LOCO 10-K & 10-Q changes, risk factors and insider trading

One of the key means to achieving our growth strategy is and will be through opening new restaurants and operating those restaurants on a profitable basis. In fiscal 2025,2026, we plan to open onethree to twofour company-operated restaurant and our franchisees intend to open eight15 to nine.16 restaurants. The ability to open new restaurants is dependent upon a number of factors, many of which are beyond our control, including our and our franchisees’ abilities to: identify available and suitable restaurant sites; compete for restaurant sites; reach acceptable agreements regarding the lease or purchase of locations; obtain or have available the financing required to acquire and operate a restaurant, including construction and opening costs; respond to unforeseen engineering or environmental problems with leased premises; avoid the impact of inclement weather and natural and man-made disasters; hire, train, and retain the skilled management and other employees necessary to meet staffing needs; obtain, in a timely manner and for an acceptable cost, required licenses, permits, and regulatory approvals; respond effectively to any changes in local, state, and federal law and regulations that adversely affect our and our franchisees’ costs or abilities to open new restaurants; and control construction and equipment cost increases for new restaurants. In addition, we may experience delays in our shop development and expansion plans due to unexpectedly long processing times or delays on the part of governmental agencies who issue necessary licenses, permits, and approvals. Delays in the permitting or licensure processes that may result from government shutdowns, staffing shortages, or similar actions that are out of our control, due to, among other things, loss of or uncertainty around federal funding, including the receipt of federal funding by states or state agencies where we operate, could lead to delays in building our shops and affect our shop development and expansion plans, which could harm our results of operations and financial condition.

As part of our longer-term growth strategy, we may enter into geographic markets in which we have little or no prior operating or franchising experience, including through company-operated restaurant growth and franchise development agreements. For example, we are pursuing the new development agreements covering territories in Texas, Colorado, New Mexico, Idaho and Washington State. We currently have twothree restaurants in Colorado.Colorado and opened our first locations in New Mexico, El Paso and Washington State in 2025. We plan on opening our first locations in New Mexico, El Paso, Idaho andin Washington State.2026. The challenges of entering new markets include (i) difficulties in hiring and training experienced personnel, (ii) unfamiliarity with local real estate markets and demographics, (iii) consumer unfamiliarity with our brand, and (iv) competitive and economic conditions, consumer tastes, and discretionary spending patterns that are different from and more difficult to predict or satisfy than in our existing markets. Any failure on our part to recognize or respond to these challenges may adversely affect the success of any new restaurants. Expanding our franchise system requires the implementation, expense, and successful management of enhanced business support systems, management information systems, and financial controls, as well as additional staffing, franchise support, and capital expenditures and working capital.

The restaurant industry is dependent upon consumer discretionary spending, which may be affected by general global economic conditions or other business conditions that may affect the desire or ability of our customers to purchase our products, including economic recessions or inflationary pressures,pressures. whichThese conditions have also caused, and may continue to cause, increased labor, energy, commodity and other restaurant operating costs. In addition, we may be affected by higher consumer debt and interest rates, adverse conditions in the mortgage housing markets, high unemployment levels, increases in gas prices, declines in median income growth, lower consumer confidence, lower consumer discretionary spending and uncertainties due to geopolitical turmoil and potential national or international security concerns.concerns, including the recent outbreak of war in Iran. If the economy experiences a significant decline, our business, results of operations, our ability to access the capital markets and our ability to comply with the terms of our secured revolving credit facility could be materially and adversely affected, and we and our franchisees might decelerate the number and timing of new restaurant openings and/or the number of planned restaurant remodels. An actual or feared outbreak of disease, epidemic or pandemic, changes to regional or local economic conditions affecting consumer spending, or increased food or energy costs could also reduce consumer transactions or impose practical limits on pricing that could harm our business, financial condition, results of operations, and cash flow. In addition, political developments regarding U.S. relations with Mexico may harm our business. For example, increases in tariffs, restrictions on trade, or deterioration in American political or economic relations with Mexico could harm our brand and profitability. United States’ immigration laws are currently a topic of considerable political focus, and U.S. Immigration and Customs Enforcement (ICE) recently intensified certain of its immigration enforcement efforts. Changes in immigration or work authorization laws or additional enforcement activities of existing immigration or work authorization laws by federal or state authorities could increase labor costs for us or our suppliers and potentially impact consumer demand. More generally, changes in trade, labor, immigration policy, or work authorization laws, or additional enforcement activities of existing immigration policyor work authorization laws by federal or state authorities could raise our input prices, or reduce the supply of immigrants, who are in many cases our customers or employees, diminishing our sales and increasing our labor costs. In addition, factors that decrease consumer spending or increase security costs, such as social unrest, terrorist attacks or military action, including wars, may adversely affect our business.

CurrentAdditionally, uncertaintiesthe U.S. government has recently made statements and taken certain actions that have created significant uncertainty about increasesthe infuture tariffsrelationship ofbetween importedthe productsU.S. fromand various other countries, including Mexico, maywith haverespect anto adversetrade effectpolicies, treaties, government regulations and tariffs. For example, on our Company. On February 1, 2025, the U.S. government proposed tariffs up to 25% on imports from certain countries, including Mexico and Canada, and implemented other tariffs on countries including China.China, largely doing so under the International Emergency Economic Powers Act (“IEEPA”). However, on February 20, 2026, the U.S. Supreme Court struck down the international tariffs imposed by President Trump that relied on the IEEPA as the basis. President Trump has subsequently expressed his intent to reinstate the tariffs through other means, and he has imposed temporary 15% tariffs on all countries under Section 122 of the Trade Act of 1974. Some of our produce, packaging and other items are procured from outside of the U.S. (including from Mexico, Canada and China), and any new or increased import duties, tariffs, trade sanctions or taxes, or other changes in U.S. trade or tax policy could result in higher food and supply costs that would adversely impact our financial results. While we are still evaluating the potential impacts of these proposedpotential tariffs, as well as our ability to mitigate their related impacts, we anticipate it might adversely impact our revenue and cost of goods sold in the United States.

We have incurred, and may continue to incur, significant impairment of certain of our assets, in particularparticularly in our new markets.

Changes in food,food costs, supply costs, and other operating expenses, especially for chicken, labor, construction and utilitieschicken could adversely affect our business, financial condition, and results of operations.

Our profitability depends in part on our ability to anticipate and react to changes in the cost of food, supplies, labor, construction and utilities. In 2024,2025, the costs of certain commodities, labor, and other inputs necessary to operate our restaurants have increased. For example, our labor and regulatory compliance have been adversely impacted as a result of AB 1228 which increased the minimum wage at fast food restaurants such as ours to $20 an hour on April 1, 2024. As a result of AB 1228, our labor and regulatory compliance costs increased significantly. See the risk titled “Matters relating to employment and labor law may adversely affect our business” below for more information. In addition, we are susceptible to increases in food costs as a result of factors beyond our control, such as general economic conditions, seasonal economic fluctuations, weather conditions including wildfires and flooding, global demand, food shortages, food safety concerns, infectious diseases, fluctuations in the U.S. dollar, cyber-attacks, transportation issues, product recalls, and government regulations, including tariffs and other import restrictions on foreign produce and other goods. For example, since 2022 we experienced inflationary pressures in recent years due to supply chain disruptions and commodity pricing volatility that adversely impacted and may continue to adversely impact our business and results of operations. Environmental and weather-related issues, which have been exacerbated by climate change, such as freezes, drought, wildfires, hurricanes and flooding, may also lead to increases, temporary or permanent, or spikes in the prices of some ingredients, such as produce and meat. Any increase in the prices of the ingredients most critical to our menu, in particular chicken, as well as corn, cheese, avocados, beans, rice, and tomatoes, could adversely compress our margins, or cause us to raise our prices, reducing customer demand. Alternatively, in the event of cost increases with respect to one or more of our raw ingredients, we might choose to temporarily suspend serving menu items, such as guacamole or one or more of our salsas, rather than pay the increased cost.

