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Financial report summary
?Competition
El Pollo LocoRisks
- The COVID-19 pandemic has adversely affected and could continue to adversely affect our financial results, operations and outlook for an extended period of time.
- Our growth strategy depends in part on opening new restaurants in existing and new markets and expanding our franchise system. We may be unsuccessful in opening new company-operated or franchise-operated restaurants or establishing new markets, which could materially adversely affect our growth.
- Opening new restaurants in existing markets may negatively impact sales at our existing restaurants.
- New restaurants, once opened, may not be profitable, and the increases in average restaurant revenue and same store sales that we have experienced in the past may not be indicative of future results.
- Our sales growth and ability to achieve profitability could be adversely affected if same store sales are less than we expect.
- Our long-term success depends in part on our ability to effectively identify and secure appropriate sites for new restaurants.
- Failure to manage our growth effectively could harm our business and operating results.
- Our expansion into new markets may present increased risks.
- We are subject to all of the risks associated with leasing space subject to long-term non-cancelable leases.
- We depend on our senior management team and other key employees, and the loss of one or more key personnel or an inability to attract, hire, integrate and retain highly skilled personnel could have an adverse effect on our business, financial condition and results of operations.
- Our business is geographically concentrated in Southern California, and we could be negatively affected by conditions specific to that region.
- We may not be able to compete successfully with other quick service and fast casual restaurants. Intense competition in the restaurant industry could make it more difficult to expand our business and could also have a negative impact on our operating results if customers favor our competitors or we are forced to change our pricing and other marketing strategies.
- Negative publicity relating to one of our restaurants, including one of our franchise-operated restaurants, could reduce sales at some or all of our other restaurants.
- Our inability or failure to recognize, respond to and effectively manage the accelerated impact of social media could have a material adverse impact on our business.
- Food safety and foodborne illness concerns could have an adverse effect on our business.
- The challenging restaurant environment may affect our franchisees, with adverse consequences to us.
- We have limited control with respect to the operations of our franchisees, which could have a negative impact on our business.
- New information or attitudes regarding diet and health could result in changes in regulations and consumer consumption habits, which could have an adverse effect on our business, financial condition and results of operations.
- Changes in economic conditions and other unforeseen conditions, particularly in the markets in which we operate, could have a material adverse effect on our business, financial condition and results of operations.
- Failure to maintain our corporate culture and changes in consumer recognition of our brand as we grow could have a material adverse effect on our business, financial condition and results of operations.
- The minimum wage, particularly in California, continues to increase and is subject to factors outside of our control.
- Changes in food and supply costs, including the impact of inflation and tariffs, or failure to receive frequent deliveries of food ingredients and other supplies could have an adverse effect on our business, financial condition and results of operations.
- We rely on only one company to distribute substantially all of our products to company-operated and franchise-operated restaurants. Failure to receive timely deliveries of food or other supplies could result in a loss of revenue and materially and adversely impact our operations.
- If we or our franchisees face labor shortages, unionization activities, labor disputes or increased labor costs, it could negatively impact our growth and could have a material adverse effect on our business, financial condition and results of operations.
- Changes in employment laws may adversely affect our business.
- Governmental regulation may adversely affect our ability to open new restaurants or otherwise adversely affect our business, financial condition and results of operations.
- Failure to obtain and maintain required licenses and permits or to comply with food control regulations could lead to the loss of our food service licenses and, thereby, harm our business.
- Restaurant companies have been the target of class action lawsuits and other proceedings alleging, among other things, violations of federal and state workplace and employment laws. Proceedings of this nature are costly, divert management attention and, if successful, could result in our payment of substantial damages or settlement costs.
- We could face liability from or as a result of our franchisees.
- We could be party to litigation that could distract management, increase our expenses or subject us to material monetary damages or other remedies.
- Compliance with environmental laws may negatively affect our business.
- The effect of changes to healthcare laws in the United States, or the repeal of existing healthcare laws, may increase the number of employees who choose to participate in our healthcare plans, which may significantly increase our healthcare costs and negatively impact our financial results.
