El Pollo Loco demonstrated exceptional financial health in the second quarter of 2026, driven by a 3.9% increase in system-wide comparable sales and a notable improvement in restaurant-level margins, reaching 19.5%. This strong performance underscores the effectiveness of the company's multifaceted strategy, encompassing innovative menu offerings, enhanced digital customer engagement, and ambitious national expansion initiatives. The company's entry into its tenth state, Idaho, with plans for further development, highlights its commitment to broader market penetration. Moreover, optimistic revisions to the full-year Adjusted EBITDA and comparable sales guidance reflect confidence in the sustained positive trajectory of the business.
During the call, Chief Financial Officer Ira Fils and Chief Executive Officer Elizabeth Goodwin Williams detailed the quarter's achievements. Total revenue climbed to $129.6 million, an increase from $125.8 million in the previous year, while GAAP net income significantly rose to $12.8 million, or $0.43 per diluted share, up from $7.1 million, or $0.24 per diluted share in the same period last year. Adjusted EBITDA also saw an increase, reaching $19.1 million compared to $18.5 million in Q2 2025. These financial milestones were supported by a 3.7% growth in company-operated revenue, driven by a 3% rise in comparable restaurant sales, and a 4.5% increase in comparable franchise restaurant sales.
A key driver of this success was menu innovation, particularly the launch of Loco Tenders and Loaded Quesadillas, which attracted new, younger demographics and boosted sales across various dayparts. The introduction of the Chata coffee platform aimed to capture the afternoon snack market, further diversifying offerings. Digital sales, including app, web, and kiosk channels, contributed approximately 28% of total system sales, marking a 13% year-over-year increase. The Loco Rewards loyalty program proved instrumental in fostering customer frequency and spend, with loyalty members visiting three times more annually than non-members. The company's strategic marketing campaigns, including partnerships and World Cup media presence, also played a crucial role in amplifying brand visibility.
Operational efficiency and an emphasis on hospitality have been central to El Pollo Loco's strategy. Labor and related expenses decreased by 90 basis points to 29.9% of company restaurant sales, attributed to improved operating efficiencies and lower health insurance costs. Despite a 4.1% commodity inflation, primarily in produce, the company managed to expand its restaurant-level margins. The leadership team remains committed to optimizing costs through labor productivity, waste reduction, and strategic menu pricing. Furthermore, the company is leveraging technology and AI tools to enhance insights, improve restaurant training, and provide more effective support to general managers.
The company's expansion plans are robust, targeting 18 to 20 new restaurant openings in 2026, nearly double the previous year's pace. The successful opening of the first Idaho location, operated by an experienced franchise partner, exemplifies the brand's ability to resonate in new markets. The focus on national expansion, particularly outside California, involves actively engaging with prospective franchise partners through discovery days, indicating a strong pipeline for future growth. The remodel program continues to yield positive results, with refreshed locations experiencing mid-single-digit sales lifts, further reinforcing confidence in strategic investments. Capital expenditure guidance was slightly reduced due to timing adjustments for the remodel program, not cancellations, demonstrating prudent financial management.
The positive sales momentum experienced in Q2 has extended into Q3, with system-wide comparable store sales increasing by 5.8% through late July, driven by strong growth in both company-operated and franchised restaurants. The company confirmed that its food sourcing is secure, particularly regarding lettuce and peppers, alleviating concerns about industry-wide recalls. This proactive approach to food safety and supply chain management reinforces consumer trust and operational stability. The company's amended revolving credit facility, extending to August 2031, provides ample liquidity and financial flexibility for continued growth and strategic initiatives. These combined efforts reflect a well-executed strategy positioning El Pollo Loco for sustained success and expanded market presence.