Public health crises, such as the COVID-19 pandemiccrises have had, and may in the future have, a significant negative impact on our business, sales, results of operations and financial condition.

Pandemics, epidemics or other public health crises, suchincluding asavian theflu COVID-19,outbreaks, have previously disrupted, and may continuein tothe future disrupt, our restaurant operations, including by causing temporary closures of some restaurants, closures of dining rooms, limited capacity restrictionsrestrictions, product supply shortages, and/or decreased operating hours for some restaurants due to government mandates and/or staffing shortages.

If future public health emergencies at a significant number of our locations require us to temporarily close those locations for disinfection or result in a large number of our employees becoming ill or quarantined and being unable to work, as has occurred in the past, our business and results of operations could be further adversely affected, which may also impact our financial condition. Such public health crises may also adversely affect our ability to implement our growth plans, including delays in the opening or construction of new restaurants or the remodel of existing restaurants.restaurants, Foras example,they have done in the global pandemic resulting from the outbreak of COVID-19 disrupted our restaurant operations from 2020 to 2023. In response to federal, state and local mandates that were aimed at limiting the spread of COVID-19, or due to staffing shortages, we and our franchisees experienced temporary closures of some restaurants, closures of dining rooms, limited capacity restrictions and/or decreased operating hours for some restaurants.past.

IfSuch crises have materially adversely affected, and may in the eventfuture ofso another public health crisis, such as the COVID-19 pandemic, emerge,affect, our sales and operating costs may be materially adversely affected,costs, which could impact our asset values, including goodwill, derivative instruments and property and equipment assets, as well as our ability to meet certain covenant provisions in our debt arrangements in future periods, and have a material adverse effect on our financial results, future operations and liquidity.

Even after a new public health crisis has subsided, we may continue to experience negative impacts to our financial results due to the public health’s crisis impact on the economy in general, globally, nationally and in the local markets in which we operate, including the availability of credit generally, adverse impacts on our liquidity, and/or decreases in consumer discretionary spending that depress demand for our products. In addition, the perceived risk of infection or a resurgence or concern of a resurgence of COVID-19 or other similar diseasesdisease may continue to adversely affect traffic to our restaurants and, in turn, may have a material adverse effect on our business, liquidity, financial condition and results of operations. WeDiseases are also subject to all of the foregoing risks in connectionassociated with the outbreakproducts ofwe othersell, diseases,including epidemicsthe oravian pandemics,flu, ormay similaralso publicadversely threatsimpact orour fearbusiness, ofeven suchif events.our products are not directly impacted.

SocialNegative social media and other negative publicity could have a material adverse impact on our business.

We rely on our ability to continue to expand our digital business, delivery orders and catering is uncertain,catering, and these new business lines are subject to various risks.

Additionally, even if food or water-borne illnesses or other food safety issues or incidents were not identified at El Pollo Loco restaurants, our restaurant sales could be adversely affected, both financially and otherwise, if instances of similar incidents or reports at other QSRs or restaurant chains were highly publicized. In addition, our restaurant sales could be adversely affected by publicity regarding other high-profile illnessesillnesses, such as avian fluflu, that customers may associate with our food products.

Adverse changes in theour franchisees’ economic environmentposition maycould affect our franchisees, withhave adverse consequences to us.

Adverse changes in the economic environment,position includingof our franchisees, whether due to macroeconomic factors, such as inflation and increased labor and supply costs, or otherwise, could result in our franchisees filing for bankruptcy or becoming delinquent in their payments to us, which could have significant adverse impacts on our business, due to loss or delay in payments of (i) royalties, (ii) information technology (“IT”) support service fees, (iii) contributions to our advertising funds, and (iv) other fees. Bankruptcies by our franchisees could (i) prevent us from terminating their franchise agreements, so that we could offer their territories to other franchisees, (ii) negatively impact our market share and operating results, as we might have fewer well-performing restaurants, and (iii) adversely impact our ability to attract new franchisees.

Franchisees may not have access to the financial or management resources that they need to open the restaurants contemplated by their agreements with us, or be able to find suitable sites on which to develop those restaurants. Franchisees may not be able to negotiate acceptable lease or purchase terms for restaurant sites, obtain necessary permits and government approvals, or meet construction schedules. Any of these problems could slow our growth and reduce our franchise revenue. Additionally, our franchisees typically depend on financing from banks and other financial institutions, which may not always be available to them, in order to construct and open new restaurants. For these reasons, franchisees operating under development agreements may not be able to meet the new restaurant opening dates required under those agreements. Also, we sublease certain restaurants to some existing California franchisees. If any such franchisees cannot meet their financial obligations under their subleases, or otherwise fail to honor or default under the terms of their subleases, especially where state franchise laws may limit our ability to terminate or modify these franchise arrangements, we will be financially obligated under a master lease and could be materially and adversely affected. In the past, franchisees have entered bankruptcy or receivership, which have in the past and can in the future lead to sale or closure of franchises, cause underperformance or underinvestment in capital expenditures, or lead to nonpayment of us or other creditors, and these circumstances could recur in the future.

We are dependent on the success of our franchisees, but have limited control with respect to thetheir operations of our franchisees,operations, which could have a negative impact on our business.

As of December 25,31, 2024,2025, approximately 65% of our restaurants were franchised restaurants,restaurants; therefore, our success relies on the financial success and cooperation of our franchisees,franchisees. yetBecause weour have limited influence over their operations. Franchiseesfranchisees are independent business operators.operators They areand not our employees, and we do not exercise control over the day-to-day operations of their restaurants. WeWhile we provide training and support to franchisees, and set and monitor operational standards, butwe have limited influence over how our franchisees’ businesses are run, and the quality of franchised restaurants may be diminished by any number of factors beyond our control. Consequently, franchisees may fail to operate their restaurants in fashions consistent with our standards and requirements, or to hire and train qualified managers and other restaurant personnel. If franchisees do not operate to our expectations, our image and reputation, and the images and reputations of other franchisees, may suffer materially, and system-wide sales could decline significantly.

We currently maintain employee health insurance coverage on a self-insured basis.basis, and we carry large deductibles or self-insure portions of other insurance programs, such as workers’ compensation insurance. We do maintain stop loss coverage for health insurance, which sets a limit on our liability for both individual and aggregate claim costs.

We are lockedparty intoto long-term and non-cancelable leases, and may be unable to renew leases at the ends of their terms.

If we are unable to achieve our socialcorporate and environmental sustainabilityresponsibility goals, our reputation and results of operations could be adversely affected.

