Fast food chain El Pollo Loco (NASDAQ: LOCO) met Wall Street’s revenue expectations in Q3 2026, with sales up 3.9% year on year to $126.3 million. Its non-GAAP profit of $0.24 per share was in line with analysts’ consensus estimates.
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El Pollo Loco (LOCO) Q3 2026 highlights:
- Revenue $126.3 million vs S&P analysts’ estimates of $126.9 million (3.9% year-on-year growth, in line)
- Adjusted EPS $0.24 vs S&P analysts’ estimates of $0.24 (in line)
- Adjusted EBITDA $17.12 million vs analyst estimates of $17.51 million (13.6% margin, 2.2% miss)
- EBITDA guidance $69 million at the midpoint for the full year, below analyst estimates of $69.82 million
- Operating margin 8.1%, down from 9.4% in the same quarter last year
- Locations 515 at quarter end, up from 498 in the same quarter last year
- Same-store sales rose 5% year on year (-0.8% in the same quarter last year)
- Market capitalization $500.9 million
StockStory’s take
El Pollo Loco’s third quarter was marked by steady sales growth and ongoing menu innovation, but the market responded negatively to the results. Management attributed performance to a combination of new product launches—such as Loaded Quesadillas and ChataCoffee beverages—and targeted value offerings through its loyalty program. CEO Liz Williams emphasized that “quality chicken at an affordable price is resonating with existing and new guests,” while also highlighting operational improvements and a focus on guest experience as key contributors to positive traffic and higher same-store sales. However, rising operating expenses and a decline in operating margin tempered the quarter’s momentum.
Looking ahead, management expects future performance to be shaped by continued investment in menu innovation, digital engagement, and national expansion. Williams outlined plans to accelerate new restaurant openings, particularly outside California, and to introduce more protein-forward menu items like deluxe wraps and grilled chicken sandwiches. She also noted the importance of balancing margin discipline with strategic investments in value and technology, stating, “We are really trying to balance not taking too much back to margin and making sure we are investing in the consumer and in value.” The company believes growth in its loyalty program and digital channels will be central to sustaining guest frequency and expanding its customer base.
Key insights from management’s remarks
Management cited menu innovation, digital sales growth, and expansion to new states as pivotal to Q3 performance, with operational improvements and marketing campaigns also boosting guest engagement.
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Menu innovation drives traffic: New offerings like Loaded Quesadillas, ChataCoffee beverages, and seasonal items such as Pumpkin Pie Mini Churros were highlighted as key drivers of incremental sales and higher check sizes. These items were designed for portability and value, directly appealing to consumer demand for convenient, affordable meals.
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Loyalty program expansion: The Loco Rewards program saw significant growth, with membership rising nearly 11% year over year. Initiatives like National Grilled Chicken Day and Loco Days boosted both new sign-ups and transaction frequency, with digital channels now accounting for 31% of system sales.
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Operational improvements: Management pointed to upgrades in the company’s training system (Pollo Zone) and a renewed focus on guest satisfaction. Early data showed that restaurants completing the new training platform achieved greater order accuracy, which supports guest retention and recurring visits.
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New market entry and franchise expansion: El Pollo Loco entered its 10th state, Idaho, and announced plans to open its first location in New York, signaling progress toward becoming a national brand. New franchise agreements and development incentives target growth both in existing and new markets, with a robust pipeline for 2027.
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Leadership changes and strategy alignment: The appointment of Damon Thomas as COO, with experience from Shake Shack and Raising Cane's, strengthens the operational team. Management underscored the alignment around guest experience and unit economics as central to future growth.
Drivers of future performance
El Pollo Loco’s outlook reflects a strategy focused on menu innovation, digital engagement, and expanding its national footprint, balanced against ongoing cost pressures and margin considerations.
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Menu pipeline and value strategy: Management plans to launch new protein-focused items, including crunch salads and grilled chicken sandwiches, to attract both existing and new guests. The company will continue its targeted value approach in the loyalty app, aiming to drive sustainable traffic and higher check sizes without over-relying on discounts.
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Accelerated new unit growth: The company expects to open 25-30 new restaurants in 2027, with roughly two-thirds outside California. New development incentives for franchise partners—especially in new markets like New York—are intended to reduce barriers to entry and support brand expansion. Management is mindful of cannibalization risks, especially in established markets, and is prioritizing greenfield locations.
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Margin discipline amid cost inflation: El Pollo Loco is balancing investments in value and technology with efforts to find operational efficiencies, such as pre-marinating chicken and upstreaming sauce preparation. Management acknowledged that some margin pressure is expected as they invest in growth, but efforts to improve kitchen efficiency and limit wage and commodity inflation are ongoing.
Catalysts in upcoming quarters
In the coming quarters, the StockStory team will be watching (1) the rollout and guest reception of new menu innovations targeted for 2027, (2) the pace and geographic distribution of new restaurant openings, particularly in new states such as New York, and (3) progress in expanding digital engagement and growing the Loco Rewards program. Continued operational improvements and the ability to manage food and labor costs will also be important drivers of future performance.
El Pollo Loco currently trades at $15.19, down from $16.46 just before the earnings. At this price, is it a buy or sell? Find out in our full research report (it’s free).
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