---

---

SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549

Form
10-Q

|  |                                                          
|- | ---------------------------------------------------------
|x | QUARTERLY REPORT PURSUANT TO
 SECTION 13 OR 15(d) OF THE 
|  | SECURITIES EXCHANGE ACT OF 1934                          
|  |                                                          
|  | For
 the quarterly period ended June 27, 2007            
|  | or                                                       
|  |                                                          
|o | TRANSITION REPORT PURSUANT TO
 SECTION 13 OR 15(d) OF THE
|  | SECURITIES EXCHANGE ACT OF 1934                          

For the transition period from __________ to __________

Commission File No. 333-115644

EPL Intermediate,
Inc.(Exact Name of
Registrant as Specified in Its Charter)

|                                                     |  |                    
|---------------------------------------------------- |  | -------------------
|Delaware                                             |  | 13-4092105         
|(State or Other Jurisdiction of                      |  | (I.R.S. Employer   
|Incorporation or Organization)                       |  | Identification No.)
|                                                     |  |                    
|3333 Michelson Drive, Suite 550                      |  |                    
|Irvine, California                                   |  | 92612              
|(Address of Principal Executive Offices)             |  | (Zip Code)         
|                                                    
|(949) 399-2000                                      
|(Registrants Telephone Number, Including Area Code)

Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes o Nox

Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of accelerated
filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check
one):

|                    |                          |                       
|------------------- | ------------------------ | ----------------------
|Large Accelerated o | Filer Accelerated Filero | Non-Accelerated Filerx

Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).Yes o     No x

As of August 10, 2007, the
registrant had 100 shares of its common stock, $.01 par value, outstanding.

---

---



TABLE OF CONTENTS

|     |  |                                                                                        |     
|---- |  | -------------------------------------------------------------------------------------- | ----
|Item |  |                                                                                        | Page
|     |  |                                                                                        |     
|     |  | PART I  FINANCIAL INFORMATION                                                         |     
|    
|1.   |  | Condensed
 Consolidated Financial Statements (Unaudited)                               | 3   
|2.   |  | Managements
 Discussion and Analysis of Financial Condition and Results of Operations | 15  
|3.   |  | Quantitative
 and Qualitative Disclosures About Market Risk                            | 24  
|4T.  |  | Controls
 and Procedures                                                               | 24  
|     |  |                                                                                        |     
|     |  | PART II  OTHER INFORMATION                                                            |     
|    
|1.   |  | Legal
 Proceedings                                                                     | 24  
|1A.  |  | Risk
 Factors                                                                          | 25  
|5.   |  | Other
 Information                                                                     | 25  
|6.   |  | Exhibits                                                                               | 26  

2

---



PART I  FINANCIAL
INFORMATION

Item 1. Financial Statements

EPL
INTERMEDIATE, INC.(A Wholly Owned Subsidiary of El Pollo Loco Holdings, Inc.)

|                                                  
|--------------------------------------------------
|CONDENSED
 CONSOLIDATED BALANCE SHEETS (UNAUDITED)
|(Amounts
 in thousands)                           
|                                                  

|                                          |  |                    |         |                |   |         | 
|----------------------------------------- |  | ------------------ | ------- | -------------- | - | ------- | 
|                                          |  | DECEMBER 27,
 2006 |         | JUNE 30,
 2007 |  
|                                          |  |                    |         |                |  
|ASSETS                                    |  |                    |         |                |   |         | 
|CURRENT ASSETS:                           |  |                    |         |                |   |         | 
|Cash and cash equivalents                 |  | $                  | 2,955   |                | $ | 12,529  | 
|Notes and accounts
receivablenet         |  |                    | 3,564   |                |   | 4,276   | 
|Inventories                               |  |                    | 1,560   |                |   | 1,533   | 
|Prepaid expenses and other current
assets |  |                    | 3,835   |                |   | 3,936   | 
|Income taxes receivable                   |  |                    | 68      |                |   | 76      | 
|Deferred income taxes                     |  |                    | 799     |                |   | 799     | 
|                                          |  |                    |         |                |   |         | 
|                                          |  |                    |         |                |   |         | 
|Total current assets                      |  |                    | 12,781  |                |   | 23,149  | 
|                                          |  |                    |         |                |   |         | 
|                                          |  |                    |         |                |   |         | 
|PROPERTY OWNEDNet                        |  |                    | 73,842  |                |   | 77,738  | 
|                                          |  |                    |         |                |   |         | 
|                                          |  |                    |         |                |   |         | 
|PROPERTY HELD UNDER CAPITAL LEASESNet    |  |                    | 1,634   |                |   | 1,365   | 
|                                          |  |                    |         |                |   |         | 
|                                          |  |                    |         |                |   |         | 
|GOODWILL                                  |  |                    | 277,514 |                |   | 277,514 | 
|                                          |  |                    |         |                |   |         | 
|DOMESTIC TRADEMARKSNet                   |  |                    | 120,700 |                |   | 120,700 | 
|                                          |  |                    |         |                |   |         | 
|OTHER INTANGIBLE ASSETSNet               |  |                    | 11,982  |                |   | 11,186  | 
|                                          |  |                    |         |                |   |         | 
|OTHER ASSETS                              |  |                    | 10,595  |                |   | 10,326  | 
|                                          |  |                    |         |                |   |         | 
|                                          |  |                    |         |                |   |         | 
|TOTAL ASSETS                              |  | $                  | 509,048 |                | $ | 521,978 | 
|                                          |  |                    |         |                |   |         | 

|                                                           |            
|---------------------------------------------------------- | -----------
|See notes to
 condensed consolidated financial statements. | (continued)

