Q2 2026 El Pollo Loco Holdings Inc Earnings Call Transcript
Key Points
- System-wide same-store sales grew 3.9% in Q2, with momentum continuing into Q3 with a 5.8% increase through July 29, 2026.
- Restaurant-level margin improved to 19.5%, within the long-term target range of 18-20%, despite commodity cost pressures.
- Menu innovation, including Loco Tenders and Loaded Quesadillas, successfully attracted new and younger customers, driving trial and check growth.
- Digital sales grew 13% year-over-year, representing 28% of system sales, with loyalty members visiting 3 times more frequently than non-members.
- New unit growth is on track with 18-20 openings planned for 2026, including successful entry into new states like Idaho, and a strong pipeline of franchise interest.
- G&A expenses decreased significantly due to a $6.3 million legal settlement and lower activism-related costs, contributing to higher net income.
- The company raised its full-year 2026 guidance for system-wide comparable store sales growth to 3.5-4.5% and adjusted EBITDA to $68-70 million.
- System-wide transactions decreased 0.9% in Q2, indicating that sales growth was driven by higher check size rather than increased customer traffic.
- Food and paper costs increased 90 basis points year-over-year due to 4.1% commodity inflation, primarily from produce, which pressured margins.
- The company faces ongoing cost pressures from packaging, oil, and fuel, which are expected to continue into the second half of the year.
- Franchise revenue decreased 3.8% due to a $1.1 million decrease in IT pass-through revenue from the POS system rollout.
- The company's Q3 margin guidance of 18-18.5% is lower than Q2's 19.5%, reflecting anticipated cost headwinds and a moderation in sales growth.
- The extension of the credit facility will increase interest costs by 50 basis points, impacting future financial performance.
- Capital spending guidance was reduced due to timing delays in the remodel program and testing of new equipment, which may slow some growth initiatives.
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 6th, 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.elpolloloco.com in the investor relations section. Before we begin our formal remarks, I need to remind everyone that our discussions today will include forward-looking statements. Including statements related to our new products and growth opportunities. Strategic and operational initiatives. Expectations regarding sales and margins, potential
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