LOCO 10-Q Quarter ended March 25, 2020

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•	Level 1: Quoted prices for identical instruments in active markets.

•	Level 2: Observable prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs or significant value drivers are observable.

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•	Level 3: Unobservable inputs used when little or no market data is available.

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•	Franchise license - inclusive of advertising services, development agreements, training, access to plans and help desk services.

•	Discounted renewal option.

•	Hardware services.

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•	the impacts of the novel coronavirus (COVID-19) pandemic on our company, our employees, our customers, our partners, our industry and the economy as a whole, as well as our franchisees ability to maintain operations in their individual restaurants;

•	the adverse impact of economic conditions on our (i) operating results and financial condition, (ii) ability to comply with the terms and covenants of our debt agreements, and (iii) ability to pay or refinance our existing debt or to obtain additional financing;

•	our ability to open new restaurants in new and existing markets, including difficulty in finding sites and in negotiating acceptable leases;

•	our ability to compete successfully with other quick-service and fast casual restaurants;

•	vulnerability to changes in consumer preferences and economic conditions;

•	vulnerability to conditions in the greater Los Angeles area;

•	vulnerability to natural disasters given the geographic concentration and real estate intensive nature of our business;

•	our ability to effectively identify and secure appropriate new sites for restaurants;

•	changes to food and supply costs, especially for chicken;

•	negative publicity, whether or not valid, and our ability to respond to and effectively manage the accelerated impact of social media;

•	our ability to continue to expand our digital business, delivery orders and catering;

•	concerns about food safety and quality and about food-borne illness, particularly avian flu;

•	dependence on frequent and timely deliveries of food and supplies and our dependence on a single supplier to distribute substantially all of our products to our restaurants;

•	our ability to service our level of indebtedness;

•	our reliance on our franchisees, who may incur financial hardships, lose access to credit, close restaurants, or declare bankruptcy, and our limited control over our franchisees and potential liability for their acts;

•	the impact of any security breaches of confidential customer information in connection with our electronic process of credit and debit card transactions;

•	the impact of any failure of our information technology system or any breach of our network security;

•	ability to protect our name and logo and other proprietary intellectual property; and

•	other risks set forth in our filings with the SEC from time to time, including under Item 1A, Risk Factors in our annual report on Form 10-K for the year ended December 26, 2018, which such filings are available online at www.sec.gov , at www.elpolloloco.com or upon request from El Pollo Loco.

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•	As a precautionary measure, we bolstered our existing cash position by fully drawing down our $150 million 2018 Revolver, adding $34.5 million of cash to our balance sheet.

•	We have temporarily suspended all but essential capital spending and share repurchase activity, reevaluated essential support center general and administrative expenses, and fine-tuned our restaurant labor model based on dining room closures and lower sales volumes.

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For our franchisees, we are deferring 50% of their April royalties until July 1, 2020, when such royalties will begin to be repaid in even monthly installments over the remainder of fiscal 2020. In addition, we deferred 100% of our franchisees' 2020 remodel and new restaurant build requirements until 2021. We also established a support team to assist franchisees in accessing funds and benefits provided by the CARES Act legislation.

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For our employees, we continue to implement actions to help protect them from the coronavirus while working in our restaurants. These include implementing enhanced cleaning procedures in our restaurants, providing gloves and masks to all system restaurant employees, installing plexiglass shields at company restaurant cashier stations and initiating other social distancing measures. We are providing extended sick leave benefits to employees impacted by COVID-19 and we have granted two weeks paid leave for employees who are 65 or older.

•	We have shifted our marketing to highlight our free delivery program; our Family Meals as a healthier and affordable option; and our meaningful value platform.

•	We delayed making April rent payments on the majority of our leased properties and we are currently negotiating rent abatement and/or deferment with our landlords for those properties.

•	We have taken advantage of provisions available under the CARES Act. Specifically, we have deferred payment of employer Social Security taxes that are otherwise owed for wage payments.

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•	expand our restaurant base;

•	increase our comparable restaurant sales; and

•	enhance operations and leverage our infrastructure.

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(1)	Percentages for line items relating to cost of operations and company restaurant expenses are calculated with company-operated restaurant revenue as the denominator. All other percentages use total revenue.

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(a)	Includes non-cash, stock-based compensation.

(b)	Loss on disposal of assets includes the loss on disposal of assets related to retirements and replacement or write-off of leasehold improvements or equipment.

(c)

During the thirteen weeks ended March 27, 2019 , we agreed in principle to sell four restaurants within the San Francisco area to an existing franchisee. Additionally, we agreed in principle to sell seven restaurants in the Phoenix area to another existing franchisee. The net assets were recorded to assets held for sale at the lower of carrying value or fair value less costs to sell, which resulted in a loss on held for sale assets of $4.1 million for the thirteen weeks ended March 27, 2019 . These transactions were completed in the second quarter of 2019.

(d)	Includes costs related to impairment of long-lived assets and closing restaurants. During the thirteen weeks ended March 25, 2020 , we recognized a $1.9 million non-cash impairment charge for the thirteen weeks ended March 25, 2020 , primarily related to the carrying value of the ROU assets of one restaurant in Texas and the long-lived assets of

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(e)

On July 30, 2014, we entered into the TRA. This agreement calls for us to pay to our pre-IPO stockholders 85% of the savings in cash that we realize in our taxes as a result of utilizing our net operating losses and other tax attributes attributable to preceding periods. For the thirteen weeks ended March 25, 2020 and March 27, 2019 , income tax receivable agreement (income) expense consisted of the amortization of interest expense and changes in estimates for actual tax returns filed, related to our total expected TRA payments.

(f)	Consists of costs related to the defense of securities lawsuits. See "Note 7, Commitments and Contingencies, Legal Matters."

(g)	Includes amounts incurred related to the payment of the final settlement amounts for multiple wage and hour class action suits.

(h)

Pre-opening costs are a component of general and administrative expenses, and consist of costs directly associated with the opening of new restaurants and incurred prior to opening, including management labor costs, staff labor costs during training, food and supplies used during training, marketing costs, and other related pre-opening costs. These are generally incurred over the three to five months prior to opening. Pre-opening costs also include occupancy costs incurred between the date of possession and the opening date for a restaurant.

(i)	Includes costs associated with the transition of our CEO, such as CEO sign-on bonus.

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*

Pursuant to Item 601(b)(32)(ii) of Regulation S-K (17 C.F.R. § 229.601(b)(32)(ii)), this certification is deemed furnished, not filed, for purposes of section 18 of the Exchange Act, nor is it otherwise subject to liability under that section. It will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except if the registrant specifically incorporates it by reference.

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