Prepared remarks
Good day, ladies and gentlemen. Thank you for standing by. Welcome to the El Pollo Loco Second Quarter 2026 Earnings Conference Call. At this time, all participants have been placed in a listen-only mode. There will be an opportunity to ask questions following the presentation. Please note that this conference is being recorded today, 08/06/2026. And now, I would like to turn the conference over to Ira Fils, the company's Chief Financial Officer.
Thank you, operator, and good afternoon. By now, everyone should have access to our second quarter 2026 earnings release, which can be found at www.elpolloloco.com in the Investor Relations section. Before we begin our formal remarks, I need to remind everyone that our discussions today will include forward-looking statements, including statements related to our new products and growth opportunities, strategic and operational initiatives, expectations regarding sales and margins, potential changes to our product platforms, capital expenditure plans, the ability of our franchisees to drive growth, expectations regarding commodity and wage inflation, remodel plans, and our 2026 guidance, among others. These forward-looking statements are not guarantees of future performance and therefore you should not put undue reliance on them. These statements are also subject to numerous risks and uncertainties that could cause actual results to differ materially from what we currently expect. For a more detailed discussion of the risks that could impact our future operating results and financial condition, we refer you to our recent SEC filings including our Form 10-K for the year ended 12/31/2025, as well as our Form 10-Q for the second quarter of 2026, which we expect to file tomorrow, and encourage you to review at your earliest convenience. During today's call, we will discuss non-GAAP measures which we use for financial and operating decision making and as a means to evaluate period-to-period comparison, and which we believe can be useful to investors evaluating our performance. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP, and reconciliations to comparable GAAP measures are available in our earnings release, which is available in the Investor Relations section of our website. With respect to the adjusted EBITDA outlook we will be providing on today's call, please note that we have not provided a reconciliation to the most directly comparable forward-looking GAAP financial measure because, without unreasonable efforts, we are unable to predict with reasonable certainty the amount of or timing of non-GAAP adjustments that are used to calculate income from operations and company-operated revenue on a forward-looking basis. Now I would like to turn it over to our CEO, Liz Williams.
Thank you, Ira, and good afternoon, everyone. We are pleased with our second quarter results of system-wide same store sales growth of 3.9% and restaurant-level margin of 19.5%, which demonstrate the sustainability of the improvement we have made over the past two years. What is more encouraging is that we achieved this performance through a combination of sales drivers and operational improvements, which gives us confidence in the long-term sustainability of our growth. More specifically, our top-line performance this quarter was driven by a combination of our strategic pillars, notably with strong brand activation and menu innovation, a targeted focus on providing value through our digital channels, and operational excellence. With that, let me walk you through our progress across our strategic pillars. Let's start with a brand that wins, which continues to be anchored by menu innovation. First, our loco tenders, which launched at the end of the first quarter, brought new guests to the brand, many of whom had not considered El Pollo Loco before, and they broadened our appeal beyond our core fire-grilled chicken loyalists. Notably, our tenders generated significant buzz and excitement, from social media conversation to word-of-mouth. This craveable product, done with our own twist, put El Pollo Loco back in the conversation in a way that we have not seen in years. Our high-quality Mexican seasoned loco tenders paired with our new Pollo Loco sauce drove trial across income and age cohorts, but notably with a new, younger consumer. They were additive to check and popular in snacking and late evening dayparts. As these were always planned as a limited-time offer, we are taking the learnings and already thinking of ways to bring them back in the future. We believe we have only scratched the surface of what is possible with loco tenders. Following tenders, in late June, we introduced loaded quesadillas, available in two flavors: queso with our creamy cilantro sauce, and street corn with our creamy chipotle sauce. Both feature our citrus-marinated fire-grilled chopped chicken breast wrapped in a warm flour tortilla and grilled to order. We designed these for portability and value, giving guests a satisfying eat they can enjoy on the go at a price of less than $10 a la carte or $10.99 for a combo meal, which includes chips, salsa, and a drink. We also gave our local rewards members early exclusive access ahead of the general launch. The early guest response has