3

---



|                                                             
|-------------------------------------------------------------
|EPL
  INTERMEDIATE, INC.                                     
|(A
  Wholly Owned Subsidiary of El Pollo Loco Holdings, Inc.)
|                                                             
|CONDENSED
  CONSOLIDATED BALANCE SHEETS (UNAUDITED)          
|(Amounts
  in thousands, except share data)                  
|                                                             

|                                                                                           |  |                     |         |                 |   |         | 
|------------------------------------------------------------------------------------------ |  | ------------------- | ------- | --------------- | - | ------- | 
|                                                                                           |  | DECEMBER 27,
  2006 |         | JUNE
30,
  2007 |  
|                                                                                           |  |                     |         |                 |  
|LIABILITIES
  AND STOCKHOLDERS EQUITY                                                     |  |                     |         |                 |   |         | 
|                                                                                           |  |                     |         |                 |   |         | 
|CURRENT
  LIABILITIES:                                                                     |  |                     |         |                 |   |         | 
|Revolving credit facility                                                                  |  | $                   | 3,000   |                 | $ | 12,000  | 
|Current portion of note payable                                                            |  |                     | 1,306   |                 |   | 1,035   | 
|Current portion of obligations under
  capital leases                                      |  |                     | 1,313   |                 |   | 1,234   | 
|Accounts payable                                                                           |  |                     | 9,821   |                 |   | 13,176  | 
|Accrued salaries                                                                           |  |                     | 3,665   |                 |   | 3,526   | 
|Accrued vacation                                                                           |  |                     | 1,834   |                 |   | 1,900   | 
|Accrued insurance                                                                          |  |                     | 3,869   |                 |   | 4,138   | 
|Accrued interest                                                                           |  |                     | 2,709   |                 |   | 1,893   | 
|Accrued advertising                                                                        |  |                     | 1,358   |                 |   |        | 
|Other accrued expenses and current
  liabilities                                           |  |                     | 4,307   |                 |   | 4,002   | 
|                                                                                           |  |                     |         |                 |   |         | 
|                                                                                           |  |                     |         |                 |   |         | 
|Total current liabilities                                                                  |  |                     | 33,182  |                 |   | 42,904  | 
|                                                                                           |  |                     |         |                 |   |         | 
|                                                                                           |  |                     |         |                 |   |         | 
|NONCURRENT
  LIABILITIES:                                                                  |  |                     |         |                 |   |         | 
|Senior secured notes (2009 Notes)                                                          |  |                     | 250     |                 |   | 250     | 
|Senior unsecured notes (2013 Notes)                                                        |  |                     | 123,646 |                 |   | 123,745 | 
|PIK
Notes (2014 Notes)                                                                     |  |                     | 26,319  |                 |   | 28,227  | 
|Note
payableless current portion                                                          |  |                     | 102,410 |                 |   | 100,936 | 
|Obligations under capital leasesless
  current portion                                    |  |                     | 3,943   |                 |   | 3,393   | 
|Deferred income taxes                                                                      |  |                     | 34,247  |                 |   | 34,555  | 
|Other intangible liabilitiesnet                                                           |  |                     | 7,434   |                 |   | 6,730   | 
|Other noncurrent liabilities                                                               |  |                     | 4,903   |                 |   | 6,430   | 
|                                                                                           |  |                     |         |                 |   |         | 
|                                                                                           |  |                     |         |                 |   |         | 
|Total noncurrent liabilities                                                               |  |                     | 303,152 |                 |   | 304,266 | 
|                                                                                           |  |                     |         |                 |   |         | 
|                                                                                           |  |                     |         |                 |   |         | 
|COMMITMENTS AND
  CONTINGENCIES                                                            |  |                     |         |                 |   |         | 
|                                                                                           |  |                     |         |                 |   |         | 
|STOCKHOLDERS
  EQUITY                                                                     |  |                     |         |                 |   |         | 
|Common stock, $.01 par value20,000 shares
  authorized; 100 shares issued and outstanding |  |                     |        |                 |   |        | 
|Additional paid-in-capital                                                                 |  |                     | 172,665 |                 |   | 173,171 | 
|Retained earnings                                                                          |  |                     | 49      |                 |   | 1,637   | 
|                                                                                           |  |                     |         |                 |   |         | 
|                                                                                           |  |                     |         |                 |   |         | 
|Total stockholders equity                                                                 |  |                     | 172,714 |                 |   | 174,808 | 
|                                                                                           |  |                     |         |                 |   |         | 
|                                                                                           |  |                     |         |                 |   |         | 
|TOTAL                                                                                      |  | $                   | 509,048 |                 | $ | 521,978 | 
|                                                                                           |  |                     |         |                 |   |         | 

|                                                            |            
|----------------------------------------------------------- | -----------
|See notes to
  condensed consolidated financial statements. | (concluded)