In addition to financial performance, companies increasingly are being judged by their performance on a variety of environmental,corporate social and governance (“ESG”)responsibility factors. Investors, governmental agencies and self-regulatory organizations, including the Securities and Exchange Commission (“SEC”), the NYSE and the Financial Accounting Standards Board (the “FASB”), have increasingly focused on social and environmental sustainability achievements and disclosures, including with respect to climate change, energy use, packaging and waste, human rights, sustainable supply chain practices, animal health and welfare and water use. Achievement of our goals are subject to risks and uncertainties, many of which are outside of our control and may prove to be more difficult and costly than we anticipate. These risks and uncertainties include, but are not limited to, our ability to achieve our ESGcorporate responsibility goals within currently projected costs and expected timeframes; unforeseen operational and technological difficulties; the success of our collaboration with our suppliers and other third parties; and competitive pressures. Failure to achieve our goals could damage our reputation and relationships with our guests, investors and other stakeholders, which could have an adverse effect on our business, results of operations and stock price. Further, different stakeholder groups have divergent views on ESGcorporate responsibility matters, which increases the risk that any action or lack thereof with respect to ESGcorporate responsibility matters will be perceived negatively by at least some stakeholders and adversely impact our reputation and business. Anti-ESGSome contrary sentiment about certain corporate responsibility matters has gained some momentum across the United States. If we do not successfully manage ESG-relatedcorporate responsibility-related expectations across these varied stakeholder interests, we may face scrutiny, reputational risk, lawsuits, or market access restrictions from these parties regarding our ESGcorporate responsibility initiatives.

From time to time, we experience cybersecurity incidents within our information systems. These cybersecurity incidents have included, and, may in the future include, those caused by physical or electronic break-ins, computer viruses, malware, worms, attacks by hackers or foreign governments, ransomware, use of artificial intelligence, unauthorized access through the use of compromised credentials and tampering, including through social engineering such as phishing attacks, coordinated denial-of-service attacks, exploitation of design flaws, bugs or security vulnerabilities and similar breaches, or intentional or unintentional acts by employees or other insiders with access privileges. In the past, these cybersecurity incidents have resulted in, and in the future could result in, among other things, temporary system disruptions or shutdowns or unauthorized access to confidential information. These events have in the past resulted in, and could in the future also result in misappropriation of our or our customers’ personal information or other proprietary or confidential information, breach of our legal, regulatory or contractual obligations, delays in our operations, or inability to access or rely upon critical business records or systems. In some cases, it may be difficult to anticipate or immediately detect such incidents and the damage they cause. The rapid evolution and increased adoption of artificial intelligence technologies may intensify these risks. We may be required to expend significant financial resources to protect against or to remediate such security breaches, including enhancing our systems, hiring and training personnel, and the cost of providing notification to affected individuals and governmental authorities. In addition, our operations depend upon our ability to protect our information systems against damage from physical theft, fire, power loss, telecommunications failure, and other catastrophic events and disruptive problems.events. Any outage of our technology systems, unauthorized access of our systems or the information stored on such systems, damage or failure of our computer systems or network infrastructure that causes an interruption in our operations could damage our reputation, subject us to litigation or to actions by regulatory authorities, harm our business relations or increase our security and insurance costs, which could have a material adverse effect on our business, financial condition and results of operations.

For example, we are also subject to federal and state laws regulating the collection and use of personal information of our employees and customers, including the California Consumer Privacy Act (“CCPA”), which took effect January 1, 2020, and the California Privacy Rights Act (“CPRA”), which was approved in November 2020, and beginning in January 2023 imposed additional data protection obligations on companies doing business in California, including rights of access, correction, deletion and opt-outs from sale of personal information or sharing of personal information for cross-context behavioral advertising. We may also be subject to data privacy laws in other jurisdictions that we have expanded or are planning to expand into, such as Colorado and Texas. Such data privacy laws impose similar requirements as the CCPA and CPRA. In addition, while we have implemented cookies notices and settings, there is the risk of class action claims arising from the use of cookies and other tracking technologies under the California Invasion of Privacy Act given the evolving nature of court decisions interpreting that law.

Various federal, state and local labor laws govern our relationships with our employees and affect operating costs. These laws include employee classifications as exempt or non-exempt, minimum wage requirements, unemployment tax rates, workers’ compensation rates, citizenship requirements, and other wage and benefit requirements for employees classified as non-exempt. Significant additional government regulations and new laws mandating increases in minimum wages or benefits such as health insurance could materially affect our business, financial condition, operating results, and cash flow. In particular, our labor and regulatory compliance have been adversely impacted as a result of AB 1228, signed into law by Governor Newsom on September 28, 2023, which repealed and replaced the FAST Act on January 1, 2024. Pursuant to AB 1228, the minimum wage at fast food restaurants that are part of brands which have more than 60 establishments nationwide was increased to $20 an hour on April 1, 2024, and a Fast Food Council created by AB 1228 will have limited power to approve annual wage increases until 2029. Under the law, the Fast Food Council also has the power to develop and propose minimum standards for fast food workers, including standards for working hours, working conditions, and health and safety. As a result of AB 1228, we have experienced an increase in our labor and regulatory compliance costs and we expect these costs willmay continue to increase in 2025 and that our results of operations and profitability will be adversely affected if we are not able to implement other measures to counter these increased costs.2026. Further, this law could prompt similar legislation in other states. In addition, the unionization of our employees and of the employees of our franchisees could materially affect our business, financial condition, operating results, and cash flow.

Labor is a primary component in the cost of operating our company-operated and franchised restaurants. Labor shortages and increased labor costs are subject to numerous internal and external factors, including higher employee-turnover rates, changes in immigration policy including barriers to immigrants entering, working in, or remaining in the United States, regulatory changes, prevailing wage rates, including increases in federal, state, or local minimum wages or in other employee benefit costs (including costs associated with health insurance coverage or workers’ compensation insurance), and increased competition we face from other companies for qualified employees. SinceIn 2023,recent years, we have continued to experienceexperienced a competitive and tight labor market. A sustained labor shortage could lead to increased costs, such as increased overtime incurred to meet the demands of our customers and increased wage rates to attract and retain employees. Any failure to meet our staffing needs or any material increases in employee turnover rates could adversely affect our business and results of operations, including our ability to grow our restaurant base. See also our risk factor titled “Public health crises, such as the COVID-19 pandemiccrises have had, and may in the future have, a significant negative impact on our business, sales, results of operations and financial condition” above for labor shortage risks we may face in connection with pandemics, epidemics and other public health emergencies, such as COVID-19.

Federally-mandated, state-mandated, or locally-mandated minimum wages have recently increased in several jurisdictions, including state and county mandates in California, and willcould be further raised in the future, including as a result of the AB 1228 in California. Although we have been able to substantially offset these cost pressures through various actions, such as increasing menu prices, managing menu mix, and productivity improvements, we expect these cost pressures to continue into 20252026 and we may not be able to offset cost increases in the future. In addition, increases in menu prices by us and our franchisees to cover increased labor costs could have the effect of lowering sales, which would thereby reduce our margins and the royalties that we receive from franchisees. Also, reduced margins of franchisees could make it more difficult to sell franchises.

We are subject to extensive laws, government regulation, and other legal requirements and our failure to comply with existing or new laws and regulations could adversely affect our operational efficiencies, ability to attract and retain talentefficiencies and results of operations.

Legislation and regulations regarding certain of our menu offerings, new informationinformation, attitudes, or attitudesregulations regarding diet and health, or adverse opinions about the health effects of consuming our menu offerings, could affect consumer preferences and negatively impact our results of operations.