been strong, and we believe loaded quesadillas strengthen our lineup within handheld and on-the-go occasions. We also introduced a new coffee platform to the menu this quarter with our Chata coffee lineup, featuring our signature horchata iced coffee and cold foam. We designed our new beverages to capture an afternoon pick-me-up occasion, which we believe is a meaningful and underserved daypart for our brand. Alongside items like our tenders and quesadillas, we see this as part of a broader snacking occasion that brings guests into our restaurant outside of traditional mealtime and also helps in building check. We are just getting started with beverages and look forward to even more innovation in the upcoming quarters. As we head into the second half of the year, we are encouraged by the strength of our innovation pipeline. Two new double chicken burrito bowls will be coming this fall, as well as a new pumpkin spice churro and caramel apple Chata coffee. We also continue to test new salads, wraps, and sandwiches as we prepare for 2027. In short, we remain committed to keeping our menu craveable, relevant, and fresh, giving guests new reasons to visit. Our Let's Get Local campaign continues to build momentum and has found new ways to put our new menu items in front of our guests, often by showing up where our brand has not historically been invited. In late June, around National Go Skateboarding Day, we launched our queso for kickflips activation featuring Olympic skateboarder Paige Henn. This content resonated well beyond our usual audience, drawing praise from across the skateboarding world, including from the editor-in-chief of Thrasher Magazine, one of the most recognized voices in that community. We followed that with our Hold It Like It Is Hot campaign, which put our new Chata coffee, loaded quesadillas, and black beans into real everyday moments to highlight how portable and delicious these products are. We continue to expand our presence with brand partnerships, working with brands like Igloo Coolers, SandCloud, and Tapatio all throughout the quarter as we showed up in live sports. From our media presence during the World Cup games to free food giveaways for at-home watch parties, we were there. We believe this combination of timely, culturally relevant marketing and strong menu innovation is exactly the kind of engine that builds lasting brand loyalty and something that we will continue to lean into as we carry the momentum through the rest of the year. Turning to our loyalty and digital business, which continues to contribute to our top-line performance, digital sales, including our app, web, and kiosk channels, represented approximately 28% of system sales and were up 13% year over year. Our local rewards members continue to be an important growth driver for the brand; these members visited approximately three times more annually than non-loyalty members. We use a strategic approach with our loyalty offers based on segmentation and purchase behavior. These targeted offers, deployed throughout the quarter together with more frequent communications, drove not only frequency growth but also check growth among our loyalty members, outpacing non-loyalty guests by more than double. As a reminder, we center our loyalty program around three things: giving members everyday value, tailoring offers based on purchase behavior, and giving our most loyal guests access to exclusive experiences. Starting with everyday value, our weekly Loco Friday drops provide great offers and value each Friday on some of our best menu items, and our Sunday Spreads provide abundant value on family chicken meals and have continued to be consistent performers for the program. These all-member deals, combined with our segmented offers based upon purchase history, have both contributed to the frequency and check growth. In addition to these deals, our exclusive giveaways, early access to menu items, and prizes have created engagement in our loyalty program. As we look ahead, in early Q3 we launched LocoDay, a summer-themed promotion featuring exclusive prizes, deals, and a grand prize VIP experience at the iHeart Music Festival. Early engagement in the promotion has exceeded expectations, and we look forward to future growth of our loyalty program. Finally, our off-premise digital business, inclusive of delivery, continues to gain strength as we have launched segmented deals targeting new customers at the snack and late-evening dayparts. For lunch, we have expanded our roster of third-party partners focused on group and catering services. In total, our off-premise digital business represents almost 17% of sales and has increased 12% year over year. While we are pleased with the growth, we believe there is still significant opportunity to grow this channel. At the intersection of digital and operational excellence is technology. We continue to make great progress in modernizing our capabilities—from in-restaurant training to analyzing consumer feedback to a more effective help desk for our restaurant general managers. Our use of technology and AI tools is improving our insights and capability. In just a few months, we have made great strides in our capabilities with the addition of Vadim Harisher, who joined us earlier