4

---



|                                                             
|-------------------------------------------------------------
|EPL
  INTERMEDIATE, INC.                                     
|(A Wholly Owned
  Subsidiary of El Pollo Loco Holdings, Inc.)
|                                                             
|CONDENSED
  CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)    
|(Amounts in
  thousands)                                     
|                                                             

|                                           |  |                         |        |                         |   |        |  |      |         |  |   |         | 
|------------------------------------------ |  | ----------------------- | ------ | ----------------------- | - | ------ |  | ---- | ------- |  | - | ------- | 
|                                           |  | 13
Weeks Ended June 30, |        | 26
Weeks Ended June 30, |  
|                                           |  | 2006                    |        | 2007                    |   | 2006   |  | 2007 |        
|                                           |  |                         |        |                         |   |        |  |      |        
|                                           |  |                         |        |                         |   |        |  |      |         |  |   |         | 
|OPERATING REVENUE:                         |  |                         |        |                         |   |        |  |      |         |  |   |         | 
|Restaurant revenue                         |  | $                       | 61,678 |                         | $ | 64,975 |  | $    | 120,829 |  | $ | 127,424 | 
|Franchise revenue                          |  |                         | 4,180  |                         |   | 4,731  |  |      | 8,197   |  |   | 9,101   | 
|                                           |  |                         |        |                         |   |        |  |      |         |  |   |         | 
|                                           |  |                         |        |                         |   |        |  |      |         |  |   |         | 
|Total operating revenue                    |  |                         | 65,858 |                         |   | 69,706 |  |      | 129,026 |  |   | 136,525 | 
|                                           |  |                         |        |                         |   |        |  |      |         |  |   |         | 
|                                           |  |                         |        |                         |   |        |  |      |         |  |   |         | 
|OPERATING EXPENSES:                        |  |                         |        |                         |   |        |  |      |         |  |   |         | 
|Product cost                               |  |                         | 19,043 |                         |   | 20,130 |  |      | 38,008  |  |   | 39,331  | 
|Payroll and benefits                       |  |                         | 15,873 |                         |   | 16,936 |  |      | 30,838  |  |   | 33,251  | 
|Depreciation and amortization              |  |                         | 2,504  |                         |   | 2,899  |  |      | 4,880   |  |   | 5,693   | 
|Other operating expenses                   |  |                         | 19,299 |                         |   | 21,115 |  |      | 39,027  |  |   | 41,826  | 
|                                           |  |                         |        |                         |   |        |  |      |         |  |   |         | 
|                                           |  |                         |        |                         |   |        |  |      |         |  |   |         | 
|Total operating expenses                   |  |                         | 56,719 |                         |   | 61,080 |  |      | 112,753 |  |   | 120,101 | 
|                                           |  |                         |        |                         |   |        |  |      |         |  |   |         | 
|                                           |  |                         |        |                         |   |        |  |      |         |  |   |         | 
|OPERATING INCOME                           |  |                         | 9,139  |                         |   | 8,626  |  |      | 16,273  |  |   | 16,424  | 
|                                           |  |                         |        |                         |   |        |  |      |         |  |   |         | 
|INTEREST EXPENSENet                       |  |                         | 7,099  |                         |   | 7,176  |  |      | 14,218  |  |   | 14,504  | 
|                                           |  |                         |        |                         |   |        |  |      |         |  |   |         | 
|                                           |  |                         |        |                         |   |        |  |      |         |  |   |         | 
|INCOME BEFORE PROVISION FOR INCOME
  TAXES |  |                         | 2,040  |                         |   | 1,450  |  |      | 2,055   |  |   | 1,920   | 
|                                           |  |                         |        |                         |   |        |  |      |         |  |   |         | 
|PROVISION FOR INCOME TAXES                 |  |                         | 793    |                         |   | 96     |  |      | 799     |  |   | 332     | 
|                                           |  |                         |        |                         |   |        |  |      |         |  |   |         | 
|                                           |  |                         |        |                         |   |        |  |      |         |  |   |         | 
|NET INCOME                                 |  | $                       | 1,247  |                         | $ | 1,354  |  | $    | 1,256   |  | $ | 1,588   | 
|                                           |  |                         |        |                         |   |        |  |      |         |  |   |         | 

See notes to
condensed consolidated financial statements.

5

---



EPL INTERMEDIATE, INC.
(A Wholly Owned Subsidiary of El Pollo Loco Holdings, Inc.)

|                                                                        
|------------------------------------------------------------------------
|CONDENSED
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Amounts in thousands)
|                                                                        

