[Management View]
Total revenue for Q2 2025 was $125.8 million, a 3% increase YoY. Company-operated restaurant revenue rose 2% to $104.3 million. Franchise revenue increased 14.8% to $13.4 million. Key strategic priorities include menu innovation, digital growth, and unit development.

[Outlook]
The company expects to open 10-11 new restaurants in 2025, with a focus on franchise growth. Capital expenditure guidance is $31-$34 million, and G&A expenses are projected at $48-$51 million. The estimated full-year tax rate is 29%-29.5%.

[Financial Performance]
YoY, total revenue increased by 3%, company-operated restaurant revenue by 2%, and franchise revenue by 14.8%. Adjusted net income was $8.2 million, up from $7.8 million. The restaurant contribution margin improved to 19.1% from 18.6%.

[Q&A Highlights]
Question 1: Can you elaborate on the challenging macro environment and its impact on your initiatives?
Answer: Innovation with Fresca salads and wraps, along with targeted value offers, helped drive transaction growth. Consumer headwinds are seen across all income groups, with pronounced effects at the end of the month when consumers are waiting for payday.

Question 2: What is causing the drag on check size for franchise traffic?
Answer: Last year's large minimum wage increase in California led to higher pricing by franchisees. This year, the ability to take price is limited due to the value-conscious environment. Some franchisees also experimented with greater discounts and promotions.

Question 3: Can you discuss the acceleration of unit growth and franchisee confidence?
Answer: The healthy business model with $2.2 million average unit volumes and margin expansion inspires franchise growth. Second-generation sites and cost-effective builds also contribute to higher returns and confidence in the pipeline.

Question 4: Can you provide more detail on Q2 same-store sales trends and Q3 outlook?
Answer: Sequential improvement was seen in May and June due to marketing initiatives and brand relaunch. July saw a slowdown due to the timing of the 4th of July. Confidence remains in the back half of the year due to innovation and operational improvements.

Question 5: How are the new menu items performing against initial testing?
Answer: Fresca wraps and salads mixed at 4%-5%, with wraps phasing out as quesadillas were introduced. Quesadillas started at 4%-5% mix and continue to grow, performing higher than initial tests.

Question 6: Have you seen any transaction lift or trade-off on average ticket due to new menu items?
Answer: Increased frequency from existing customers and new customer acquisition are attributed to innovation. The brand relaunch and operational improvements also contribute to positive transaction trends.

Question 7: Can you discuss the initial reaction to the rebrand in the L.A. market?
Answer: The rebrand has led to a notable uptick in new customers. The impact will build over time as more restaurants are remodeled and the brand relaunch gains visibility.

Question 8: Are you still expecting about 2% pricing in the back half of the year?
Answer: Q3 will see about 2.5% pricing, and Q4 about 2.7%. Targeted price increases, such as combo pricing, help balance discounting efforts.

Question 9: Is the margin target of 17.25%-17.75% for the full year still realistic?
Answer: The target is realistic, with potential upside. Limited international exposure and visibility into commodity costs support margin improvement efforts.

[Sentiment Analysis]
Analysts were cautiously optimistic, focusing on the impact of macroeconomic challenges and the effectiveness of strategic initiatives. Management maintained a confident tone, emphasizing innovation, operational improvements, and franchise growth.

[Quarterly Comparison]
| Metric | Q2 2025 | Q2 2024 |
|---------------------------------|---------------|---------------|
| Total Revenue | $125.8 million| $122.2 million|
| Company-operated Revenue | $104.3 million| $102.3 million|
| Franchise Revenue | $13.4 million | $11.7 million |
| Adjusted Net Income | $8.2 million | $7.8 million |
| Restaurant Contribution Margin | 19.1% | 18.6% |

[Risks and Concerns]
- Macroeconomic headwinds affecting consumer spending.
- Limited ability to take price increases in a value-conscious environment.
- Potential delays in remodeling projects due to local permitting processes.

[Final Takeaway]
El Pollo Loco's Q2 2025 performance highlights the positive impact of menu innovation and strategic expansion. Despite macroeconomic challenges, the company achieved revenue growth and margin improvement. The focus on franchise growth, digital sales, and operational excellence positions the company for continued success. Management remains confident in their strategic initiatives and the long-term potential of the brand.