this year as our Chief Technology Officer. His leadership in digital, data, and technology is unlocking opportunity and insights across the business, and we look forward to sharing more about our technology advancements in future calls. Moving on to operational excellence and our hospitality mindset, I am pleased with the continued progress we made this quarter in improving guest experience and overall customer satisfaction. System satisfaction scores continue to move in the right direction on a year-over-year basis, and we saw improvement across the board from order accuracy to speed of service to overall friendliness. This kind of consistent incremental progress is exactly what we set out to build, and it reflects the discipline our teams have in driving operational excellence every day. As we look forward to national expansion with new restaurant openings, we will continue to build our operational people capability as this is the single most critical item in ensuring consistency and execution across our restaurants. We know there is room to have even more consistent guest experience that builds long-term loyalty, and we are focused on investing in people, tools, training, and technology to get us there. Shifting to financial metrics, we are proud to have coupled our sales momentum with winning unit economics. In Q2, we delivered another solid restaurant-level margin of 19.5%, comfortably within our 18% to 20% long-term target range. We are pleased with this result, especially in light of the significant cost pressure in produce during the quarter. Even with this headwind, our underlying cost discipline continues, which speaks to the margin focus we have built over the past several years. We will continue to manage the levers within our control closely, including labor productivity, waste reduction, and disciplined menu pricing, and we are watching our key commodities as we move through the back half of the year. As we said last quarter, we will also balance the goals of driving year-over-year margin expansion with the need for value offers and investment in innovation, technology, and unit growth. We believe we can do all of these and be in the healthy margin range. Let me now touch on our new unit growth pillar. First, we were pleased to welcome Tara Hinkle in late June to the El Pollo Loco family as our new Chief Development Officer. Tara joined us with extensive industry experience and expertise that spans development operations, market planning, franchise recruiting, and finance, with experience from brands like Taco Bell, Starbucks, and Coffee Bean & Tea Leaf. We remain confident in our goal of opening 18 to 20 new restaurants system-wide this year, nearly double our 2025 pace. Our new restaurants continue to open with strength, which reinforces our confidence in the appeal for fire-grilled chicken and the El Pollo Loco brand as we continue our nationwide expansion. A good proof point of this progress came at the end of June, when our franchise partner opened our first restaurant in Idaho, making the entry into our tenth state. The Idaho restaurant is run by an experienced franchise group with more than 25 years in the El Pollo Loco system, and we already have a second location scheduled to open later this fall, with three to four more planned in the market as it develops. Less than two years ago, El Pollo Loco operated in just seven states. Since then, we have added Washington, New Mexico, and now Idaho—three new states in under 24 months. As we look forward, the vast majority of our openings will continue to be outside of California. Our new unit growth continues to benefit from second-generation sites where we are achieving lower development costs than the typical ground-up build. Together with our value engineering initiatives, we remain focused on overall new unit economics. As we look forward to becoming a national brand, we are encouraged by the discussions and the level of interest with prospective franchise partners. Over the past couple of months, we have hosted discovery days at our restaurant support center with new franchise groups representing opportunities across the country. These visits have been positive, and we are in discussion on various development agreements. We expect to have more details to share on future calls and remain confident that our development pipeline is building nicely as we continue expansion across the country. On the Restaurant Refresh initiative, we remain pleased with our results. On average, we continue to see a mid-single-digit sales lift in the locations we have refreshed, consistent with what we have shared on prior calls. We will continue to be thoughtful about pacing this initiative in a way that supports our teams without disrupting day-to-day operations. In summary, we are proud of our quarterly performance and the work we have done over the last 2.5 years in transforming the El Pollo Loco brand. Our menu innovations are driving real trial and repeat, and our marketing and loyalty engines are amplifying that momentum. Our operations scores continue to improve, and we are back to healthy margin expansion and unit growth. With that, let me turn the call over to Ira for a more detailed discussion of our second quarter financial results.
