El Pollo Loco 2015 Annual Report Download - page 19

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Table of Contents
You should carefully consider the following risk factors, as well as other information contained in this report, including our financial statements
and the notes related to those statements. The occurrence of any of the following risks could materially and adversely affect our business,
prospects, financial condition, results of operations, and cash flow.
Risks Related to Our Business and Industry
A prolonged economic downturn could materially affect us in the future.
The restaurant industry is dependent upon consumer discretionary spending. A prolonged economic downturn or an economic recession could
impact the public’s ability and desire to spend discretionary dollars as a result of job losses, home foreclosures, significantly-reduced home
values, investment losses, bankruptcies, and reduced access to credit, which could result in lower levels of customer traffic and lower average
check sizes in our restaurants. If the economy experiences another significant decline, our business, results of operations, and ability to comply
with the terms of our secured revolving credit facility could be materially and adversely affected, and we and our franchisees might decelerate
the number and timing of new restaurant openings. Deterioration in customer traffic or a reduction in average check size would negatively
impact our revenues and our profitability and could result in further reductions in staff levels, additional impairment charges, and potential
restaurant closures.
We are vulnerable to changes in consumer preferences and economic conditions that could harm our business, financial condition, results of
operations, and cash flow.
Food service businesses depend on consumer discretionary spending and are often affected by changes in consumer tastes, national, regional,
and local economic conditions, and demographic trends. Factors such as traffic patterns, weather, fuel prices, local demographics, and the type,
number, and locations of competing restaurants may adversely affect the performances of individual locations. In addition, economic downturns,
inflation, or increased food or energy costs could harm the restaurant industry in general and our locations in particular. Adverse changes in any
of these factors could reduce consumer traffic or impose practical limits on pricing that could harm our business, financial condition, results of
operations, and cash flow. There can be no assurance that consumers will continue to regard chicken-based or Mexican-inspired food favorably
or that we will be able to develop new products that appeal to consumer preferences. Our business, financial condition, and results of operations
depend in part on our ability to anticipate, identify, and respond to changing consumer preferences and economic conditions.
Our business is geographically concentrated in the greater Los Angeles area, and we could be negatively affected by conditions specific to
that region.
Our company-
operated and franchised restaurants in the greater Los Angeles area generated, in the aggregate, approximately 80% of our revenue
in fiscal 2014 and approximately 80% in fiscal 2013. Adverse changes in demographic, unemployment, economic, or regulatory conditions in
the greater Los Angeles area or in the State of California, including, but not limited to, enforcement policies for and changes in immigration law,
have had and may continue to have material adverse effects on our business. We believe that an increase in unemployment would have a
negative impact on traffic in our restaurants. As a result of our concentration in the greater Los Angeles area, we have been disproportionately
affected by the above adverse economic conditions as compared to other national chain restaurants.
Furthermore, prolonged or severe inclement weather could affect our sales at restaurants in locations that experience such conditions, which
could materially and adversely affect our business, financial condition, and results of operations. Weather conditions could impact our business
more than other businesses in our industry because of our significant concentration of restaurants in the greater Los Angeles area. We may also
suffer
15
ITEM 1A.
RISK FACTORS