LOCO Q2 Deep Dive: Menu Innovation and Value Strategies Offset Flat Traffic

August 12, 2025 at 23:11 PM EDT

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Fast food chain El Pollo Loco (NASDAQ: LOCO) reported Q2 CY2025 results exceeding the market’s revenue expectations, with sales up 3% year on year to $125.8 million. Its non-GAAP profit of $0.28 per share was 16.7% above analysts’ consensus estimates.

Is now the time to buy LOCO? Find out in our full research report (it’s free).

El Pollo Loco (LOCO) Q2 CY2025 Highlights:

Revenue: $125.8 million vs analyst estimates of $125.1 million (3% year-on-year growth, 0.6% beat)
Adjusted EPS: $0.28 vs analyst estimates of $0.24 (16.7% beat)
Adjusted EBITDA: $18.47 million vs analyst estimates of $16.28 million (14.7% margin, 13.5% beat)
Operating Margin: 9%, down from 10.1% in the same quarter last year
Locations: 499 at quarter end, up from 495 in the same quarter last year
Same-Store Sales were flat year on year (4.5% in the same quarter last year)
Market Capitalization: $311.4 million

StockStory’s Take

El Pollo Loco’s second quarter results for 2025 showed revenue and adjusted profit above Wall Street expectations, even as same-store sales remained flat and operating margin declined year over year. Management attributed performance to targeted menu innovation and value-driven promotions rather than across-the-board discounting. CEO Elizabeth Williams pointed to the launch of Fresca Wraps, salads, and premium quesadillas as key drivers in attracting both new and returning customers. The company’s updated “Let’s get Loco” brand campaign and refreshed digital experience also supported a modest improvement in overall traffic, helping to partially offset persistent consumer headwinds.

Looking forward, management believes continued menu innovation, digital engagement, and operational improvements will underpin growth, although they remain cautious about the consumer environment. Williams emphasized, “Our brand relaunch and menu innovations will serve as important foundations for our growth over time.” The company is planning a suite of new product launches and expanded remodeling efforts, while maintaining a disciplined approach to pricing and cost control. CFO Ira Fils noted that visibility on commodity costs and measured pricing adjustments should help sustain restaurant-level margins, but acknowledged that macroeconomic uncertainties and consumer value sensitivity will remain key variables.

Key Insights from Management’s Remarks

Management attributed the quarter’s outperformance to successful menu launches, effective targeted discounting, and operational improvements that drove both transaction growth and profitability.

Menu innovation drove engagement: New Fresca Wraps and salads, along with the premium quesadilla launch, targeted health-conscious and convenience-seeking consumers. Early response exceeded test results, with quesadillas quickly reaching 4–5% of sales mix and driving both new and repeat visits.
Targeted value promotions: Instead of broad discounting, El Pollo Loco focused on selective offers such as app-only deals, Taco Tuesday, and delivery service promotions. Management believes this approach resonated with value-oriented guests while protecting overall menu pricing integrity.
Brand relaunch and marketing: The “Let’s get Loco” campaign, launched in May, refreshed the brand’s messaging around its fire-grilled chicken heritage. Collaborations with athletes and the introduction of a branded food truck amplified the campaign’s reach and contributed to increased customer engagement, particularly among younger consumers.
Operational improvements: Enhanced labor productivity, deployment of new technology, and streamlined routines improved efficiency at the restaurant level. These changes translated to a 19.1% restaurant contribution margin and improved frequency among loyalty program members.
Franchise unit momentum: Franchisees opened new locations and remodeled existing ones, benefiting from healthier unit economics and incentives. Management cited strong interest in second-generation sites, which can be converted at lower cost and higher return, supporting an acceleration in unit growth plans for 2026.

Drivers of Future Performance

El Pollo Loco’s outlook centers on sustaining traffic growth through new menu offerings, marketing, and disciplined cost control, while navigating ongoing consumer and macroeconomic pressures.

Menu pipeline and brand campaigns: The company plans to build on recent launches with additional product innovation, including burrito bowls, new salads, beverages, and unique chicken formats. Management expects these offerings to attract both new and existing customers, supporting traffic and check growth as brand awareness expands.
Digital and operational investments: Ongoing upgrades to the app, loyalty program, and third-party delivery partnerships remain priorities. The digital business now accounts for over a quarter of sales, and management sees further opportunities to drive frequency and efficiency through enhanced digital engagement and kitchen technology.
Unit growth and remodeling: El Pollo Loco expects to open at least 10 new restaurants this year, mainly outside California, and accelerate remodels across the system. Management is confident in the franchise pipeline, with many new sites already secured. However, challenges like permitting delays and macro headwinds could affect the pace of expansion.

Catalysts in Upcoming Quarters

In coming quarters, the StockStory team will monitor (1) the performance and customer adoption of new menu items such as burrito bowls and chicken tenders, (2) the effectiveness of the brand relaunch and marketing campaigns in driving traffic and awareness, and (3) progress toward unit growth and remodel goals, particularly outside California. Continued digital engagement and execution on operational efficiencies will also be important markers of strategic success.

El Pollo Loco currently trades at $10.17, down from $10.33 just before the earnings. At this price, is it a buy or sell? The answer lies in our full research report (it’s free).

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