Thank you, Liz. Good afternoon, everyone. For the second quarter ended 07/01/2026, total revenue was $129.6 million compared to $125.8 million in the second quarter of 2025. Company-operated restaurant revenue increased 3.7% to $108.1 million from $104.0 million in the same period last year. A $3.8 million increase in company-operated restaurant sales was driven by 3% growth in company-operated comparable restaurant sales as well as sales from the three company restaurants opened since the second quarter of 2025. The growth in comparable restaurant sales included a 4.2% increase in average check size, partially offset by a 1.1% decrease in transactions. During the second quarter, our effective price increase versus 2025 was approximately 3.4%. Franchise revenue decreased 3.8% to $12.9 million during the second quarter, driven by a $1.1 million decrease in franchise IT pass-through revenue related to the franchise rollout of our new point-of-sale system completed in 2025. Franchise revenue did benefit from a 4.5% increase in comparable restaurant sales and revenue associated with 11 franchise-operated restaurant openings subsequent to the second quarter of 2025. The 4.5% increase in comparable franchise store sales consisted of a 5.3% increase in average check size, partially offset by a 0.8% decrease in transactions. For the second quarter, system-wide same store sales were up 3.9% with system-wide transactions down 0.9%. We are very pleased to report that the positive sales momentum we experienced in Q2 has continued into the third quarter. System-wide comparable store sales for the third quarter to date through 07/29/2026 increased 5.8%, consisting of a 4.4% increase in company-operated restaurants and a 6.6% increase in franchise restaurants. Looking ahead, we believe same store sales for the third quarter will be in the 3.5% to 4.5% range. Turning to expenses, food and paper costs as a percentage of company restaurant sales increased approximately 90 basis points year over year to 25.4%, primarily due to commodity inflation of 4.1%, primarily produce, combined with increased discounts and menu mix shifts. These increases were partially offset by higher menu pricing. We expect commodity inflation to be in the 2.5% to 3.5% range for the full year 2026. Labor and related expenses as a percentage of company restaurant sales decreased about 90 basis points year over year to 29.9% as we continue to benefit from improvements in operating efficiencies along with lower health insurance and workers' compensation costs. In addition, labor as a percentage of sales benefited from leverage on the 3% company-owned comparable store sales. Wage inflation during the second quarter was under 1% for all our company-owned locations. For the full year 2026, we expect wage inflation of between 1.5% to 2.5%. Occupancy and other operating expenses as a percentage of company restaurant sales decreased 30 basis points year over year to 25.3%, primarily due to lower liability insurance costs, lower utilities, and lower other controllable expense, which offset increases from higher delivery and mobile ordering fees and higher repairs and maintenance expense. Our restaurant contribution margin for the second quarter improved to 19.5% compared to 19.1% in the year-ago period. As we continue our path of margin improvement, we expect our restaurant-level margin for the full year 2026 to be between 18.25% to 18.75%, an increase from the 17.8% we ran for the full year of 2025. In addition, we expect our restaurant margins in the third quarter of 2026 to be between 18% to 18.5%, which is in line with the 18.3% we posted in the third quarter of 2025. General and administrative expenses decreased $7.1 million to $13.5 million in the prior year. The decrease was primarily due to $6.3 million received from a legal settlement, lower shareholder activism-related expenses, and lower restructuring and executive transition-related costs. The decrease was partially offset by higher legal fees, new store preopening costs, and other general and administrative expense. Excluding the impact of the $6.3 million favorable legal settlement, as a percentage of sales G&A decreased to 10.3%, or 50 basis points. During the second quarter, we recorded a provision for income taxes of $5.2 million for an effective tax rate of 28.8%. This compares to a provision for income taxes of $3.0 million and an effective tax rate of 29.6% in the prior year period. We reported GAAP net income of $12.8 million or $0.43 per diluted share in the second quarter compared to GAAP net income of $7.1 million or $0.24 per diluted share in the prior year period. Adjusted EBITDA for the second quarter of 2026 was $19.1 million compared to $18.5 million in the second quarter of 2025. Adjusted net income for the second quarter was $8.9 million or $0.30 per diluted share compared to adjusted net income of $8.2 million or $0.28 per diluted share in the second quarter of last year. Please refer to our earnings release