|                                                                                   |  |                         |        |      |   |        |  
|---------------------------------------------------------------------------------- |  | ----------------------- | ------ | ---- | - | ------ | -
|                                                                                   |  | 26 Weeks Ended June 30, |       
|                                                                                   |  | 2006                    |        | 2007 |  
|                                                                                   |  |                         |        |      |  
|                                                                                   |  |                         |        |      |  
|CASH FLOWS FROM OPERATING                                                          |  |                         |        |      |   |        |  
|ACTIVITIES:                                                                        |  |                         |        |      |   |        |  
|Net income                                                                         |  | $                       | 1,256  |      | $ | 1,588  |  
|Adjustments to reconcile net income to net
 cash provided by operating activities: |  |                         |        |      |   |        |  
|Depreciation and amortization of property
 and intangible assets                   |  |                         | 4,880  |      |   | 5,693  |  
|Stock-based compensation expense                                                   |  |                         | 321    |      |   | 560    |  
|Interest accretion                                                                 |  |                         | 1,774  |      |   | 2,007  |  
|Gain on disposal of assets                                                         |  |                         |       |      |   | (384   | )
|Amortization of deferred financing costs                                           |  |                         | 653    |      |   | 693    |  
|Amortization of negative leasehold interest                                        |  |                         | (219   | )    |   | (136   | )
|Deferred income taxes                                                              |  |                         | (59    | )    |   | 308    |  
|Changes in operating assets and
 liabilities:                                      |  |                         |        |      |   |        |  
|Notes and accounts receivablenet                                                  |  |                         | (752   | )    |   | (712   | )
|Inventories                                                                        |  |                         | 23     |      |   | 27     |  
|Prepaid expenses and other current assets                                          |  |                         | (845   | )    |   | (101   | )
|Income taxes receivable / payable                                                  |  |                         | 2,594  |      |   | (8     | )
|Other assets                                                                       |  |                         | 82     |      |   | (261   | )
|Accounts payable                                                                   |  |                         | 195    |      |   | 2,550  |  
|Accrued salaries and vacation                                                      |  |                         | (1,209 | )    |   | (73    | )
|Accrued insurance                                                                  |  |                         | 44     |      |   | 269    |  
|Other accrued expenses and current and
 noncurrent liabilities                     |  |                         | 1,177  |      |   | (952   | )
|                                                                                   |  |                         |        |      |   |        |  
|                                                                                   |  |                         |        |      |   |        |  
|Net cash provided by operating activities                                          |  |                         | 9,915  |      |   | 11,068 |  
|                                                                                   |  |                         |        |      |   |        |  
|                                                                                   |  |                         |        |      |   |        |  
|CASH FLOW FROM INVESTING ACTIVITIES:                                               |  |                         |        |      |   |        |  
|                                                                                   |  |                         |        |      |   |        |  
|Proceeds from asset disposition                                                    |  |                         |       |      |   | 570    |  
|Purchase of property                                                               |  |                         | (4,713 | )    |   | (8,463 | )
|Payment of acquisition costs                                                       |  |                         | (2,022 | )    |   |       |  
|                                                                                   |  |                         |        |      |   |        |  
|                                                                                   |  |                         |        |      |   |        |  
|Net cash used in investing activities                                              |  |                         | (6,735 | )    |   | (7,893 | )
|                                                                                   |  |                         |        |      |   |        |  
|                                                                                   |  |                         |        |      |   |        |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                                              |  |                         |        |      |   |        |  
|Proceeds from issuance of common stock                                             |  |                         | 28     |      |   |       |  
|Repurchase of common stock                                                         |  |                         |       |      |   | (54    | )
|Proceeds from borrowings                                                           |  |                         |       |      |   | 14,500 |  
|Payment of obligations under capital leases                                        |  |                         | (590   | )    |   | (629   | )
|Payments on debt                                                                   |  |                         | (3,297 | )    |   | (7,245 | )
|Deferred financing costs                                                           |  |                         | (1,195 | )    |   | (173   | )
|                                                                                   |  |                         |        |      |   |        |  
|                                                                                   |  |                         |        |      |   |        |  
|Net cash (used in) provided by financing
 activities                               |  |                         | (5,054 | )    |   | 6,399  |  
|                                                                                   |  |                         |        |      |   |        |  

|                                                           |            
|---------------------------------------------------------- | -----------
|See notes to
 condensed consolidated financial statements. | (continued)

6

---



EPL INTERMEDIATE, INC.
(A Wholly Owned Subsidiary of El Pollo Loco Holdings, Inc.)

|                                                                         
|-------------------------------------------------------------------------
|CONDENSED
 CONSOLIDATED STATEMENTS OF CASH FLOWS 
 (Amounts in thousands)
|                                                                         

|                                                                                                                          |  |                         |        |      |   |        | 
|------------------------------------------------------------------------------------------------------------------------- |  | ----------------------- | ------ | ---- | - | ------ | 
|                                                                                                                          |  | 26 Weeks Ended June 30, |       
|                                                                                                                          |  | 2006                    |        | 2007 |  
|                                                                                                                          |  |                         |        |      |  
|INCREASE (DECREASE) IN CASH AND CASH
 EQUIVALENTS                                                                         |  | $                       | (1,874 | )    | $ | 9,574  | 
|                                                                                                                          |  |                         |        |      |   |        | 
|CASH AND CASH EQUIVALENTSBeginning of
 period                                                                            |  |                         | 3,552  |      |   | 2,955  | 
|                                                                                                                          |  |                         |        |      |   |        | 
|                                                                                                                          |  |                         |        |      |   |        | 
|CASH AND CASH EQUIVALENTSEnd of period                                                                                   |  | $                       | 1,678  |      | $ | 12,529 | 
|                                                                                                                          |  |                         |        |      |   |        | 
|                                                                                                                          |  |                         |        |      |   |        | 
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW
 INFORMATIONCash paid during the period for: Interest (net of amounts
 capitalized) |  | $                       | 12,115 |      | $ | 12,921 | 
|                                                                                                                          |  |                         |        |      |   |        | 
|                                                                                                                          |  |                         |        |      |   |        | 
|Income taxes                                                                                                              |  | $                       |       |      | $ | 23     | 
|                                                                                                                          |  |                         |        |      |   |        | 
|                                                                                                                          |  |                         |        |      |   |        | 
|SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING
 ACTIVITIES:                                                                  |  |                         |        |      |   |        | 
|Unpaid purchases of property and equipment                                                                                |  | $                       | 306    |      | $ | 805    | 
|                                                                                                                          |  |                         |        |      |   |        | 
|                                                                                                                          |  |                         |        |      |   |        | 
|Recording of amounts due to predecessor
 stockholders in connection with acquisition                                      |  | $                       | 3,825  |      | $ |       | 
|                                                                                                                          |  |                         |        |      |   |        | 

|                                                           |            
|---------------------------------------------------------- | -----------
|See notes to
 condensed consolidated financial statements. | (concluded)

7

---



EPL INTERMEDIATE, INC. 
(A Wholly-Owned Subsidiary of El Pollo Loco Holdings, Inc.)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS

1. Basis of Presentation

The
accompanying condensed consolidated financial statements are unaudited. EPL
Intermediate, Inc. (Intermediate) and its wholly owned subsidiary El Pollo
Loco, Inc. (EPL and collectively with Intermediate, the Company,) prepared
these condensed consolidated financial statements in accordance with Article 10
of Regulation S-X. In compliance with those instructions, certain information
and footnote disclosures normally included in financial statements prepared in
accordance with accounting principles generally accepted in the United States
of America have been condensed or omitted.

