El Pollo Loco 2016 Annual Report Download - page 55

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Commodity Price Risk
Weareexposedtomarketpricefluctuationinfoodproductprices.Giventhehistoricalvolatilityofcertainofourfoodproductprices,includingchicken,other
proteins,grains,produce,dairyproducts,andcookingoil,thesefluctuationscanmateriallyimpactourfoodandbeveragecosts.Whileourpurchasingcommitments
partiallymitigatetheriskofsuchfluctuations,thereisnoassurancethatsupplyanddemandfactorssuchasdiseaseorinclementweatherwillnotcausetheprices
ofthecommoditiesusedinourrestaurantoperationstofluctuate.Inperiodswherethepricesofcommoditiesdrop,wemaypayhigherpriceunderourpurchasing
commitments.Inarapidly-fluctuatingcommoditiesmarket,itmayprovedifficultforustoadjustourmenupricesinaccordwithinputpricefluctuations.
Therefore,totheextentthatwedonotpassalongcostincreasestoourcustomers,ourresultsofoperationsmaybeadverselyaffected.Atthistime,wedonotuse
financialinstrumentstohedgeourcommodityrisk.SeeItem1A,“RiskFactors—RisksRelatedtoOurBusinessandIndustry—Changesinfoodandsupplycosts,
especiallyforchicken,couldadverselyaffectourbusiness,financialconditionandresultsofoperations,”andNote14toourconsolidatedfinancialstatements
includedelsewhereinthisreport.
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