for a reconciliation of non-GAAP measures. As Liz mentioned earlier, we are pleased with our increasing pace of new store development as we opened five new franchise locations and one new company location in the second quarter. Since the end of the second quarter, we have opened an additional two locations, bringing our 2026 year-to-date new store openings to 10, and we remain on track to deliver a total of 18 to 20 new openings in 2026. In regard to our remodeling efforts, during the second quarter we completed six franchise restaurant remodels and five company remodels, bringing the remodels completed through the first half of the year to 24, consisting of 12 franchise remodels and 12 company remodels. In terms of liquidity, as of July 1, 2026, after a net paydown of $21 million on our revolver during the preceding 26 weeks, we had $30 million of debt outstanding and $13.3 million in cash and cash equivalents. Subsequent to the end of the quarter, on 08/04/2026, we amended our $150 million revolving credit facility, extending the term to August 4, 2031. With that, we would like to provide you with the following updated guidance for 2026. We are increasing our system-wide comparable store sales growth guidance to now be between 3.5% and 4.5% for the full year. We are increasing our adjusted EBITDA guidance to be between $68 million and $70 million. We are reducing our expected capital spending to be between $33 million and $37 million. In addition, we now expect depreciation and amortization expenses to be between $18 million and $18.5 million for the year. We are maintaining the following guidance: the opening of at least three to four company-operated restaurants and 15 to 16 franchise-operated restaurants, G&A expenses between $52 million and $54 million excluding one-time charges or benefits, and finally an estimated effective income tax rate of approximately 29% to 29.5% before discrete items. This concludes our prepared remarks. We would like to thank you again for joining us on the call today, and we are now happy to answer any questions that you may have. Operator, please open the line for questions.
Questions and answers
Thank you. And our first question is from the line of Todd Brooks with Benchmark. Please proceed with your question.
Congrats on another solid quarter and continued momentum into the third quarter. If we can, Liz, if we can talk about franchisees. You gave us some good color last quarter about the magnitude of the openings in Washington and New Mexico. Now you have added Idaho on top of it. What are you seeing for continued strength and performance in newer markets?
Yes, appreciate the question. Our newer markets are opening really well. We are very pleased with the strength of the sales. Most are opening above system average, particularly when it is the first restaurant and the first state and/or first market. They are opening to just blockbuster lines and, quite frankly, exceeding our expectations, which is giving us a belief that the fire-grilled chicken is resonating and our brand is resonating. It also gives us the confidence to open more units and those franchisees to open more units in those markets. So like I mentioned, Idaho—the second Idaho location is coming on board in the next couple months. They are already looking for additional sites. Similarly, up in Washington, we got just one unit; we have been working on finding additional sites up there. Following on with the rest of the quarter, we will have restaurants opening in Colorado, another one in Washington as I mentioned, and then a few more in California, and one in New Mexico. So just really pleased with how these are opening and our franchise partners; it is giving a lot of confidence to them and then additional new partners who are looking at coming into the brand.
And I wanted to follow up on that because I think you used the word national three or four times during the prepared remarks. These discovery days and the outbound work that you are doing to build a pipeline of interest with potential franchisees—can you give us a sense of how far afield the interest in the brand is reaching? Does it feel contiguous? Are you seeing interest nationwide, which kind of helps prove out that concept of fire-grilled chicken working anywhere in your mind? I'm curious how this is developing as it goes.
There is nationwide interest, and while we have been rather contiguous over the years, particularly West Coast and down into the South as we went over to Texas and just a couple in Louisiana, jumping across the country is certainly something that we are considering and talking with folks about. There is a lot of population on the East Coast and throughout different parts of the country, so we do not think it has to be contiguous. We could see a world where we could jump many states and go across the country. It really just depends on how these conversations progress over the next couple months, and hopefully we will share more in upcoming calls to that effect.