We may become subject to liabilities arising from environmental laws that could likely increase our operating expenses and materially and adversely affect our business and results of operations.

Seasonal factors, including weather disruptions,disruptions and the timing of holidaysholidays, also cause our revenue to fluctuate from quarter to quarter. Our revenue per restaurant is typically lower in the first and fourth quarters due to reduced January and December transactions and higher in the second and third quarters due to higher transactions, reflecting the seasonality trends in our operating markets. As a result of seasonality, our quarterly and annual results of operations and key performance indicators such as company restaurant revenue and comparable restaurant sales may fluctuate. Accordingly, results for any one quarter are not necessarily indicative of results to be expected for any other quarter or for any year and comparable restaurant sales for any particular future period may decrease. In the future, operating results may fall below the expectations of securities analysts and investors. In that event, the price of our common stock would likely decrease.

Future offerings of debt or equity securities by us may adversely affect the market price of our common stock.stock or dilute the ownership of our existing stockholders.

We are a Delaware corporation, and the anti-takeover provisions of Delaware law impose various impediments to the ability of a third-party to acquire control of us, even if a change of control would be beneficial to our existing stockholders. In addition, provisions of our amended and restated certificate of incorporation and by-laws may make it difficult for, or prevent, a third-party from acquiring control of us without the approval of our Board of Directors. Among other things, these provisions: provide for a classified board of directors with staggered three-year terms; do not permit cumulative voting in the election of directors, which would allow a minority of stockholders to elect director candidates; delegate the sole power to a majority of the board of directors to fix the number of directors; provide the power to our Board of Directors to fill any vacancy on our Board of Directors, whether such vacancy occurs as a result of an increase in the number of directors or otherwise; authorize the issuance of “blank check” preferred stock without any need for action by stockholders; eliminate the ability of stockholders to call special meetings of stockholders; establish advance notice requirements for nominations for election to our Board of Directors or for proposing matters that can be acted on by stockholders at stockholder meetings; and provide that, on or after the date that Trimaran Pollo Partners, L.L.CL.L.C. ceases to beneficially own at least 40% of the total votes eligible to be cast in the election of directors, a 75% supermajority vote will be required to amend or repeal provisions relating to, among other things, the classification of the board of directors, the filling of vacancies on the board of directors, and the advance notice requirements for stockholder proposals and director nominations.

WeFrom time to time, we are subject to proposals by stockholders urging us to take certain corporate actions. If activist stockholder activities ensue, we may be subject to shareholder activism in the future, which could result in substantial costs and divertthe diversion of management’s and our Board of Directors’ attention and resources from our business. Such shareholder activism could give rise to perceived uncertainties as to our future, adversely affect our relationships with our employees, customers, or suppliers and make it more difficult to attract and retain qualified personnel. We may be required to incur significant fees and other expenses related to activist shareholder matters, including for third party advisors. We may be subjected to a proxy contest or to litigation by activist investors. Our stock price has been and could be subject to significant fluctuation or otherwise be adversely affected by the events, risks and uncertainties of any shareholder activism.

We use a 52- or 53-week fiscal year ending on the last Wednesday of each calendar year. Fiscal 2025, 2024, 2023, and 20222023 ended on December 31, 2025, December 25, 2024,2024 and December 27, 2023 and December 28, 2022,2023, respectively. In a 52-week fiscal year, each quarter includes 13 weeks of operations. In a 53-week fiscal year, the first, second and third quarters each include 13 weeks of operations, and the fourth quarter includes 14 weeks of operations. Approximately every sixfive or sevensix years a 53-week fiscal year occurs. Fiscal 2024,2025 2023was a 53-week fiscal year, and 2022fiscal 2024 and 2023 were 52-week fiscal years. 53-week years may cause revenues, expenses, and other results of operations to be higher due to the additional week of operations. Fiscal years are identified in this Annual Report according to the calendar years in which they ended. For example, references to fiscal 20242025 refer to the fiscal year ended December 25,31, 2024.2025.

El Pollo Loco is a differentiated and growing restaurant concept that specializes in fire-grilling citrus-marinated chicken and operates in the limited-service restaurant segment. We strive to offer foodquality thatchicken integratesserved thefast culinaryand traditions of Mexico with the healthier lifestyle.easy. Our distinctive menu features our signature product--citrus-marinated fire-grilled chicken--and a variety of Mexican and LA-inspired entrees that we create from our chicken. We serve individual and family-sized chicken meals, including a variety of Mexicanentrees like our Double Chicken Tostada, Guacamole Chicken Burrito, and LA-inspiredSalsa entrees, and sides, and, throughout the year, on a limited-time basis, additional proteins like beef and shrimp. Our entrees include favorites such as ourVerde Chicken Avocado Burrito, Pollo Fit entrees, chicken tostada salads, and Pollo Bowls.Quesadilla. Our famous Creamy Cilantro dressings and salsas are prepared fresh daily, allowing our customers to create their favorite flavor profiles to enhance their culinary experience. We believe that our distinctive menu withthat betterfeatures forquality youchicken is a flavorful and more affordable alternativesoption that appeals to consumers across a wide variety of socio-economic backgrounds and drives our balanced composition of sales throughout the day (our “day-part mix”),day, including at lunch and dinner.

Additionally,As a result of recent California legislation increasing wages of fast food workers, we areexperienced impactedan byincrease macroeconomicin challenges,our such as inflationary pressureslabor and changesregulatory compliance costs in tradefiscal policies, that have in the past,2024 and mayfiscal continue2025. toAlthough in the future, affect our operations in certain areas such as food cost, labor costs, construction costs and other restaurant operating costs. Wewe have been able to substantially offset these inflationary and other cost pressures through various actions, such as increasing menu prices, managing menu mix, and productivity improvements. However,improvements, we expect these inflationary and other cost pressures to continue in fiscal 2025 and we may not be able to offset cost increases in the future.2026.

CurrentThere uncertaintiesis aboutongoing increasesuncertainty inregarding tariffsincreased oftariff duties on goods imported productsinto fromthe countries,United includingStates, Mexico,which if imposed, may have an adverse effect on our Company. On February 1,20, 2025,2026, the U.S. governmentSupreme proposedCourt struck down the international tariffs upimposed by President Trump that relied on the IEEPA as the basis. President Trump has subsequently expressed his intent to 25%reinstate onthe importstariffs fromthrough certainother countries, including Mexicomeans, and Canada,he andhas implementedimposed othertemporary 15% tariffs on all countries includingunder China.Section Some122 of ourthe Trade Act of 1974. Certain of the produce, packaging materials, and other items procured by our Company are procuredsourced from outside of the U.S.United (States, including from Mexico,Canada, Mexico and Asia. Current and proposed tariff rates range widely, depending on the country of origin. Certain goods from Canada and ChinaMexico that are compliant with the United States-Mexico-Canada Agreement (USMCA), are, and may continue to be, exempt from new tariffs. While we continue to evaluate the potential impacts of increased tariff rates, as well as our ability to mitigate any such related impacts, we anticipate that the imposition of tariffs on goods we import into the United States will adversely impact our revenue and cost of goods sold in the United States. Any new or increased import duties, tariffs, trade sanctions or taxes, or other changes in U.S. trade or tax policy could result in higherfurther increases to our food and supplysupplies costs that would adversely impact our financial results. While we are still evaluating the potential impacts of these proposed tariffs, as well as our ability to mitigate their related impacts, we anticipate it might adversely impact our revenue and cost of goods sold in the United States. For additional information, see “Item 1A. Risk FactorsFactors,”, including the risk factor titled “We are vulnerable to changes in political and economic conditions, such as trade policies, tariff and import regulations by the United States, as well as consumer preferences.”