The
accompanying condensed consolidated financial statements include all
adjustments (consisting of normal recurring adjustments and accruals) that
management considers necessary for a fair presentation of its financial
position and results of operations for the interim periods presented. The
results of operations for the interim periods presented are not necessarily
indicative of the results that may be expected for the entire year.

The
accompanying condensed consolidated financial statements should be read in
conjunction with the Companys audited consolidated financial statements and
the related notes thereto included in the Companys Annual Report on Form 10-K
for the year ended December 27, 2006 (File No. 333-115644) as filed with the
Securities and Exchange Commission (the Commission) on March 23, 2007.

The
Company uses a 52-, 53-week fiscal year ending on the last Wednesday of the
calendar year. In a 52-week fiscal year, each quarter includes 13 weeks of
operations; in a 53-week fiscal year, the first, second and third quarters each
include 13 weeks of operations and the fourth quarter includes 14 weeks of
operations. Fiscal year 2006, which ended December 27, 2006, and fiscal year
2007, which will end December 26, 2007, are both 52-week fiscal years. For
simplicity of presentation, the Company has described the periods ended June
28, 2006 and June 27, 2007 as June 30, 2006 and 2007, respectively.

The
Company is a wholly-owned subsidiary of El Pollo Loco Holdings, Inc.
(Holdings), which is a wholly owned indirect subsidiary of Chicken
Acquisition Corp (CAC) which is owned by Trimaran Pollo Partners, LLC (the
LLC). The Companys activities are performed principally through its
wholly-owned subsidiary, EPL, which develops, franchises, licenses, and
operates quick-service restaurants under the name El Pollo Loco®.

2. Acquisition of the Company

On
September 27, 2005, Holdings entered into a stock purchase agreement (the
Stock Purchase Agreement) among Chicken Acquisition Corp. (CAC), Holdings,
Intermediate, EPL, the equity holders of Holdings, and American Securities
Capital Partners, L.P. (ASCP). Pursuant to the Stock Purchase Agreement, CAC,
an affiliate of Trimaran Fund II, L.L.C., agreed to purchase (the
Acquisition) all of Holdings issued and outstanding common stock (other than
certain shares exchanged by existing shareholders, including management,
representing approximately 7.3% of Holdings). On November 18, 2005, Holdings,
CAC, and the other parties to the Stock Purchase Agreement completed the
Acquisition. As a result of the Acquisition, CAC expects to be the owner of the
nations leading restaurant company specializing in flame-grilled chicken. The
Acquisition was accounted for as a purchase of Holdings by CAC in accordance
with Statement of Financial Accounting Standards (SFAS) No. 141, Business
Combinations.

The
following table summarizes the estimated fair values of the assets acquired and
liabilities assumed at the date of Acquisition based on the initial aggregate
purchase price of $435.9 million. The purchase price allocation was based on
estimates of the fair value of the assets acquired and liabilities assumed as
determined by management with the assistance of an independent valuation
company. The valuation was finalized in fiscal 2006.

8

---



|                          |  |                |         | 
|------------------------- |  | -------------- | ------- | 
|                          |  | (in thousands) |        
|                          |  |                |        
|Current
 assets           |  | $              | 31,213  | 
|Property                  |  |                | 68,424  | 
|Other assets              |  |                | 2,282   | 
|Intangible
 assets, net   |  |                | 125,405 | 
|Goodwill                  |  |                | 272,204 | 
|                          |  |                |         | 
|Total assets acquired     |  |                | 499,528 | 
|                          |  |                |         | 
|Current
 liabilities      |  |                | 25,379  | 
|Other
 liabilities        |  |                | 38,296  | 
|                          |  |                |         | 
|Total liabilities assumed |  |                | 63,675  | 
|                          |  |                |         | 
|Net assets acquired       |  | $              | 435,853 | 
|                          |  |                |         | 

The
net intangible assets consist of a $120.7 million domestic trademark, an $8.0
million franchise network and a net unfavorable lease intangible liability of
$3.3 million. The goodwill recorded as part of the purchase accounting is not
deductible for income tax purposes.

3. Asset Impairment

The
Company periodically reviews the performance of company-operated stores for
indicators of asset impairment. If the Company concludes that the carrying value
of certain assets will not be recovered based on expected undiscounted future
cash flows, an impairment write-down is recorded to reduce the assets to their
estimated fair value. The Company has not recognized any impairment charges
during the 26 weeks ended June 30, 2006 and 2007.

4. Stock-Based Compensation

As
of June 30, 2007, options to purchase 308,737 shares of common stock of CAC
were outstanding, including 80,831 options that are fully vested. The remaining
options vest 100% on the seventh anniversary of the grant date, 100% upon a
change in control of CAC if certain conditions are met, or partially vest upon
the Companys attaining annual financial or other goals, with the remaining
unvested portion vesting on the seventh anniversary of the grant date. All
options were granted with an exercise price equal to the fair value of the
common stock on the date of grant.

