Margin Expansion and Franchise Growth Stand Out in El Pollo Loco’s Third Quarter Results
Profitability Outpaces Modest Revenue Growth
El Pollo Loco Holdings, Inc. (NASDAQ: LOCO) announced its financial results for the third quarter of 2025, delivering higher margins and profits, even as total revenues inched up modestly to $121.5 million from $120.4 million a year ago. The company's disciplined focus on operational efficiency resulted in significant gains at the restaurant and corporate levels.
Margin Improvement Reflects Operating Efficiency and Value Initiatives
Despite system-wide comparable restaurant sales declining 0.8%, restaurant contribution increased to $18.5 million, or 18.3% of company-operated restaurant revenue, up from $16.9 million and 16.7% in the same period last year. This improvement points to better cost management and strategic pricing. Meanwhile, net income climbed to $7.4 million ($0.25 per diluted share), a 19% increase from last year's $6.2 million ($0.21 per share). Adjusted EBITDA reached $17.4 million versus $15.5 million previously, underlining healthier underlying cash flow.
| Q3 2025 | Q3 2024 | % Change | |
|---|---|---|---|
| Total Revenue ($M) | 121.5 | 120.4 | +0.9% |
| Net Income ($M) | 7.4 | 6.2 | +19.4% |
| Adjusted EBITDA ($M) | 17.4 | 15.5 | +12.3% |
| Restaurant Contribution Margin | 18.3% | 16.7% | +1.6pp |
Franchise Revenues Rise and Restaurant Openings Accelerate
Franchise revenue jumped 13.5% to $12.9 million, boosted by a technology rollout and five new franchise-operated restaurants opened in the past year. The third quarter also marked a milestone with the opening of El Pollo Loco’s 500th restaurant. Management stated they are building a pipeline to almost double unit openings in 2026—a sign of accelerating expansion plans and robust franchise demand.
| Metric | Q3 2025 | Q3 2024 |
|---|---|---|
| Company-operated Restaurant Revenue ($M) | 100.7 | 101.2 |
| Franchise Revenue ($M) | 12.9 | 11.3 |
| System-wide Restaurants (End of Q3) | 498 | 498 |
| Company-operated Restaurants (End of Q3) | 174 | 172 |
| Franchised Restaurants (End of Q3) | 324 | 324 |
Improved Balance Sheet and Ongoing Investment
LOCO finished the quarter with $10.9 million in cash and cut its outstanding debt to $61 million. Following the quarter's close, the company paid down an additional $6 million, bringing the current outstanding borrowings to $55 million. Capital spending for 2025 is expected to range between $28 million and $30 million, supporting restaurant openings and technology upgrades.
2025 Outlook Signals Confidence in Growth Pipeline
Looking ahead, El Pollo Loco projects at least 10 new system-wide openings in the remainder of the year. General and administrative expense (excluding one-time costs) is expected to range between $47.5 million and $49.5 million, while the estimated tax rate will be just below 30%. These targets underscore management’s continued push for margin improvement while growing its footprint.
Key Takeaways for Investors
El Pollo Loco’s third-quarter report showcases healthy margin expansion, strong franchise momentum, and careful expense management. Even as same-store sales edged slightly lower, operational improvements and expanding unit growth offer a solid foundation for the chain’s long-term prospects. Investors will want to watch if LOCO can sustain margin gains as expansion accelerates into 2026 and beyond.
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