In 2025,2026, we intend to open onethree to twofour new company-operated restaurants in California and eightTexas, and our franchisees intend to nineopen 15 to 16 new franchised restaurants. To increase comparable restaurant sales, we plan to increase customer frequency, attract new customers, and improve per-person spend.

In fiscal 2024, comparable restaurant sales system-wide increased 3.2%. In fiscal 2023, comparable restaurant sales system-wide decreased 0.3%. In fiscal 2022, comparable restaurant sales system-wide increased 5.9%. Comparable restaurant sales growth/decline reflects the change in year-over-year sales for the comparable restaurant base. A restaurant enters our comparable restaurant base the first full week after its 15-month anniversary. System-wide comparable restaurant sales include restaurant sales at all comparable company-operated restaurants and at all comparable franchised restaurants, as reported by franchisees. Refer to “Comparable Restaurant Sales” definition in the subsection titled “Key Performance Indicators” below for further information.

In fiscal 2024,2025, we opened twoone company-operated restaurants,restaurant, and our franchisees opened twoeight new restaurants. From time to time, we and our franchisees close restaurants. In fiscal 2024,2025, we did not close any company-operated restaurants, and our franchisees closed four restaurants. In fiscal 2025, the Company acquired one franchise-operated restaurant. Our restaurant counts at the beginning and end of each of the last three years were as follows:

During the year ended December 25,31, 2024,2025, we completed eight17 company-operated restaurant remodels and 4452 franchise remodels. In fiscal 2025,2026, we plan to continue our standard practices for remodels, which includes completing a total of 30-4025 to 35 company and 30-4030 to 40 franchise remodels. Remodeling is a use of cash and has implications for our net property and depreciation line items on our consolidated balance sheets and statements of income, among others. The cost of our restaurant remodels varies depending on the scope of work required, but on average the investment is $0.3 million toapproximately $0.4 million per restaurant.

Loco Rewards™

Our Loco Rewards loyalty program offers rewards that incentivize customers to visit our restaurants more often each month. Customers earn points for each dollar spent and points can be redeemed for multiple redemption options. If a customer does not earn or use points within a one-year period, their account is deactivated and all points expire. When a customer is part of the rewards program, the obligation to provide future discounts related to points earned is considered a separate performance obligation, to which a portion of the transaction price is allocated. The performance obligation related to loyalty points is deemed to have been satisfied, and the amount deferred in the balance sheet is recognized as revenue, when the points are transferred to a reward and redeemed, the reward or points have expired, or the likelihood of redemption is remote. A portion of the transaction price is allocated to loyalty points on a pro-rata basis, based on stand-alone selling price, as determined by menu pricing and loyalty point’s terms.

This report contains forward-looking statements within the meaning of federal securities laws that are subject to risks and uncertainties. All statements other than statements of historical fact included in this report are forward-looking statements. Examples of forward-looking statements in this report include, but are not limited to, discussions of our current expectations, projections, intentions, or beliefs relating to our financial condition, results of operations, liquidity, prospects, growth, trends, strategies, and the industry in which we operate. You can identify forward-looking statements because they do not relate strictly to historical or current facts. These statements may include words such as “aim,” “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “outlook,” “potential,” “project,” “projection,” “plan,” “intend,” “seek,” “may,” “could,” “would,” “will,” “should,” “can,” “can have,” “likely,” the negatives thereof and other words and terms of similar meaning used in connection with any discussion of the timing or nature of future operating or financial performance or other events. All forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those that we expected.Whileexpected. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and it is impossible for us to anticipate all factors that could affect our actual results. All forward-looking statements are expressly qualified in their entirety by these cautionary statements. You should evaluate all forward-looking statements made in this report in the context of the factors that could cause outcomes to differ materially from our expectations. These factors include, but are not limited to: our ability to open new restaurants in new and existing markets; our ability to compete successfully; global economic or other business conditions, including trade policies, tariff and import regulations by the United States, as well as consumer preferences; our ability to attract, develop, assimilate, and retain employees; our vulnerability to regional geographic conditions; our ability to maintain business continuity in the event of a disaster or disruption; impairment of our assets; changes in food and supply costs, especially for chicken, labor, construction and utilities; the impacts of public health crises; potential negative publicity; our ability to continue to expand our digital business, delivery orders and catering; concerns about food safety and quality and about food-borne illness; dependence on frequent and timely deliveries of food and supplies; our ability to service our level of indebtedness; the success of our marketing programs, new menu items, advertising campaigns and restaurant designs and remodels; risks related to our dependence on our franchisees, including their vulnerability to economic changes; exposure from our self-insurance programs; obligations under long-term and non-cancelable leases, and our ability to renew leases at the end of their terms; our ability to achieve our corporate responsibility goals; information technology system failures, cybersecurity breaches, or failure to protect our customers’ data or personal information; our ability to enforce and maintain our intellectual property; the impact of federal, state and local laws, including those governing our relationships with our employees fluctuations in our quarterly operating results due to seasonality and other factors; any future offerings of debt or equity securities that may impact the market price of our common stock or dilute existing shareholders’ ownership; the possibility that Delaware law, our organizational documents, our shareholder rights agreement, and our existing and future debt agreements may impede or discourage a takeover; the impact of shareholder activism on our expenses, business and stock price; and the risks set forth in our filings with the SEC from time to time, including under Item 1A, Risk Factors in our Annual Report on Form 10-K for the year ended December 25,31, 2025, which filings are available online at www.sec.gov. We caution you that the important factors referenced above may not contain all of the factors that are important to you. In addition, we cannot assure you that we will realize the results or developments we expect or anticipate or, even if substantially realized, that they will result in the consequences we anticipate or affect us or our operations in the ways that we expect. The forward-looking statements included in this report are made only as of the date hereof, and we caution you to not place undue reliance on any forward-looking statement made in this report. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as required by law. If we do update one or more forward-looking statements, no inference should be made that we will make additional updates with respect to those or other forward-looking statements. We qualify all of our forward-looking statements by these cautionary statements.

El Pollo Loco is a differentiated and growing restaurant concept that specializes in fire-grilling citrus-marinated chicken and operates in the limited service restaurant segment. We strive to offer quality chicken served fast and easy. Our distinctive menu features our signature product--citrus-marinatedproduct—citrus-marinated fire-grilled chicken--andchicken—and a variety of Mexican and LA-inspiredcontemporary entrees that we create from our chicken. We serve individual and family-sized chicken meals, including a variety of entrees like our Double Chicken Tostada, Guacamole Chicken Burrito, and Salsa Verde Chicken Quesadilla. Our famous Creamy Cilantro dressings and salsas are prepared fresh daily, allowing our customers to create their favorite flavor profiles to enhance their culinary experience. We believe that our distinctive menu that features quality chicken is a flavorful and affordable option that appeals to consumers across a wide variety of socio-economic backgrounds and drives our balanced composition of sales throughout the day, including at lunch and dinner. In 2025, El Pollo Loco launched a brand refresh, inclusive of a new advertising campaign, restaurant design, new products, and an emphasis on hospitality in our restaurants. All these elements reinforce our position in the market of “Quality Chicken, Fast & Easy.”