Changes in
stock options for the 26 weeks ended June 30, 2007 are as follows:

|                               |  |        |         |                                |   |                                                     |  |                                 |     |  |   |        | 
|------------------------------ |  | ------ | ------- | ------------------------------ | - | --------------------------------------------------- |  | ------------------------------- | --- |  | - | ------ | 
|                               |  | Shares |         | Weighted-AverageExercise Price |   | Weighted-AverageRemainingContractual Life(in Years) |  | AggregateIntrinsicValue (000s) |    
|                               |  |        |         |                                |   |                                                     |  |                                 |    
|OutstandingDecember
 27, 2006 |  |        | 302,772 |                                | $ | 66.58                                               |  |                                 |     |  |   |        | 
|Granted                        |  |        | 11,123  |                                | $ | 108.84                                              |  |                                 |     |  |   |        | 
|Exercised                      |  |        | (709    | )                              | $ | 10.39                                               |  |                                 |     |  |   |        | 
|Canceled                       |  |        | (4,449  | )                              | $ | 97.68                                               |  |                                 |     |  |   |        | 
|                               |  |        |         |                                |   |                                                     |  |                                 |     |  |   |        | 
|OutstandingJune
 30, 2007     |  |        | 308,737 |                                | $ | 67.78                                               |  |                                 | 7.5 |  | $ | 15,427 | 
|                               |  |        |         |                                |   |                                                     |  |                                 |     |  |   |        | 

The
intrinsic value is calculated as the difference between the market value as
June 30, 2007 and the exercise price of the options outstanding and options
exercisable.

For
options granted prior to December 29, 2005 that may be cancelled and replaced
with restricted stock upon completion of an initial public offering before
November 18, 2007, the Company uses variable accounting to recognize expense
based on the change in incremental value of the award at each reporting period.
Compensation expense of $253,000 and $399,000 and a corresponding decrease in
net income of $156,000 and $235,000 was recognized for the 13 and 26 weeks
ended June 30, 2007, respectively, related to these options.

9

---



In
accordance with the prospective method of adoption of SFAS 123R, the Company
recognized share-based compensation expense before tax of $86,000 and $161,000
and a corresponding decrease to net income of $54,000 and $95,000 for the 13
and 26 weeks ended June 30, 2007, respectively, related to vesting of stock
options granted after the adoption of SFAS 123R.

5. Commitments and Contingencies

Legal Matters

On
or about April 16, 2004, two former employees and one current employee filed a class
action suit in the Superior Court of the State of California, County of Los
Angeles, against the Company on behalf of all putative class members (former
and current general managers and restaurant managers from April 2000 to
present) alleging certain violations of California labor laws, including
alleged improper classification of general managers and restaurant managers as
exempt employees (the Elias Action). Plaintiffs requested remedies include
compensatory damages for unpaid wages, interest, certain statutory penalties,
disgorgement of alleged profits, punitive damages and attorneys fees and costs
as well as certain injunctive relief. The complaint was served on the Company
on April 19, 2004. The court has ordered the class action stayed pending the
arbitration of one of the named putative class plaintiffs claims as a result
of his execution of a mandatory arbitration agreement. While the Company
intends to defend against this action vigorously, the ultimate outcome of this
case is presently not determinable as it is in a preliminary phase. Thus, the
Company cannot at this time determine the likelihood of an adverse judgment or
a likely range of damages in the event of an adverse judgment.

On
or about October 18, 2005, Salvador Amezcua, on behalf of himself and all
others similarly situated, filed a purported class action complaint against the
Company in the Superior Court of the State of California, County of Los
Angeles. Carlos Olvera replaced Mr. Amezuca as the named class representative
on August 16, 2006 (the Olvera Action). This action alleges certain
violations of California labor laws and the California Business and Professions
Code, based on, among other things, failure to pay overtime compensation,
failure to provide meal periods, unlawful deductions from earnings and unfair
competition. Plaintiffs requested remedies include compensatory and punitive
damages, injunctive relief, disgorgement of profits and reasonable attorneys
fees and costs. The Company was served with this complaint on December 16,
2005. The court has ordered that the case be deemed complex and assigned it to
the complex litigation panel. While the Company intends to defend against this
action vigorously, the ultimate outcome of this case is presently not determinable
as it is in a preliminary phase. This action has been designated by the court
as related to the Elias Action referenced above. Thus, the Company cannot at
this time determine the likelihood of an adverse judgment or a likely range of
damages in the event of an adverse judgment. Any settlement of or judgment with
a negative outcome arising from such lawsuit could have an adverse material
impact on the Companys consolidated financial position, results of operations
or cash flows.

The
contractual rights to use the name El Pollo Loco® and certain related
trademarks and intellectual property in Mexico were assigned to us in 1996,
pursuant to an agreement between the Company and a company controlled by Juan
Francisco Ochoa, the founder of the first El Pollo Loco restaurant in Mexico
and the United States. As consideration for the assignment of such rights, the
Company agreed, subject to the terms and conditions of the agreement, to use
commercially reasonable efforts to develop a minimum number of restaurants in
Mexico by February 2006 and to pay certain fees for each such restaurant. On
March 31, 2004, EPL-Mexico filed suit alleging, among other things, that the
Company breached its agreement with EPL-Mexico by failing to exploit the trademarks
and develop new restaurants in Mexico. A jury trial was held in July 2007 in
federal district court in Laredo, Texas. The jury returned a verdict finding
damages for EPL-Mexico in the approximate
amount of $22 million. Before a final judgment is rendered, the Court has
requested that the parties file post-trial motions, which were due August 9,
2007. The Company believes there are inconsistencies in the jury verdict.
Further, it is the Companys contention that two key factual findings by
the jury support our position. The first is that plaintiff knew of the injuries
it alleged in this case as early as 1997 but did not file this lawsuit until
2004, which we assert was after the statute of limitations expired. The second
is that the value of the 1996 agreement was $1,087,500. The Company deposited
that same amount into the registry of the Court two years ago, representing the
buyout price in the contract. The Company is hopeful that the trial judge will
recognize the significance of these two key jury findings and enter a final
judgment in our favor. If the Courts judgment upholds the jurys damages
findings, the Company will appeal. The failure to prevail in this action could
result in the loss of the Companys ownership in Mexico of the El Pollo
Loco trademarks and intellectual property. This could negatively affect our brand
in the United States and elsewhere. In addition, a final adverse judgment could
result in the imposition of significant monetary damages, which could have a
material adverse impact on the Companys consolidated financial position,
results of operations or cash flows.