That is great. And then just final question—I will jump back in queue. If you are going to make a jump into a non-contiguous new territory or market, what are you looking for in that franchise partner? And in your outreach, are those types of partners being drawn to the brand, or do you have to go find them? Can you give us the criteria and the interest from that type of partner?
Certainly. Partners that we are talking with are partners that have experience in the restaurant space, multi-unit. We want partners that are a great fit with the brand, that love the brand, have the enthusiasm for the brand, and believe in the economic story of the brand. They should also have a proven track record in the restaurant space and be great operators—that is really important to us. They have done this before; they know how to do new store development, grand openings, and great customer service. We also have the benefit of a fabulous franchise system today, and I cannot say enough great things about our existing franchise partners. We are talking with many of them about their desires to be in additional states. As I mentioned in the remarks, our partner up in Idaho has been in the system for many years, and that has been a great opening for many reasons, one of which is he knows the El Pollo Loco system and has a great team that was able to get trained and ready to go with great efficiency.
The next question is from the line of Matthew Curtis with D.A. Davidson. Please proceed with your question.
I want to talk about comp trends. July accelerated in terms of traffic relative to the second quarter. I was wondering if you could unpack what drove the sequential acceleration. Was it LTO momentum, loyalty activity, easier comparisons, or something else? And then given the guidance for the full third quarter on comps, it implies a deceleration. Is that just a function of more difficult comparisons in August and September, or is there something else going on we should be aware of?
Thanks for the question. I will start and then hand it over to Ira for the back half of that. I would say all of the above when you gave the list. We were proud of how our loaded quesadilla got off to a great start—it is a nice eat at a great value—combined with the media that we had behind it. Also, we wish we could have World Cup-style advertising in the month of July every year. Usually people are not watching live sports in July, and we think that certainly got eyeballs on El Pollo Loco. Also, in terms of just the momentum that the brand was experiencing. Then, in terms of the lap from last year as well, with everything going on last year people were not coming out of their homes as much, and some of that certainly has come back as well. In fact, we are seeing even some trends where people are eating in the dining room more whereas last year if they were coming out, maybe they were going through the drive-through. So I would say all of those factors have played a role.
And then as we look into the back half of the year, as we think about our full-year guidance and the quarter, we ran a 3.9% in Q2. If you think about the midpoint of the guidance for both Q3 and Q4, that is right at 4%, so really consistent with what we ran in Q2. I will tell you there is about a 200 basis point change as you go into Q4 versus Q3 in regards to the compares getting tougher as you move into Q4. But as you can see by our guidance, we feel great about what is going on from a same-store sales trend, and we really foresee Q3 being pretty much on the same pace as Q2.
Okay. Got it. Then separately on local tenders, can you expand on what you learned from the local tenders in terms of guest acquisition, repeat rates, check impact, and all of that? Given that the product brought new guests into the brand, what needs to be true for tenders to return in a more permanent or recurring way?
So tenders did great for us, and we will come around to the answers. On the back half, the tenders were always planned as a limited-time offer for the main reason of having some of the equipment in the restaurants to be able to hold them so that we could operate at a higher velocity and execute them operationally for better performance. We are working with the system now and testing holding equipment so that they could be a permanent menu item. What gives us confidence in earning that spot for a permanent menu item was that tenders drove a lot of incrementality, particularly around a new consumer—a younger consumer—but also consumers wanting something more portable and consumers wanting them late night. We saw higher incidence and attach rate through delivery, coupled with late night. When I say late night for us, late night is like 8 to 10 p.m.; we are not talking true deep late night. It was evident that this fit a need state in snacking, which was an afternoon as well. We were also pleased with how it helped with check across the board at all times of the day. We are going back into tests and will learn more on different ways to enjoy tenders. We have a great menu item that has the tender in a wrap, which is a portable, more robust eat. I personally love the tender chopped up on a salad. There is a lot we can do with tenders, and I think you will see more over the upcoming quarters.
