EPL Intermediate Inc., parent company of El Pollo Loco Inc., has reported financial results for its 13-week second quarter and 26 weeks ended June 30.
For the 13-week period, same-store sales for the system decreased 6.8 percent while operating revenue dropped 4.9 percent to $72.7 million. According to the company's earnings report, the decrease in company-operated revenue was primarily attributed to a 7 percent decrease in company-operated same-store sales for the second quarter and lost sales of $500,000 from the closure of three company-operated restaurants in 2008.
Franchise revenue decreased 12.1 percent to $4.9 million for the 13-week period when compared to the same time last year. The decrease is primarily due to decreased development fees attributed to fewer franchised restaurant openings in the current period and also due to lower royalties and percentage rent income, which are based on sales.
Operating income increased $7.1 million, or 237 percent, to $4.1 million in the second quarter of 2009 from an operating loss of $3 million for the same quarter of 2008. The increase is due primarily to an expense of $10.7 million incurred in the second quarter of 2008 to settle trademark litigation between EPL-Mexico v. EPL-USA.
As a result of the factors cited above, there was a net loss for the 13 weeks of $27.2 million compared to a net loss of $5.6 million for the 13 weeks ended June 30, 2008.
26-week period
Same-store sales for the system decreased 6.3 percent for the 26 weeks ended June 30.
Operating revenues for the 26-week period were $143.3 million, a decrease of $4.3 million, or 2.9 percent, over operating revenues for the 26 weeks ended June 30, 2008 of $147.6 million.
Operating income was $8.2 million for the quarter, an increase of $4.8 million, or 138.8 percent, from operating income of $3.4 million reported in the same period last year. This is primarily due to an expense of $10.7 million incurred in the second quarter of 2008 to settle litigation between EPL-Mexico v. EPL-USA trademark litigation that did not recur in the current year.
As a result of the factors above, there was a net loss for the 26 weeks of $28.5 million compared to a net loss of $6 million for the 26 weeks ended June 30, 2008.
"As we expected, 2009 has proven to be more challenging than last year as a result of several converging factors which include further contraction in the economy; disproportionately high levels of unemployment in our core markets and, in particular, among Hispanics, which are a key demographic for our brand; and fierce competitive activity fueled by deep discounting," said Stephen E. Carley, president and CEO of El Pollo Loco. "The depressed economy, especially in California where the vast majority of our restaurants are located, negatively impacted our same store-sales and restaurant margins and contributed to our first decline in six-month same-store sales in nine years."
During the quarter, El Pollo Loco got into a chicken fight with rival KFC over the fast food chain's launch of grilled chicken. El Pollo Loco also called out KFC for its use of rendered beef fat in the product's grilled chicken marinade.
