El Pollo Loco (LOCO) Q4 2025 earnings review
Sales Rebound and Margin Expansion Anchor Strong Finish to 2025
El Pollo Loco broke a three-quarter streak of negative comparable sales, delivering a 2.1% system-wide comp increase in Q4. Revenue grew 8.1% year-over-year to $123.5 million, bolstered by a $5.3 million contribution from a 53rd operating week. Crucially, the turnaround is translating to the bottom line: Restaurant contribution margin expanded to 17.5% and Adjusted Net Income jumped 24% to $7.3 million ($0.25 per share). Management's 2026 guidance points to accelerating unit growth and continued positive comps, signaling confidence that the brand revitalization strategy is gaining traction.
🐂 Bull Case
System-wide comparable sales reversed from -0.8% in Q3 to +2.1% in Q4, led by a strong 3.3% comp increase at franchised locations, proving that recent menu innovations and marketing efforts are resonating.
Despite a highly inflationary labor environment in California throughout 2025, Q4 restaurant contribution margin expanded 80 basis points YoY to 17.5%, showcasing excellent operational cost control.
🐻 Bear Case
While overall sales improved, company-operated transactions fell 2.3% in Q4. The sales growth relied entirely on a 2.7% increase in average check, raising questions about sustainable organic traffic at corporate stores.
General and administrative expenses rose 18% in Q4 to $13.1M. 2026 guidance calls for $52M-$54M in G&A (excluding one-time costs), a structural increase over 2025 levels.
⚖️ Verdict: 🟢
Bullish. The reversal to positive system-wide comps alongside material margin expansion proves the brand can navigate a difficult macro and regulatory environment. The commitment to double new unit openings in 2026 shows management believes the foundational turnaround is complete.
Key Themes
System-Wide Comps Reversing Course
After struggling with negative comparable sales for the first three quarters of 2025, system-wide comps reversed to a positive 2.1%. Franchised restaurants heavily outperformed corporate stores, posting a 3.3% comp gain driven by both check size (+2.5%) and, importantly, positive transaction growth (+0.8%). Company-operated comps grew a modest 0.4%.
Corporate Store Traffic Still Lagging
Despite the positive top-line turnaround, company-operated transactions remained in negative territory at -2.3% for Q4. This marks a deceleration from Q3's brief stabilization (+0.1%) and indicates that the corporate stores' 0.4% comp growth was entirely reliant on price/mix (+2.7%). Long-term sustainable growth requires a return to positive traffic across the entire system.
Margin Expansion Realized
Restaurant contribution margin improved to 17.5% from 16.7% a year ago. Management cited better operating efficiencies and higher menu prices as the primary drivers. This is a significant achievement given the substantial wage inflation (California's $20/hour minimum wage) absorbed earlier in 2025.
53rd Week Accounting Boost
Q4 2025 contained 14 operating weeks compared to 13 weeks in Q4 2024. This extra week contributed $5.3 million in company-operated restaurant revenue and $0.5 million in franchise revenue. Investors should normalize the 8.1% total revenue growth down to approximately 3.4% when assessing the true underlying run-rate.
Aggressive Acceleration in Unit Development
The company signaled a major shift from stabilization to growth by guiding for 18 to 20 new system-wide restaurant openings in 2026 (15-16 franchised, 3-4 corporate). This represents a drastic acceleration from the 9 total system-wide gross openings achieved in all of FY25.
Other KPIs
Accelerating. Up 18% from $14.3 million in 24Q4. The strong EBITDA generation underscores the success of the operating efficiency initiatives, flowing top-line pricing and the extra operating week cleanly through to profitability.
Accelerating. An increase of 15.5% YoY, driven by the extra operating week, $0.4M related to terminated development agreements, strong franchisee comparable sales (+3.3%), and the addition of nine franchise-operated openings over the past year.
Improving. The company aggressively paid down $20.0 million on its revolving credit facility during the year, strengthening the balance sheet ahead of the planned 2026 development acceleration. Subsequent to Q4, they paid down an additional $5.0 million.
Guidance
Accelerating versus the FY25 total system-wide comp. This indicates management's confidence that the momentum generated in Q4 will carry through the next fiscal year, avoiding a return to the negative prints seen in early 2025.
Stable. The midpoint of $67.0M is essentially flat compared to the $66.7M achieved in FY25. However, FY25 included a highly profitable 53rd week, meaning the FY26 guidance implies solid underlying organic growth on a 52-week equivalent basis.
Accelerating. Up from the $30-$34M range guided for 2025. This elevated spend directly correlates with the goal of opening 3-4 new company-owned stores and continuing the comprehensive system-wide remodel program.
Accelerating long-term target. This marks a new multi-year framework demonstrating that the 2026 development pipeline (18-20 units) is intended to be the new baseline for compounding unit growth rather than a one-year anomaly.
Key Questions
Corporate vs. Franchise Traffic Disparity
Franchised restaurants achieved positive transaction growth (+0.8%) in Q4 while company-operated units saw transactions decline by 2.3%. What specific geographic, operational, or pricing differences are driving this divergence?
Adjusting for the 53rd Week
Can you quantify the exact Adjusted EBITDA contribution from the 53rd week in 2025 to help investors properly benchmark the 2026 Adjusted EBITDA guidance of $66M-$68M?
Remodel Sales Lifts
With CapEx guided significantly higher for 2026 to support new builds and remodels, what sustained sales and traffic lifts are you currently observing in the fully remodeled cohorts?
G&A Run-Rate
Guidance calls for $52M-$54M in G&A for 2026, an acceleration from 2025. Is this increase primarily driven by headcount to support the new unit pipeline, or are there underlying tech and wage inflations contributing?