Additionally, we are impacted by macroeconomic challenges, such as inflationary pressures and changes in trade policies, that have in the past affected, and may continue in the future, to affect our operations in certain areas such as food cost, labor costs, construction costs and other restaurant operating costs. We have been able to substantially offset these inflationary and other cost pressures through various actions, such as increasing menu prices, managing menu mix, and productivity improvements. However, we expect these inflationary and other cost pressures to continue in 2026 and we may not be able to offset cost increases in the future. Global events, such as the recent outbreak ofongoing war in Iran, may also impact our business costs, including the costs of transportation and energy.

There is ongoing uncertainty regarding increased tariff duties on goods imported into the United States, which has caused substantial market uncertainty and in certain cases, retaliatory measures by trading partners. Such changes include the imposition of tariffs under the authority of the International Emergency Economic Powers Act, which the U.S. Supreme Court found unlawful in February 2026, the creation of a refund process for such tariff duties, andand, most recently, the imposition of new tariffs under otherSection statutory301 authorities.of the Trade Act of 1974 on imports from numerous trading partners, effective July 24, 2026. Certain of the produce, packaging materials, and other items procured by our Company are sourced from outside the United States, including from Canada, Mexico and Asia. Current and proposed tariff rates range widely, depending on the country of origin. Certain goods from Canadaorigin and Mexico that are compliant with the United States-Mexico-Canada Agreement (USMCA) are, and may continue to be, exempt from new tariffs. While we continue to evaluate the potential impactsavailability of increasedproduct-specific tariff rates, as well as our ability to mitigate any such related impacts, we anticipate that the imposition of tariffs on goods we import into the United States will adversely impact our revenue and cost of goods sold in the United States. Any new or increased import duties, tariffs, or taxes, or other changes in U.S. trade or tax policy could result in further increases to our food and supplies costs that would adversely impact our financial results. For additional information, see “Item 1A. Risk Factors,” in our Annual Report on Form 10-K for the year ended December 31, 2025, including the risk factor titled “We are vulnerable to changes in political and economic conditions, such as trade policies, tariff and import regulations by the United States, as well as consumer preferences.”exemptions.

Seasonal factors, including weather and the timing of holidays, cause our revenue to fluctuate from quarter to quarter. Our revenue per restaurant is typically lower in the first and fourth quarters due to reduced January and December transactionstransactions, and higher in the second and third quarters. As a result of seasonality, our quarterly and annual results of operations and key performance indicators, such as company-operated restaurant revenue and comparable restaurant sales, may fluctuate.

As of AprilJuly 1, 2026, we had 505511 locations in nineten states. For the twenty-six weeks ended July 1, 2026, our franchisees opened six new restaurants, two in Colorado and one in each of the following states: California, Arizona, Idaho, and Texas, and the Company opened one new restaurant in California and one new restaurant in Texas. In fiscal 2025, we opened one new company-operated restaurantsrestaurant in California, and our franchisees opened eight new restaurants, two in California, two in Arizona, and one in each of the following states: Colorado, Texas, New Mexico and Washington. For the thirteen weeks ended April 1, 2026, our franchisees opened one new restaurant in California and the Company opened one new restaurant in Texas.

For the thirteen and twenty-six weeks ended AprilJuly 1, 2026, our total revenue was $126.2$129.6 million.million and $255.8 million, respectively. For the thirteen weeks ended AprilJuly 1, 2026, our company-operated restaurant revenue was $105.9$108.1 million, and our franchise revenue and franchise advertising fee revenue was $20.3$21.5 million. For the twenty-six weeks ended July 1, 2026, our company-operated restaurant revenue was $214.1 million, and our franchise revenue and franchise advertising fee revenue was $41.7 million.

For the thirteen and twenty-six weeks ended AprilJuly 1, 2026, system-wide comparable restaurant sales increased by 5.8%3.9% and 4.9%, respectively, from the comparable period in the prior year. For company-operated restaurants, comparable restaurant sales for the thirteen and twenty-six weeks ended AprilJuly 1, 2026 increased by 5.4%.3.0% and 4.2%, respectively. For franchise-operated restaurants, comparable restaurant sales increased by 6.1%4.5% and 5.2% for the thirteen and twenty-six weeks ended AprilJuly 1, 2026.2026, respectively. A restaurant enters our comparable restaurant base the first full week after its 15-month anniversary. System-wide comparable restaurant sales include restaurant sales at all comparable company-operated restaurants and at all comparable franchise-operated restaurants, as reported by franchisees. Refer to “Comparable Restaurant Sales” definition in the section titled “Key Performance Indicators” below.

Our restaurant counts at the beginning and end of each of the last three fiscal years and the thirteentwenty-six weeks ended AprilJuly 1, 2026,2026 and June 25, 2025 were as follows:

During the thirteentwenty-six weeks ended AprilJuly 1, 2026, we completed a total of 1324 remodels of which 712 were company-operated restaurant remodels. In fiscal 2026, we plan to continue our standard practices for remodels, which includes a goal of completing a total of 25 to 35 company-operated restaurantsrestaurant remodels and 30 to 40 franchise-operated restaurant remodels. Remodeling is a use of cash and has implications for our net property and depreciation line items on our consolidated balance sheets and consolidated statements of income, among others. The cost of our restaurant remodels varies depending on the scope of the work required, but on average the investment is approximately $0.4 million per restaurant.

As of AprilJuly 1, 2026 and December 31, 2025, the revenue allocated to loyalty points that had not been redeemed was $1.2$1.3 million and $1.1 million, respectively, which is reflected in our accompanying condensed consolidated balance sheets within other accrued expenses and current liabilities. We had over 5.45.6 million loyalty program members as of AprilJuly 1, 2026.

Our revenue is derived from three primary sources: company-operated restaurant revenue, franchise revenue, which is comprised primarily of franchise royalties and, to a lesser extent, franchise fees and sublease rental income, and franchise advertising fee revenue. See Note 11,10, “Revenue from Contracts with Customers” into the Notes to Condensed Consolidated Financial Statements above for further details regarding our revenue recognition policy.

Our operating results for the thirteen and twenty-six weeks ended AprilJuly 1, 2026 and MarchJune 26,25, 2025 are expressed as percentages of total revenue, with the exception of cost of operations and company restaurant expenses, which are expressed as percentages of company-operated restaurant revenue, and are compared in the tables below.

For the quarter ended AprilJuly 1, 2026, company-operated restaurant revenue increased $7.6$3.8 million, or 7.7%,3.7% from the comparable period in the prior year. The increase in company-operated restaurant revenue was mainly due to an increase in company-operated comparable restaurant revenue of $5.4$3.1 million, or 5.4%,3.0%, as well as $0.7$1.0 million of additional sales from the opening of twothree restaurants after the firstsecond quarter of 2025. This company-operated restaurant revenue increase was partially offset by $0.3 million of higher discounts and net revenue deferrals associated with our Loco Rewards loyalty program. The company-operated comparable restaurant sales increase consisted of a 5.7%4.2% increase in average check size, partially offset by a 0.3%1.1% decrease in transactions.

