El Pollo Loco Holdings (LOCO) risk factors, FY2024 10-K

Risks Related to Our Operations

1. 01We may be unsuccessful in opening new company-operated or franchised restaurants or in establishing new markets, which could adversely affect our growth
2. 02If we are unable to successfully manage these risks and open new restaurants or sign new franchisees as anticipated, or if restaurant openings are significantly delayed, we could face increased costs and lower than anticipated sales and earnings in future periods
3. 03We may not be able to compete successfully, including with other quick-service and fast casual restaurants
4. 04We are vulnerable to changes in political and economic conditions such as trade policies, tariff and import regulations by the United States, as well as consumer preferences
5. 05If we are unable to attract, develop, assimilate, and retain employees, we may not be able to grow or successfully operate our business
6. 06Our business could be negatively affected by regional geographic concentrations
7. 07Our inability or failure to execute our business continuity and response plan following a major disaster such as a natural disaster, terrorism, social unrest or a cybersecurity incident affecting our corporate facilities could materially adversely affect our business
8. 08Our long-term success depends in part on our ability to effectively identify and secure appropriate sites for new restaurants
9. 09We have incurred, and may continue to incur, significant impairment of certain of our assets, in particular in our new markets
10. 10Changes in food, supply costs, especially for chicken, labor, construction and utilities could adversely affect our business, financial condition, and results of operations
11. 11Public health crises, such as the COVID-19 pandemic have had, and may in the future have, a significant negative impact on our business, sales, results of operations and financial condition
12. 12Social media and negative publicity could have a material adverse impact on our business
13. 13We rely on our ability to continue to expand our digital business, delivery orders and catering is uncertain, and these new business lines are subject to various risks
14. 14Food-borne illness and other food safety and quality concerns may negatively impact our business and profitability
15. 15Failure to receive timely deliveries of food or other supplies could result in a loss of revenue and materially and adversely impact our operations
16. 16Our level of indebtedness, and restrictions under our credit facility, could materially and adversely affect our business, financial condition, and results of operations
17. 17Our marketing programs may not be successful, and our new menu items, advertising campaigns, and restaurant designs and remodels may not generate increased sales or profits
18. 18Adverse changes in the economic environment may affect our franchisees, with adverse consequences to us
19. 19Franchisees may not have access to the financial or management resources that they need to open the restaurants contemplated by their agreements with us, or be able to find suitable sites on which to develop those restaurants
20. 20We have limited control with respect to the operations of our franchisees, which could have a negative impact on our business
21. 21If our relations with existing or potential franchisees deteriorate, restaurant performance and our development pipeline could suffer
22. 22We currently maintain employee health insurance coverage on a self-insured basis. We do maintain stop loss coverage which sets a limit on our liability for both individual and aggregate claim costs
23. 23We are locked into long-term and non-cancelable leases, and may be unable to renew leases at the ends of their terms
24. 24If we are unable to achieve our social and environmental sustainability goals, our reputation and results of operations could be adversely affected

Risks Related to Information Technology and Data Security

1. 25Information technology system failures or breaches of our network security could interrupt our operations and adversely affect our business
2. 26If we are unable to protect our customers’ payment method data or personal information, we could be exposed to data loss, litigation, liability, and reputational damage

Risks Related to Intellectual Property

1. 27The failure to enforce and maintain our trademarks and protect our other intellectual property could materially and adversely affect our business, including our ability to establish and maintain brand awareness

Risks Related to Government Regulation and Litigation

1. 28Matters relating to employment and labor law may adversely affect our business
2. 29We are from time to time the target of class action lawsuits and other claims proceedings, which could adversely affect our business and results of operations
3. 30If we or our franchisees face labor shortages or increased labor costs, our results of operations and growth could be adversely affected
4. 31We are subject to extensive laws, government regulation, and other legal requirements and our failure to comply with existing or new laws and regulations could adversely affect our operational efficiencies, ability to attract and retain talent and results of operations
5. 32Legislation and regulations regarding certain of our menu offerings, new information or attitudes regarding diet and health, or adverse opinions about the health effects of consuming our menu offerings, could affect consumer preferences and negatively impact our results of operations
6. 33We may become subject to liabilities arising from environmental laws that could likely increase our operating expenses and materially and adversely affect our business and results of operations

Risks Related to Ownership of Our Common Stock

1. 34Our quarterly operating results may fluctuate significantly due to seasonality and other factors, some of which are beyond our control, which could adversely affect the market price of our common stock
2. 35Future offerings of debt or equity securities by us may adversely affect the market price of our common stock
3. 36Delaware law, our organizational documents, our shareholder rights agreement and our existing and future debt agreements may impede or discourage a takeover, depriving our investors of the opportunity to receive a premium for their shares
4. 37Shareholder activism could cause us to incur significant expense, disrupt our business, result in a proxy contest or litigation and impact our stock price
5. 38For example, on August 4, 2024, the Board of Directors approved and entered into an amendment to the Rights Agreement (the “Amendment”, and together with the Rights Agreement, the “Amended Rights Agreement”)
6. 39exceptions is applicable, from 12.5% to 15.0%. In all other respects, the terms of the Rights Agreement remain unmodified and in full force and effect