're seeing now, not baking in any relief from these levels currently?

We definitely have relief from produce, but there's still some other items where we're feeling pressure on.

Perfect. Thank you. Thank you.

The next question is from the line of Jeremy Hamblin with Craig Helm. Please just hear their questions.

Thanks. I'll add my congratulations on the strong results. I just want to come back to the question around the Q3 guide. So if we look back, I don't think that the compares actually get tougher in August or September. I think they're pretty similar to what July looked like. Just wanted to see if you could confirm that. And so, you know, just maybe some assumption that there's a moderation from the current 5.8% level?

That's exactly right, Jeremy. The balance of the quarter is pretty similar to what July was. And I think the way to think about it is more about the balance of the quarter being more similar to what Q2 was. And that really in July we had some outsized benefit from some things that Liz mentioned. You know, we had some great advertising mentions and spots related to the World Cup. It really worked hard for us this year. Live sports is great for us from a media standpoint, and it, again, played really well for us. So I think July was a little more outsized, and as we think about the quarter in a whole, you know, kind of the midpoint of our guide, that's where you think about where our trend is.

Got it. And I have to ask, since it's kind of topical here, you know, some other, you know, kind of Mexican food concepts have been thrown some curveballs here, you know, with their sourcing. Have you, you know, have you kind of scoured your food sourcing to ensure no potential issues with jalapenos, anything like that? And have you seen any impact at all, you know, kind of with those headlines that are reaching consumers?

Yeah, yeah. So we take food safety, you know, utmost seriousness. And, you know, of course, we've scoured every bit of our supply chain and work really closely with suppliers. El Pollo Loco was not involved in any of the lettuce recalls. There was no lettuce product pulled and no illnesses have been linked to us. And all of our lettuce is currently sourced from the USA. So all of that. And then on the peppers, we don't use jalapeno peppers. We use serrano peppers. And we also don't use the supplier that I know people are talking about right now. So, you know, we continue to be vigilant with the supply chain. And, you know, it's definitely part of the industry and caring deeply about that. In terms of benefit, it's hard to tease out. You know, I think possibly, you know, we probably got a little bit of help from it. I know our salad business and our it is a core part of our menu and it remains strong. strong, don't have any worries in terms of consumer demand there, particularly in the summertime. They're really popular items, and they continue to remain strong.

And then I want to come to the CapEx for a second. I think you lowered it by about $3 or $4 million, but you're maintaining your unit growth. You might have mentioned it, But can you just talk about kind of the lowering of that as they're, you know, presumably the new units are coming in at or below budget? But just, Culler, you might be able to share on that.

Yeah, great question, Jeremy. So where we really took the CapEx tipping down is more just the timing of our remodel program. We're very happy. We're very pleased with the results of the remodel program. We're continuing to move forward. But just as we evaluate, A, the timing of permits, number one, and two, making sure that we're deploying the right resources internally from an operations and from a development standpoint, we've just pulled the timing back a little bit of it, and that's really the first driver of the lowered CapEx. And the second one is, you know, a little bit what Liz has mentioned, we're still testing and we're working on holding equipment, which we feel like if the tests go, that's something we're going to move forward with. It's just more of a timing issue than a cancellation of a project.

Got it. One other housekeeping item. With the extension of your credit agreement, what's the interest rate that we should expect?

The spread from what we were paying before will be going up by about 50 basis points.

Thank you. Ladies and gentlemen, we've reached the end of today's question and answer session.

I'd like to turn the call back over to Liz Williams for closing remarks.

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

This will conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.