For the quarter ended AprilJuly 1, 2026, franchise revenue decreased $1.2$0.5 million, or 8.8%,3.8% from the comparable period in the prior year. This decrease was primarily due to thea $1.9$1.1 million decrease in franchisee information technology (“IT”) pass-through revenue related to the franchise rollout of the new Point of Sale (“POS”) system completed in 2025, which was partially offset by a corresponding decrease in related franchise expenses. The decrease was also partially offset by the increase in franchise revenue related to the 911 franchise-operated restaurant openings during or subsequent to the firstsecond quarter of 2025 and by a franchise comparable restaurant sales increase of 6.1%.4.5%. The franchise comparable restaurant sales increase consisted of a 4.9%5.3% increase in average check size, combinedpartially withoffset by a 1.1%0.8% increasedecrease in transactions.

For the quarter ended AprilJuly 1, 2026, franchise advertising fee revenue increased $0.6$0.4 million, or 8.0%,5.3% from the comparable period in the prior year. As advertising fee revenue is a percentage of franchisees’ revenue, the fluctuations for the quarter were due to the increases and decreases noted in franchise revenue above.

For the quarter ended July 1, 2026, food and paper costs increased $2.0 million, or 7.7%, from the comparable period in the prior year. The increase in food and paper costs was primarily due to higher sales, higher commodity costs, increased discountsdiscounts, and highermenu-mix produce pricing.shifts. For the quarter, food and paper costs as a percentage of company-operated restaurant revenue were 24.9%,25.4%, downup from 25.2%24.5% in the comparable period of the prior year. The percentage decreaseincrease was primarily due to menuhigher pricecommodity increasescosts, increased discounts, and menu-mix shifts highlighted above, partially offset by themenu increasedprice discountsincreases and costcost-management increases highlighted above.initiatives.

For the quarteryear-to-date period ended AprilJuly 1, 2026, labor and related expenses decreased $0.3$0.2 million, or 1.1%,0.3%, from the comparable period in the prior year. The decrease in labor and related expenses for the quarter was primarily due to a $0.5$1.2 million reduction in group insurance and workersworkers’ compensation claims,claim $0.5expenses millionand costsother relatedbenefit-related to improved labor efficiencies as part of our cost-management initiativescosts, partially offset by a $0.7$1.0 million increase in otherdirect labor-related expensescosts, relatedincluding torestaurant labor and management incentive compensation, an increase in training, overtime and wage inflation and labor relatedassociated expenses fromwith the opening of twothree restaurants after the firstsecond quarter of 2025. For the year-to-date period ended July 1, 2026, labor and related expenses as a percentage of company-operated restaurant revenue were 30.0%, down from 31.7% in the comparable period in the prior year. The percentage change was driven by leverage on higher company-operated restaurant sales, reduced group insurance and workers’ compensation claims and improved labor efficiencies, partially offset by higher other labor-related costs.

For the quarter ended AprilJuly 1, 2026, occupancy and other operating expenses increased $1.7$0.6 million, or 6.5%,2.1%, from the comparable period in the prior year. The increase was primarily due to a $0.8$0.4 million increase in other operating expensesexpenses, primarily from marketplace delivery fees, mobile order fees,fees and credit card fees, anand a $0.4 million increase of $0.5 million in utilities and repairs and maintenance costs,costs. These increases were partially offset by a $0.2 million decrease in utility costs and another increasecontrollable expenses. For the quarter ended July 1, 2026, occupancy and other operating expenses as a percentage of $0.4company-operated millionrestaurant revenue were 25.3%, down from 25.6% in advertisingthe andcomparable occupancyperiod costs.in the prior year. The decrease as a percentage of sales resulted primarily from leverage on higher company-operated restaurant sales.

For the quarteryear-to-date period ended AprilJuly 1, 2026, occupancy and other operating expenses increased $2.2 million, or 4.3%, from the comparable period in the prior year. The increase was primarily due to a $1.1 million increase in other operating expenses, primarily from delivery fees, mobile order fees and credit card fees, a $0.8 million increase in utilities and repairs and maintenance costs, and a $0.3 million increase in other operating expenses. For the year-to-date period ended July 1, 2026, occupancy and other operating expenses as a percentage of company-operated restaurant revenue were 25.8%,25.5%, down from 26.1%25.9% in the comparable period in the prior year. The decrease as a percentage of sales resulted from the leverage on thehigher comparablecompany-operated storerestaurant sales increase highlighted above.sales.

For the quarter endingended AprilJuly 1, 2026, general and administrative expenses increaseddecreased $1.5$6.5 million, or 13.6%,47.9%, from the comparable period in the prior year. The increasedecrease for the quarter was primarily due to a $0.6$6.3 million received from a legal settlementsettlement, net of legal expenses, in the current year, a $0.8 million decrease in legal and professional fee costs related to shareholder activism and related matters in the prior year, and a $0.7 million decrease related to restructuring and executive transition costs in the prior year. The general and administrative expenses decrease was partially offset by a $0.3 million increase in legal feesfees, anda other general and administrative costs, $0.3$0.5 million increase toin outside services and software maintenance, a $0.2 million increase toin stock-basedstore compensationpre-opening expense,costs and a combined $0.2$0.3 million increase relatedin toother our corporate office relocationgeneral and theadministrative implementation of a new enterprise resource planning (“ERP”) system, partially offset by $0.6 million of lower shareholder activism.expenses.

For the quarter ended AprilJuly 1, 2026, franchise expenses decreased $1.3$0.8 million, or 10.1%,6.0%, from the comparable period in the prior year. The decrease was primarily due to thea $1.9$1.2 million decrease in franchise IT pass-through expense related to the franchise rollout of the new POS system completed in 2025.2025, partially offset by a $0.4 million increase in advertising expenses.

For the quarter ended AprilJuly 1, 2026, depreciation and amortization increased $0.4$0.2 million, or 11.0%,6.1%, from the comparable period in the prior year. The increase was primarily due to the completion of 17 company-operated restaurant remodels in 2025 and 75 company-operated restaurant remodels in the first quarter of 2026, along with the rollout of the new POS system to company-operated restaurants completed in 2025.

During both the thirteen and twenty-six weeks ended AprilJuly 1, 20262026, we recorded $0.2 million in non-cash impairment charges related to the carrying value of the ROU assets of one restaurant in Nevada. During both the thirteen and Marchtwenty-six 26,weeks ended June 25, 2025, we did not record any non-cash impairment charges. Given the inherent uncertainty in projecting results for newer restaurants in newer markets, we are monitoring the recoverability of the carrying value of the assets of several restaurants on an ongoing basis. For these restaurants, if expected performance is not realized, an impairment charge may be recognized in future periods, and such charge could be material.

During both the thirteen and twenty-six weeks ended AprilJuly 1, 2026 and MarchJune 26,25, 2025, we recognized less than $0.1 million of closed-store reserve expense related to the amortization of ROU assets, property taxes and CAM expenses for our closed locations.

For the quarter ended AprilJuly 1, 2026, interest expense, net, decreased $0.4$0.5 million from the comparable period in the prior year. The decrease in interest expense was primarily related to the lower interest rates induring fiscalthe second quarter of 2026 and lower outstanding balances on our 2022 Revolver (as defined below) versus the comparable period in the prior year.

For the quarter ended AprilJuly 1, 2026, we recorded an income tax provision of $3.3$5.2 million, reflecting an estimated effective tax rate of 29.0%.28.8%. For the quarter ended MarchJune 26,25, 2025, we recorded an income tax provision of $2.3$3.0 million, reflecting an estimated effective tax rate of approximately 29.7%.29.6%.

