El Pollo Loco 2015 Annual Report Download - page 54

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Table of Contents
Recent Accounting Pronouncements
Recent accounting pronouncements are described in Note 2 to our consolidated financial statements included elsewhere in this report.
Key Financial Definitions
Revenue
Our revenue is derived from two primary sources: company-operated restaurant revenue and franchise revenue, the latter of which is comprised
primarily of franchise royalties and, to a lesser extent, franchise fees and sublease rental income.
Food and Paper Costs
Food and paper costs include the direct costs associated with food, beverage and packaging of our menu items. The components of food and
paper costs are variable in nature, change with sales volume, are impacted by menu mix, and are subject to increases or decreases in commodity
costs.
Labor and Related Expenses
Labor and related expenses include wages, payroll taxes, workers’ compensation expense, benefits, and bonuses paid to our restaurant
management teams. Like other expense items, we expect labor costs to grow proportionately as our restaurant revenue grows. Factors that
influence labor costs include minimum wage and payroll tax legislation, the frequency and severity of workers’
compensation claims, health care
costs, and the performance of our restaurants.
Occupancy Costs and Other Operating Expenses
Occupancy costs include rent, common area maintenance, and real estate taxes. Other restaurant operating expenses include the costs of utilities,
advertising, credit card processing fees, restaurant supplies, repairs and maintenance, and other restaurant operating costs.
General and Administrative Expenses
General and administrative expenses are comprised of expenses associated with corporate and administrative functions that support the
development and operations of our restaurants, including compensation and benefits, travel expenses, stock compensation costs, legal and
professional fees, and other related corporate costs. Also included are pre-opening costs, and expenses above the restaurant level, including
salaries for field management, such as area and regional managers, and franchise field operational support.
Franchise Expenses
Franchise expenses are primarily comprised of rent expenses incurred on properties leased by us and then sublet to franchisees, and expenses
incurred in support of franchisee information technology systems.
Depreciation and Amortization
Depreciation and amortization primarily consist of the depreciation of fixed assets, including leasehold improvements and equipment.
Loss on Disposal of Assets
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.
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