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El Pollo Loco launches new branding with Q4 2018 suit settlements behind it

March 8, 2019

With a new logo, "See the Flame" tagline, an emphasis on healthful foods and a people-first culture, El Pollo Loco released its fourth quarter 2018 financials, showing the brand is firmed footed in transformation mode.

Part of that transformation is leaving the less glowing aspects of the past behind, as El Pollo Loco executives announced settlement of "multiple class action lawsuits" that resulted in a Q42018 pre-tax expense of $36.3 million, according to a conference call on the quarterly numbers. 

"It was important for us to get these longstanding legal issues taken care of, so that we can focus all our attention going forward on building upon the momentum generated in 2018," said El Pollo Loco President and CEO Bernard Acoca during the call. 

Highlights for the quarter that ended Dec. 26, 2018, include: 

• Net loss was $23.4 million or $0.60 per diluted share, compared to net loss of $38,000 in the prior year. 
• Total revenue, excluding franchise advertising fee revenue, increased 6.2 percent to $101.1 million compared to $95.2 million in the same period of 2017. (Including $5.2 million of franchise advertising fee revenue related to franchise advertising fund contributions, required as part of new accounting guidance implementation, total revenue increased 11.6% to $106.3 million.)
• System-wide comparable restaurant sales increased 4.4 percent, including a 3.7 percent increase for company-operated restaurants, and a 5.1 percent increase for franchised restaurants.
• Pro forma net income(1) was $6.1 million, or $0.16 per diluted share, compared to pro forma net income of $4.4 million, or $0.11 per diluted share.
• Adjusted EBITDA was $14.5 million, compared to $13.4 million in the same period of 2017.

"We ended 2018 with strong operating momentum, with fourth quarter results that included a 4.4 percent system-wide increase in comparable restaurant sales, which was our best performance since the first quarter of 2015, and included transaction growth of 2.3 percent," Acoca said on the call. "On a two-year basis, system-wide comparable restaurant sales increased by 5.8 percent, which was the best performance since the first quarter of 2016.  

"Our restaurant teams also delivered strong restaurant operating profit margin of 18.7 percent, and pro forma EPS of $0.16, up 45 percent over last year. We believe these results are evidence that the initiatives we launched during 2018 as part of our Transformation Agenda are gaining traction and driving results."

2019 outlook

Acoca told investors on the call the company was moving aggressively forward to transform itself into an even bigger presence in the Mexican QSR category. Some aspects he mentioned as key to this transformation include the actions associated with creating a more "people first" culture, including new bonus structures and employee appreciation initiatives.

2019 guidance for the company assumes the following: 

• 2-4 percent system-wide comparable restaurant sales growth.
• Three to four new company-owned restaurants and three to five new franchised restaurants.
• Restaurant contribution margin of 18.2-18.9 percent.
• Adjusted EBITDA of $62 to $65 million.