El Pollo Loco did something last quarter that's not easy to do. Its same-store sales declined by 0.8% as customers ordered cheaper items. But people came in more often, particularly at franchise locations.
Yet the company's restaurant-level profitability increased despite all that budget shopping.
Once the quarter ended, results improved further. Same-store sales so far in the fourth quarter are up 2.2%. Some of that is easier comparisons. But at a point when consumers are broadly cutting back on fast-food dining, executives will take whatever they can get.
"We made a lot of adjustments," CEO Liz Williams told analysts Thursday. "We made them throughout the year in terms of bringing more value to the menu, our positioning, getting our operators improved so that when (customers) did come in, they had a really great experience.
"So as we sit here today, I would say that the consumer isn't any worse than they've really been all year. We're figuring out how to maneuver to give a great experience given that they are so stretched."
The results sent El Pollo Loco's stock soaring. Shares of the chain rose more than 11% in morning trading Friday.
Restaurant contribution margin at company-operated restaurants was 18.3% of sales, up from 16.7% a year ago. Net income adjusted for one-time events increased 24% to $7.8 million, or 27 cents per share. Adjusted EBITDA, or earnings before interest, taxes, depreciation and amortization, increased 12.3%.
All that is coming against the backdrop of a difficult operating environment in California, where most of El Pollo Loco's 500 restaurants are located. Fast-food chains in the state are required to pay workers at least $20 an hour. In addition, sales have been more difficult in parts of the state partly due to immigration enforcement issues this year.
Those issues have made life difficult for El Pollo Loco's fellow California-heavy chains. So the higher traffic and improving sales results mean the chain is taking market share in the state. "We are indeed outperforming on sales and transactions," Williams said. "That would indicate we are taking some share, which I think we can attribute to getting positioned right on value, on innovation and on the brand really starting to resonate."
That improvement will be crucial for El Pollo Loco. The company's stock entered Friday trading down 22% so far in 2025, including a decline of nearly 5% Thursday. Sardar Biglari, the activist investor and chairman of Steak 'n Shake owner Biglari Holdings, has made an offer to buy the chain. The investment firm CapitalSpring is also in talks with El Pollo Loco on some kind of potential "extraordinary transaction."
El Pollo Loco used "targeted innovation and value offerings" to get customers to come in a bit more often, notably $9.99 quesadilla combos. The company increased its app-only promotions, used "targeted couponing" and increased promotions on third-party delivery sites.
The company is promising more menu innovation in the coming months. It just introduced a Double Chicken Street Corn and Queso Crunch Burrito Bowl. It plans to add more versions next year of its Double Pollo Salads. It is testing Loco Tenders and a "Fire-Fried Chicken Sandwich," which will be grilled rather than fried.
El Pollo Loco is also joining the beverage parade. The company is working on a new beverage platform for next year. The company is testing several drinks. "We believe beverages represent a significant opportunity for El Pollo Loco as an add-on to increase average check and also fulfill multiple daypart needs for our customers," Williams said.
As for operations, Williams said the company used technology and better kitchen equipment to improve labor productivity. It also found cost savings in its supply chain. All that led to improved profit margins.
El Pollo Loco is rolling out kiosks to its company stores, and about half of the system now has the devices. It is also big on delivery and its mobile app. App, web and third-party aggregator sales now represent 15.1% of its business, compared with 13.8% a year ago. Executives believe third-party delivery helps the company reach new customers.
Loyalty transactions also are up 28% this year, Williams said.
El Pollo Loco just opened its 500th location in Colorado Springs. It more recently opened a location in El Paso, Texas. About three-quarters of its new openings this year are outside California. And the chain expects more openings in 2026.
UPDATE: This story has been updated to add the stock price change.
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