El Pollo Loco 2015 Annual Report Download - page 46

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Table of Contents
Restaurant Contribution and Restaurant Contribution Margin
Restaurant contribution and restaurant contribution margin are neither required by, nor presented in accordance with, GAAP. Restaurant
contribution is defined as company-operated restaurant revenue less company restaurant expenses. Restaurant contribution margin is defined as
restaurant contribution as a percentage of net company-operated restaurant revenue. Restaurant contribution and restaurant contribution margin
are supplemental measures of operating performance of our restaurants, and our calculations thereof may not be comparable to those reported by
other companies. Restaurant contribution and restaurant contribution margin have limitations as analytical tools, and you should not consider
them in isolation or as substitutes for analysis of our results as reported under GAAP. Management believes that restaurant contribution and
restaurant contribution margin are important tools for investors, because they are widely-used metrics within the restaurant industry to evaluate
restaurant-level productivity, efficiency, and performance. Management uses restaurant contribution and restaurant contribution margin as key
metrics to evaluate the profitability of incremental sales at our restaurants, to evaluate our restaurant performance across periods, and to evaluate
our restaurant financial performance compared with our competitors.
A reconciliation of restaurant contribution and restaurant contribution margin to company-operated restaurant revenue is provided below:
New Restaurant Openings
The number of restaurant openings reflects the number of new restaurants opened by us and our franchisees during a particular reporting period.
Before a new restaurant opens, we and our franchisees incur pre-opening costs, as described below. New restaurants often open with an initial
start-up period of higher than normal sales volumes, which subsequently decrease to stabilized levels. New restaurants typically experience
normal inefficiencies in the form of higher food and paper, labor, and other direct operating expenses and, as a result, restaurant contribution
margins are generally lower during the start-up period of operation. The average start-up period after which our new restaurants’ revenue and
expenses normalize is approximately eight to twelve weeks. When we enter new markets, we may be exposed to start-up times and restaurant
contribution margins that are longer and lower than reflected in our average historical experience.
EBITDA and Adjusted EBITDA
EBITDA represents net income (loss) before interest expense, benefit (provision) for income taxes, depreciation, and amortization. Adjusted
EBITDA represents net income (loss) before interest expense, benefit (provision) for income taxes, depreciation, amortization, and items that we
do not consider representative of our on-going operating performance, as identified in the reconciliation table below.
EBITDA and Adjusted EBITDA as presented in this prospectus are supplemental measures of our performance that are neither required by, nor
presented in accordance with, GAAP. EBITDA and Adjusted EBITDA are not measurements of our financial performance under GAAP and
should not be considered as alternatives to net income (loss), operating income, or any other performance measures derived in accordance with
GAAP, or as alternatives to cash flow from operating activities as a measure of our liquidity. In addition, in evaluating EBITDA and Adjusted
EBITDA, you should be aware that in the future we will incur expenses or charges such as those added back to calculate EBITDA and Adjusted
EBITDA. Our presentation of EBITDA and Adjusted EBITDA should not be construed as an inference that our future results will be unaffected
by unusual or nonrecurring items.
42
Fiscal Year
(Dollar amounts in thousands)
2014
2013
2012
Company
-
operated restaurant revenue
$
322,516
$
294,327
$
274,928
Company restaurant expenses
251,795
232,408
220,470
Restaurant contribution
$
70,721
$
61,919
$
54,458
Restaurant contribution margin (%)
21.9
%
21.0
%
19.8
%