El Pollo Loco Sees Bigger Future Beyond California

El Pollo Loco's Q2 results offered more evidence that its recent operating improvements are holding. But the larger message from CEO Liz Williams was about what comes next: using new menu items, digital engagement, and franchise development to expand its footprint beyond California.

Systemwide comps sales rose 3.9 percent in the second quarter, led by a 4.5 percent increase at franchise restaurants and a 3 percent gain at company-operated locations. Total revenue grew to $129.6 million from $125.8 million in the same period a year ago, while restaurant-level margin improved to 19.5 percent from 19.1 percent.

The comp increase was driven by check rather than traffic. Systemwide transactions declined 0.9 percent during the quarter. Company-operated average check increased 4.2 percent and franchise average check rose 5.3 percent, aided by an effective price increase of roughly 3.4 percent versus 2025.

Menu innovation remains a key part of the strategy. Loco Tenders, introduced at the end of Q1 as a LTO, drew new and younger consumers to the brand. Williams said the Mexican-seasoned tenders also performed well in snacking, delivery, and the brand's late-evening daypart.

The company is now testing holding equipment that could allow it to operate the product at a higher volume and potentially bring it back as a recurring or permanent offering.

"As these were always planned as an LTO, we are taking the learnings and already thinking of ways to bring them back in the future," Williams said. "We believe we've only scratched the surface of what is possible with Loco Tenders."

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The chain followed tenders with Loaded Quesadillas in late June. The portable items come in queso and street-corn varieties and are priced at less than $10 à la carte, or $10.99 as a combo meal with chips, salsa, and a drink. Loco Rewards members received early access before the broader launch.

El Pollo Loco also introduced a Chata coffee platform featuring horchata, iced coffee, and cold foam. The brand sees beverages, tenders, and quesadillas as ways to create occasions outside its traditional lunch and dinner business, including afternoon snacking and on-the-go visits.

Marketing supported the new products. The company continued its "Let's Get Loco" campaign, launched a skateboarding-focused activation with Olympic skateboarder Paige Heyn around National Go Skateboarding Day, and ran promotions tied to the World Cup. Williams said the brand's July performance benefited from a combination of its Loaded Quesadillas launch, marketing activity, and the visibility created by live sports.

Systemwide comps increased 5.8 percent through July 29, including 4.4 percent growth at company-operated restaurants and a 6.6 percent rise at franchise locations. But management said July received an outsized benefit from World Cup advertising, and third-quarter same-store sales growth is expected to settle between 3.5 and 4.5 percent. The company expects restaurant-level margin of 18 to 18.5 percent in Q3.

El Pollo Loco's digital and loyalty programs are also playing a larger role in the company's sales strategy. Digital sales across app, web, and kiosk channels represented about 28 percent of system sales in the quarter and grew 13 percent year-over-year. Off-premise digital sales, including delivery, accounted for almost 17 percent of sales and increased 12 percent.

Loco Rewards members visit approximately three times more often annually than nonmembers, Williams said, while loyalty-member check growth outpaced non-loyalty guests by more than double. The company has used the platform for targeted offers, early menu access, giveaways, and promotions such as its summer-themed Loco Days campaign.

The company is pairing that customer-facing work with a broader development push. El Pollo Loco expects to open 18 to 20 restaurants systemwide in 2026, including at least three to four company-operated units and 15-16 franchised locations. It has opened 10 restaurants year-to-date, including its first location in Idaho at the end of June.

The Idaho opening marked El Pollo Loco's entry into its 10th state. Less than two years ago, the chain operated in seven states. It has since added Washington, New Mexico, and Idaho, and Williams said the vast majority of future openings are expected outside California.

A second Idaho restaurant is scheduled to open this fall, with three to four more units planned for the market over time. Management said first locations in newer states and markets are generally opening above the system average, often with strong opening demand.

El Pollo Loco is also fielding interest from prospective franchisees outside its largely contiguous Western and Southern footprint. The company has hosted discovery days with potential partners representing opportunities across the country, although it has not announced specific new development agreements or new East Coast markets.

"There is nationwide interest," Williams said. "And while we have been rather contiguous over the years…. Jumping across the country is certainly something that we are considering doing. It really just depends on how these conversations progress over the next couple of months."

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