10

---



Pursuant
to Statement of Accounting Standards No. 5, Accounting for Contingencies (FAS
5) and FASB Interpretation 14 (FIN14), two conditions must be met in order to
establish an accrual: (i) it is probable that a liability has been
incurred; and (ii) the amount of loss can be reasonably estimated.

We
believe that due to the significant points that we have for appeal in the EPL 
Mexico litigation, the likelihood of a loss is not probable even if the Court
enters a judgment that mirrors the jury verdict. Additionally, FAS 5 and FIN14
state that if a loss can be reasonably estimated, it should be recorded. Due to
the uncertainties involved in predicting possible outcomes of the judgment,
then predicting possible outcomes to the rulings on appeal that we would file
if a material adverse judgment is issued, it is our opinion that, even though
we have received an adverse jury verdict, a reasonable estimate of the loss
cannot be determined at this time. Therefore, no accrual for the EPL  Mexico
litigation has been recorded as of June 30, 2007. Once a judgment is issued,
the number of possible outcomes will be reduced, and we will then re-evaluate
whether to establish an accrual for this contingency.

On
November 1, 2006, Fall River Music, Inc. filed a lawsuit in United States
District Court, Central District of California, Santa Ana Division, against the
Company and its advertising agency, Krueger Communications, LLC. Fall River
Music claims all rights, title and interest to the musical composition
Guantanamera, and alleges that the music used by the Company in its
advertisements is an infringement of Fall Rivers copyrights. Fall River Music,
Inc. seeks unspecified damages as a result of this alleged infringement. While
the Company has received a denial of coverage from its insurance company,
Kruegers insurance company has accepted coverage and is currently defending
the Company. The action is set for trial on February 12, 2008. Thus, the
Company cannot at this time determine the likelihood of an adverse judgment or
a likely range of damages in the event of an adverse judgment. Any settlement
of or judgment with a negative outcome arising from such lawsuit could have an
adverse material impact on the Companys consolidated financial position,
results of operations or cash flows.

On
January 11, 2007, Veronica Blanco, on behalf of herself and all others
similarly situated, filed a purported class action complaint against the
Company in the United States District Court, Central District of California,
Santa Ana Division. Veronica Blanco, on behalf of herself and all others
similarly situated, alleges violations of the federal Fair Credit Reporting Act
and Fair and Accurate Credit Transactions Act, which restrict the credit card
information that may be printed on customer receipts. While the Company intends
to defend against this action vigorously, the ultimate outcome of this case is
not presently determinable as it is in the preliminary phase.

On
April 10, 2007, Shawn Monroe filed a class action lawsuit in Superior Court of
the State of California, County of Los Angeles against the Company on behalf of
all putative class members (all individuals in California with disabilities who
use wheelchairs or electric scooters for mobility) alleging violations on
behalf of himself and all others similarly situated of the Americans with
Disabilities Act and the corresponding sections of the California Civil Code.
Plaintiffs seek permanent injunctive relief as well as statutory damages in the
amount of $1,000 per violation. The complaint was served on the Company on May
17, 2007. While the Company intends to defend this action vigorously, the
ultimate outcome of this case is not presently determinable as it is in the
preliminary phase.

On
April 23, 2007, Dora Santana filed a class action lawsuit in the Superior Court
of the State of California, County of Los Angeles, against the Company on
behalf of all putative class members (Assistant Shift Managers) alleging
certain violations on behalf of herself and all others similarly situated of
certain California labor laws, including failure to pay overtime, failure to
compensate properly for time worked off the clock, and failure to allow meal
periods. Plaintiffs requested remedies include compensatory damages for unpaid
wages, interest, certain statutory penalties, disgorgement of alleged profits, punitive
damages and attorneys fees and costs as well as certain injunctive relief. The
complaint was served on the Company on June 5, 2007. While the Company intends
to defend against this action vigorously, the ultimate outcome of this case is
not presently determinable as it is in the preliminary phase.

The
Company is also involved in various other claims and legal actions that arise
in the ordinary course of business. We do not believe that the ultimate
resolution of these actions will have a material adverse effect on our
financial position, results of operations, liquidity and capital resources. A
significant increase in the number of these claims or an increase in amounts
owing under successful claims could materially adversely affect our business,
financial condition, results of operation and cash flows.

11

---



Purchasing Commitments

The
Company has entered into long-term beverage supply agreements with certain
major beverage vendors. Pursuant to the terms of these arrangements, marketing
funds are provided to the Company and its franchisees from the beverage vendors
based upon the dollar volume of purchases for company-operated restaurants and
franchised restaurants, respectively, which will vary according to their demand
for beverage syrup and fluctuations in the market rates for beverage syrup.
These contracts have terms extending into 2011 with an estimated Company
obligation totaling $9,903,000.

Office Lease

On
May 18, 2007, the Company entered into a new corporate office lease. The lease
is expected to commence in October of 2007 and has a term of 10 1⁄2 years at an
annual expense for financial statement purposes of approximately $323,000.