Thank you. Our next question is from the line of Todd Brooks with BenchmarkStonex. Please proceed with your question.
I think you have heard me yet. I have one for Ira that I forgot to ask here. Ira, you talked about reduced cost pressure in the quarter, and I have heard from a couple of other operators that it was very spiky but relatively short lived. If you look at the COGS pressure that you talked about, what proportion of that was related to produce? And are you finding that it is more short lived and retrenching here as we get into Q3? And if that is the case, just wondering about the 19.1% restaurant-level margin in Q2 versus the 18% to 18.5% guide.
To answer the first part, about three quarters of the COGS pressure that we saw in Q2 was related to produce in particular. We have seen it mitigate some; there is still a little pressure there, but it has mitigated. We are seeing some pressure on other lines as well, including some packaging and some pressure on oil costs, though not as significant as produce. We've also seen some fuel pressure for delivery charges as far as getting things to the restaurant. We have all that baked into our guidance for the balance of the year. Regarding margins as we look forward, we are not currently baking in relief from all of these levels. We have definitely seen relief in produce, but there are still other items where we are feeling pressure.
Okay. Perfect. Thank you.
Thank you. The next question is from the line of Jeremy Hamblin with Craig Hallum. Please proceed with your question.
Thanks. I will add my congratulations on the strong results. I just want to come back to the question around the Q3 guide. If we look back I do not think that the compares actually get tougher in August or September; I think they are pretty similar to what July looked like. Can you confirm that? Is there some assumption that there is moderation from the current 5.8% level?
That is exactly right, Jeremy. The balance of the quarter is pretty similar to what July was. The way to think about it is more about the balance of the quarter being more similar to what Q2 was. July had some outsized benefit from things Liz mentioned, like advertising and World Cup-related media. It played really well for us this year. So I think July was a little more outsized, and as we think about the quarter as a whole, the midpoint of our guide is where you should think about our trend.
Got it. I have to ask since it is topical here—some other Mexican food concepts have had sourcing issues recently. Have you scoured your food sourcing to ensure no potential issues with jalapeños or anything like that? Have you seen any impact at all with those headlines reaching consumers?
We take food safety with the utmost seriousness and have scoured every bit of our supply chain, working closely with our suppliers. El Pollo Loco is not involved in any of the lettuce recalls; there was no lettuce product pulled and no illnesses have been linked to us. All of our lettuce is currently sourced from the U.S. On the peppers, we do not use jalapeño peppers; we use serrano peppers, and we also do not use the supplier that people are talking about right now. We continue to be vigilant with the supply chain and care deeply about that. In terms of benefit, it's hard to tease out, but possibly we got a little bit of help from it. Our salad business is a core part of our menu and remains strong. We do not have any worries in terms of consumer demand there—particularly in the summertime those items are really popular and continue to remain strong.
Got it. Then I want to come to the CapEx for a second. I think you lowered it by about $3 or $4 million, but you are maintaining unit growth. Can you talk about the lowering of that? Presumably, are the new units coming in at or below budget? Any color you can share on that?
Great question, Jeremy. Where we really reduced CapEx is more just the timing of our remodel program. We are very pleased with the results of the remodel program and are continuing to move forward, but as we evaluate timing—permits and making sure we are deploying the right internal resources from operations and development—we have just pulled the timing back a little bit, and that is the first driver of the lower CapEx. The second is that we are still testing and working on holding equipment. If the tests go well, that is something we will move forward with. So it is more of a timing issue than a cancellation of a project.
Got it. One other housekeeping item: with the extension of your credit agreement, what is the interest rate change we should expect?
The spread from what we were paying before will be going up by about 50 basis points.
Ladies and gentlemen, we have reached the end of today's question-and-answer session. I would like to turn the call back over to Liz Williams for closing remarks.
Thanks again, everyone, for your interest in El Pollo Loco. We look forward to speaking with you again next quarter. Have a great evening.
This will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.