For the year-to-date period ended July 1, 2026, we recorded an income tax provision of $8.5 million, reflecting an estimated effective tax rate of 28.8%. For the year-to-date period ended June 25, 2025, we recorded an income tax provision of $5.3 million, reflecting an estimated effective tax rate of approximately 29.7%. The difference between the 21.0% statutory rate and our effective tax rate of 29.0%28.8% for the quarteryear-to-date period ended AprilJuly 1, 2026 is primarily a result of state tax raterates based on apportioned income andincome, the impact of non-tax deductible executive compensation, and tax deficiencies related to stock option exercises, for which the associated tax deductions were lower than the cumulative amount recorded as stock-based compensation expense, partially offset by the impact of higher stock compensation expense deductible for tax related to the vesting of restricted stock awards as compared to the cumulative amount recorded as stock-based compensation expense, and federal targeted job credits.

System-wide sales are neither required by, nor presented in accordance withwith, GAAP. System-wide sales are the sum of company-operated restaurant revenue and sales from franchise-operated restaurants. Our total revenue in our condensed consolidated statements of income is limited to company-operated restaurant revenue and franchise revenue from our franchisees. Accordingly, system-wide sales should not be considered in isolation or as a substitute for our results as reported under GAAP. Management believes that system-wide sales are an important figure for investors, because they are widely used in the restaurant industry, including by our management, to evaluate brand scale and market penetration. System-wide sales do not include the eight licensed stores in the Philippines.

Comparable restaurant sales reflect year-over-year sales changes for comparable company-operated, franchise-operated, and system-wide restaurants. A restaurant enters our comparable restaurant base the first full week after it has operated for fifteen months. Comparable restaurant sales exclude restaurants closed during the applicable period. At AprilJuly 1, 2026 and MarchJune 26,25, 2025, there were 485489 and 484485 system-wide comparable restaurants in both periods, 171respectively, 172 and 170171 company-operated restaurants, respectively, and 313317 and 314 franchise-operated restaurants, respectively. Comparable restaurant sales indicate the performance of existing restaurants, since new restaurants are excluded. Comparable restaurant sales growth can be generated by an increase in the number of meals sold and/or by increases in the average check amount, resulting from a shift in menu mix and/or higher prices resulting from new products or price increases. Because other companies may calculate this measure differently than we do, comparable restaurant sales as presented herein may not be comparable to similarly titled measures reported by other companies. Management believes that comparable restaurant sales is a valuable metric for investors to evaluate the performance of our store base, excluding the impact of new stores and closed stores.

For the thirteentwenty-six weeks ended AprilJuly 1, 2026, net cash used in investing activities decreasedincreased by $6.9$10.3 million from the comparable period of the prior year. This change was primarily due to aan increase in purchase of property and equipment mostly related to restaurant remodeling and new restaurant development during the thirteentwenty-six weeks ended AprilJuly 1, 2026 when compared to the prior year.

For the thirteentwenty-six weeks ended AprilJuly 1, 2026, net cash used in financing activities decreasedincreased by $5.6$15.0 million from the comparable period of the prior year. TheThis change was primarily due to paydownsa of $7.0$21.0 million net paydown on the 2022 Revolver (as defined below) during the thirteentwenty-six weeks ended AprilJuly 1, 20262026, compared to a net borrowings of $2.0 million onnet the 2022 Revolverpaydown during the thirteentwenty-six weeks ended MarchJune 26,25, 20252025. The increase was partially offset by ana $2.2 million increase of $1.8 million ofin proceeds from the issuance of common stock upon exercise of stock options duringand the thirteen weeks ended April 1, 2026 as compared to the thirteen weeks ended March 26, 2025 as well as no repurchasesabsence of common stock repurchases during the thirteencurrent-year weeks ended April 1, 2026 asperiod, compared repurchases of common stock ofto $1.8 million of repurchases during the thirteenprior-year weeks ended March 26, 2025.period.

Borrowings under the 2022 Credit Agreement (other than any swingline loans) bear interest, at the borrower’s option, at rates based upon either the secured overnight financing rate (“SOFR”) or a base rate, plus, for each rate, a margin determined in accordance with a lease-adjusted consolidated leverage ratio-based pricing grid. The base rate is calculated as the highest of (a) the federal funds rate plus 0.50%, (b) the published Bank of America prime rate, or (c) Term SOFR with a term of one-month SOFR plus 1.00%. For Term SOFR loans, the margin is in the range of 1.25% to 2.25%, and for base rate loans the margin is in a range of 0.25% to 1.25%. Borrowings under the 2022 Revolver may be repaid and reborrowed. The interest rate range under the 2022 Revolver was 5.01%4.97% to 5.02% and 4.97% to 7.00% for the thirteen and twenty-six weeks ended July 1, 2026, and 5.65% to 5.93% and 5.67% to 7.75% for the thirteen weeks and twenty six weeks ended AprilJune 1, 2026 and March 26,25, 2025, respectively.

The 2022 Credit Agreement contains certain customary financial covenants.covenants, which covenants are subject to certain exceptions. We were in compliance with the financial covenants as of AprilJuly 1, 2026.

At AprilJuly 1, 2026, we had $44.0$30.0 million in outstanding borrowings under the 2022 Revolver and one letter of credit in the amount of $10.3 million outstanding, and as a result, we had $95.7$109.7 million in borrowing availability. Subsequent to the quarter-end, we paid down $4.0 million on the 2022 Revolver, resulting in outstanding borrowings of $26.0 million as of July 29, 2026.

Our material cash requirements as of AprilJuly 1, 2026 have not changed materially since those disclosed under Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Material Cash Requirements, of our Annual Report on Form 10-K for the year ended December 31, 2025. Our material cash requirements relate mostly to future (i) debt payments, including expected interest expense, calculated based on current interest rates, (ii) restaurant operating lease payments, (iii) purchasing commitments for chicken, (iv) restaurant finance lease payments, and (v) capital expenditures.

On NovemberMay 2,28, 2023,2026, we announced that our Board of Directors approved a share repurchase program (the “2026 Share Repurchase Program”) under which we wereare authorized to repurchase up to $20,000,000$40.0 million of shares of our common stock. Under the 2026 Share Repurchase Program, we wereare permitted to repurchase our common stock from time to time, in amounts and at prices that we deemeddeem appropriate, subjectbased toon various factors, including the market conditionsprice of our common stock, general business, economic and othermarket conditions, alternative investment opportunities and funding considerations. Pursuant to the 2026 Share Repurchase Program, we wereare authorized to effect repurchases usingthrough open market purchases, block trades, privately negotiated transactions or other transactions conducted in accordance with Rule 10b-18 under the Exchange Act, including pursuant to Rule 10b5-1 trading plans, and/or through privately negotiated transactions.plans. The 2026 Share Repurchase Program diddoes not obligate us to acquire any particular number of shares.shares, Duringhas thean 13open-ended weeksterm endedand Marchmay 26,be 2025,expanded, themodified, Companysuspended repurchasedor 159,750discontinued shares pursuant to the Share Repurchase Program. The Company did not repurchaseat any shares pursuant to the Share Repurchase Program during the 13 weeks ended April 1, 2026. The Share Repurchase Program expired on March 31, 2025.time.