El Pollo Loco (NASDAQ:LOCO) reported a fifth straight quarter of higher systemwide sales in the third quarter of 2026, as menu promotions and digital orders helped bring in more customers. Earnings declined from a year earlier, however, as general and administrative expenses rose.
Systemwide same-store sales increased 5%, including a 0.7% rise in traffic, the company said on its Nov. 5 earnings call. Total revenue rose to $126.3 million from $121.5 million a year earlier, while net income fell to $6.9 million, or $0.23 per diluted share, from $7.4 million, or $0.25 per share.
CEO Liz Williams said the chain’s sales growth reflected a combination of menu innovation, value offers and operational improvements. The quarter was its fourth consecutive quarter of positive comparable sales, she said.
Sales growth continues into fourth quarter
Company-operated comparable restaurant sales rose 4.4% in the third quarter, driven by a 4% increase in average check size and a 0.3% increase in transactions. CFO Ira Fils said the effective menu price increase compared with the prior year was approximately 3.9%.
Franchise comparable sales increased 5.3%, including a 4.4% increase in average check size and a 0.9% increase in transactions. Franchise revenue nevertheless declined 3% to $12.5 million, partly because the prior-year period included technology pass-through revenue from a point-of-sale rollout and a royalty adjustment.
Fils said systemwide comparable sales rose 3.6% in the fourth quarter through Oct. 28. The company expects full-year same-store sales growth of approximately 4.5%.
Williams attributed the recent momentum to a balance of new products and value offers, including targeted deals through the company’s loyalty app. Third-quarter promotions included Loaded Quesadillas, which she said added sales beyond the chain’s existing quesadilla business and increased overall checks. The items remain available through the app as a Loco Rewards member exclusive.
Digital orders and loyalty gains
Digital sales through the app, website and kiosks represented 31% of system sales, up from 27% a year earlier. Williams said traffic growth was led by digital channels, with both the company’s app and third-party marketplaces increasing notably.
Loco Rewards membership grew nearly 11% year over year, and members accounted for 14% of visits. Williams said members visit twice as often annually as nonmembers.
A Sept. 9 National Grilled Chicken Day promotion produced 56,000 redemptions and 25,000 new rewards sign-ups, making it the program’s highest transaction day on record, according to Williams. The offer provided members a free two-piece chicken meal with a drink purchase.
Margins hold as expenses rise
Restaurant contribution margin edged up to 18.4% from 18.3% a year earlier, within the company’s long-term target range of 18% to 20%. Food and paper costs fell as a percentage of company restaurant sales, while labor costs were flat.
General and administrative expenses increased to $14 million from $12.3 million, reflecting higher incentive compensation, stock compensation and other expenses. Adjusted EBITDA fell to $17.1 million from $17.4 million, while adjusted earnings declined to $0.24 per diluted share from $0.27.
For 2026, the company expects restaurant contribution margin of 18.25% to 18.5% and reiterated adjusted EBITDA guidance of $68 million to $70 million, with results expected near the midpoint. It also projected capital spending of $33 million to $35 million.
Looking toward 2027, Williams said the company plans to balance investment in customer value with efforts to improve kitchen efficiency. Fils said management would weigh pricing against inflation while seeking efficiencies to support margins.
Expansion plans include New York
El Pollo Loco had opened 14 restaurants this year as of the call and expects 18 to 20 openings for all of 2026, absent unexpected delays. It is targeting 25 to 30 openings in 2027.
Williams said roughly one-third of next year’s openings are expected in California and two-thirds outside the state. About two-thirds are expected to be conversions of existing sites, rather than ground-up developments. Openings will likely remain weighted toward the second half, though she expects a higher proportion in the first half than in past years.
The company is targeting a mid-2027 opening for its first New York restaurant, in Queens. It has development agreements covering 15 restaurants in the area over five years. Fils said the company increased development incentives for brand-new markets such as New York while reducing incentives in California and pulling back slightly in developing markets where it already operates.
About El Pollo Loco (NASDAQ:LOCO)
El Pollo Loco Holdings, Inc (NASDAQ: LOCO) operates and franchises quick-service restaurants specializing in Mexican-inspired food and citrus-marinated, fire-grilled chicken. Its menu includes chicken meals, burritos, tacos, quesadillas, salads, bowls and family meals, along with a variety of sides, beverages and desserts.
The company was founded in 1975 in Guasave, Sinaloa, Mexico, and expanded into the United States in 1980 with its first restaurant in Los Angeles. El Pollo Loco primarily serves customers through restaurants in the western and southwestern United States, particularly in California, Arizona, Nevada, Colorado and Texas.
