El Pollo Loco 2015 Annual Report Download - page 57

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Table of Contents
Franchise Revenue
In fiscal 2014, franchise revenue increased $1.9 million, or 9.5%. This increase was due primarily to increases in franchised comparable
restaurant sales of 8.0%, $0.3 million related to the buyout of a sublease agreement in which the franchisee entered into a direct lease with the
landlord of the property, $0.1 million for the additional week of franchise revenue recognized in a 53-
week fiscal year, and $0.1 million in higher
franchise agreement renewal fees. This increase was partially offset by the negative impacts of the closure of one franchised restaurant in each of
fiscal 2014 and 2013.
Food and Paper Costs
Food and paper costs increased $9.0 million in fiscal 2014, due to an $8.0 million increase in food costs and a $1.0 million increase in paper
costs. This increase was due primarily to higher sales volume and to higher commodity costs. Food and paper costs as a percentage of company-
operated restaurant revenue were 31.8% in both fiscal 2014 and 2013. This percentage was flat due to higher commodity costs, offset by
increases in average check size, due to menu price increases in the fourth quarter of 2013 and the third and fourth quarters of 2014.
Labor and Related Expenses
Payroll and benefit expenses increased $5.0 million in fiscal 2014, compared to fiscal 2013. This increase was due primarily to increased labor
costs resulting from higher sales volume, additional labor needs arising from the opening of eleven new restaurants in fiscal 2014 and two new
restaurants in fiscal 2013, and a minimum wage increase in California in the third quarter of fiscal 2014. These increases were partially offset by
lower medical insurance costs, due to lower claims activity. Payroll and benefit expenses as a percentage of company-operated restaurant
revenue were 25.0% in fiscal 2014, compared to 25.7% in fiscal 2013. This decrease was due primarily to increased revenue, the relatively fixed
nature of restaurant management labor costs, menu price increases, and lower medical insurance costs.
Occupancy and Other Operating Expenses
Occupancy and other operating expenses increased $5.4 million in fiscal 2014, compared to fiscal 2013. This increase was due primarily to (i) a
$1.4 million increase in utility costs, due primarily to higher gas and electric costs and additional utility costs as a result of new restaurants
opened in 2014 and 2013, (ii) a $2.1 million increase in advertising costs, which drove higher sales and to additional advertising contributions in
the Los Angeles market in the second and part of the third quarter of 2014, (iii) a $1.0 million increase in occupancy costs, due primarily to
increased rent, as a result of new restaurants opened in 2014 and 2013, and (iv) a $0.9 million increase in operating expense, resulting primarily
from higher credit and debit card processing fees and various other operating-related expenses. Occupancy and other operating expenses as a
percentage of company-
operated restaurant revenue were 21.3% in fiscal 2014, compared to 21.5% in fiscal 2013. This decrease is primarily due
to higher revenue and the relatively fixed nature of occupancy costs, partially offset by the higher expenses discussed above.
General and Administrative Expenses
General and administrative expenses increased $4.0 million in fiscal 2014. The increase was due primarily to (i) a $2.1 million increase in
payroll expense, due primarily to an increase in corporate employees and an additional week of operations payroll expense recognized for a fifty-
third week in fiscal 2014, partially offset by lower medical costs, due primarily to lower medical claims activity, (ii) a $0.8 million increase in
professional fees, due primarily to costs associated with our IPO and with securing federal and state tax credits, and (iii) a $1.0 million increase
in restaurant opening costs, due primarily to increased company-operated restaurant openings in 2014 as compared to 2013. General and
administrative expenses as a percentage of total revenue were 8.6% in fiscal 2014, compared to 8.1% in fiscal 2013. This increase was due
primarily to the higher costs noted above, partially offset by increased revenue.
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