- We may incur costs resulting from breaches of security of confidential consumer information related to our electronic processing of credit and debit card transactions.
- We rely heavily on information technology, and any material failure, weakness, interruption or breach of security could prevent us from effectively operating our business.
- Our insurance programs, including high deductible insurance programs, may expose us to significant and unexpected costs and losses.
- The failure to comply with our debt covenants or the volatile credit and capital markets could have a material adverse effect on our financial condition.
- We have significant debt and if we are unable to repay our debt when it becomes due or comply with our obligations in the underlying credit agreement, our business, financial condition and results of operations could be materially harmed.
- Our current insurance may not provide adequate levels of coverage against claims.
- Estimates are used in our analysis of property, fixtures and equipment or operating results at certain restaurant locations that may cause us to incur impairment charges on certain long-lived assets, which may adversely affect our results of operations.
- Estimates are used in determining the gain or loss from the disposition of assets held for sale, which may adversely affect our results of operations.
- Anti-takeover provisions contained in our certificate of incorporation and bylaws, as well as provisions of Delaware law, could impair a takeover attempt.
- We may not be able to adequately protect our intellectual property, which could harm the value of our brand and have a material adverse effect on our business, financial condition and results of operations.
- Adverse weather and natural or man-made disasters in the markets in which we operate could have a material adverse effect on our business, financial condition and results of operations.
- Terrorist attacks or an active shooter could have a material adverse effect on consumer spending.
- We might require additional capital to support business growth, and this capital might not be available.
- Changes to accounting rules or regulations may adversely affect the reporting of our results of operations.
- Declines in our business have resulted in and could result in future goodwill impairment charges.
- Unanticipated changes in effective tax rates or adverse outcomes resulting from examination of our income or other tax returns could adversely affect our financial condition and results of operations.
- Our quarterly operating results may fluctuate significantly and could fall below the expectations of securities analysts and investors due to seasonality and other factors, some of which are beyond our control, resulting in a decline in our stock price.
- Our stock price has been and may continue to be highly volatile, and, as a result, you may not be able to resell your shares at or above the price you paid for them.
- The future issuance of additional common stock in connection with our equity incentive plan will dilute your stockholdings.
- The amount and frequency of dividend payments made on our common stock could change.
- Any inability to continue to pay cash dividends may negatively impact investor confidence in us and negatively impact our stock price.
- If securities or industry analysts do not publish research or reports about our business, or publish inaccurate or unfavorable research or reports about our business, our stock price and trading volume could decline.
- Any failure to establish, maintain and apply adequate internal control over our financial reporting may adversely affect our reported results of operations.
Management Discussion
- ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
- We operate on a 52- or 53-week fiscal year ending on the Tuesday closest to December 31 for financial reporting purposes. Fiscal year 2021 is the 52-week period ended December 28, 2021 ("Fiscal 2021"). Fiscal year 2020 is the 52-week period ended December 29, 2020 ("Fiscal 2020"). Fiscal year 2019 is the 52-week period ended December 31, 2019 ("Fiscal 2019").
- We are a nationwide operator and franchisor of restaurants featuring fresh and fast cuisine, including both Mexican inspired and American classic dishes. As of December 28, 2021, we have 600 Del Taco restaurants, a majority of these in the Pacific Southwest. In each of our restaurants, our food is made to order in working kitchens. We serve our customers fresh and high-quality food typical of fast casual restaurants but with the speed, convenience and value associated with traditional quick service restaurants (“QSRs”). With attributes of both a fast casual restaurant and a QSR — a combination we call QSR+ — we occupy a place in the restaurant market distinct from our competitors. With a menu designed to appeal to a wide variety of budgets and tastes and recently updated interior and exterior designs across most of our entire system, we believe that we are poised for growth, operating within a fast growing segment of the restaurant industry, the limited service restaurant (“LSR”) segment. With high quality food and attractive price points, we believe we offer a compelling value proposition relative to both QSR and fast casual peers.