6. Predecessor Debt (2009 Notes)

In
December 2003, EPL issued the 2009 Notes, consisting of $110.0 million of
senior secured notes accruing interest at 9.25% per annum, due 2009. At
December 27, 2006 and June 30, 2007, $250,000 principal amount of the 2009
Notes was outstanding.

7. Senior Unsecured Notes Payable (2013 Notes)

EPL
has outstanding 2013 Notes, consisting of $125.0 million aggregate principal
amount of 11 3/4% senior notes due 2013. Interest is payable in May and
November beginning May 15, 2006. The 2013 Notes are unsecured, are guaranteed
by Intermediate, and may be redeemed, at the discretion of the issuer, after
November 15, 2009. The indenture contains certain provisions which may prohibit
EPLs ability to incur additional indebtedness, sell assets, engage in
transactions with affiliates, and issue or sell preferred stock, among other
items. In October 2006, EPL completed the exchange of the 2013 Notes for
registered, publicly tradable notes that have substantially identical terms as
the 2013 Notes.

EPL
incurred direct costs in connection with the offering of the 2013 Notes. These
costs have been capitalized and are included in other assets in the
accompanying balance sheets. The Company used the proceeds from the 2013 Notes
to purchase substantially all of the outstanding 2009 Notes.

As
a holding company, the stock of EPL constitutes Intermediates only material
asset. Consequently, EPL conducts all of the Companys consolidated operations
and owns substantially all of the consolidated operating assets. The Companys
principal source of the cash required to pay its obligations is the cash that
EPL generates from its operations. EPL is a separate and distinct legal entity,
has no obligation to make funds available to Intermediate, and the 2013 Notes
and the 2014 Notes (see Note 9) have restrictions that limit distributions or
dividends to be paid by EPL to Intermediate. Conditions that would allow for
distributions or dividends to be made include compliance with a Fixed Charge
Coverage Ratio test (as defined in the indenture governing the 2013 Notes) and
cash received from the proceeds of new equity contributions. As of June 30,
2007, we are restricted from incurring additional indebtedness, as EPL does not
currently meet the fixed charge coverage ratio. This restriction does not apply
to the existing loan availability of $5.4 million under the revolving line of
credit. There are also some allowed distributions, payments and dividends for
other specific events. Distributions, dividends or investments would also be
limited to 50% of consolidated net income under certain circumstances.

8. Notes Payable to Merrill Lynch, Bank of
America, et al and Revolving Credit Facility

On
November 18, 2005, EPL entered into senior secured credit facilities (the
Credit Facility) with Intermediate, as parent guarantor, Merrill Lynch
Capital Corporation, as administrative agent, the other agents identified
therein, Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated and Bank of America, N.A., as lead arrangers and book managers,
and a syndicate of financial institutions and institutional lenders. The Credit
Facility provides for a $104.5 million term loan and $25.0 million in revolving
availability. Of this senior secured revolving credit facility, EPL drew down
$14.5 million and issued $7.6 million of letters of credit to replace existing
letters of credit. Future principal payments under the term loan at June 30,
2007 are as follows (in thousands).

12

---



|                               |  |   |         | 
|------------------------------ |  | - | ------- | 
|Year Ending December 31        |  |   |         | 
|2007(July 1st  December 31st) |  | $ | 518     | 
|2008                           |  |   | 1,035   | 
|2009                           |  |   | 1,035   | 
|2010                           |  |   | 1,035   | 
|2011                           |  |   | 1,035   | 
|Thereafter                     |  |   | 97,313  | 
|                               |  |   |         | 
|                               |  |   |         | 
|                               |  | $ | 101,971 | 
|                               |  |   |         | 

The
Credit Facility bears interest, payable quarterly, at a Base Rate or LIBOR, at
EPLs option, plus an applicable margin. The applicable margin is based on
EPLs financial performance, as defined. The applicable margin rate was 3.00%
with respect to LIBOR and 2.00% with respect to Base Rate advances and
thereafter ranges from: 2.75% to 2.25% with respect to LIBOR advances and 1.75%
to 1.25% with respect to Base Rate advances. The effective rate at December 27,
2006 and June 30, 2007 was 8.37% and 7.86%, respectively. In March 2007 the
Company amended the credit facility to reduce the interest rate by 0.50% and to
modify in the Companys favor the terms of certain restrictive covenants. The
Credit Facility is secured by a first-priority pledge by Holdings of all of the
outstanding stock of the Company, a first priority pledge by the Company of all
of EPLs outstanding stock and a first priority security interest in
substantially all of EPLs tangible and intangible assets. In addition, the
Credit Facility is guaranteed by the Company and Holdings. The Credit Facility
matures on November 18, 2011. As of June 30, 2007, EPL was in compliance with
all of the financial covenants contained in its senior credit facility and has
$5.4 million available for borrowings under the revolving line of credit.

9. PIK Notes (2014 Notes)

At
December 27, 2006 and June 30, 2007, the Company had $26.3 million and $28.2
million, respectively, outstanding in aggregate principal amount of the 2014
Notes. No cash interest will accrue on the 2014 Notes prior to November 15,
2009. Instead, the principal value of the 2014 Notes will increase (representing
accretion of original issue discount) from the date of original issuance until
but not including November 15, 2009 at a rate of 14 1/2% per annum compounded
annually, so that the accreted value of the 2014 Notes on November 15, 2009
will be equal to the full principal amount of $39.3 million at maturity.
Beginning on November 15, 2009, cash interest will accrue on the 2014 Notes at
an annual rate of 14 1/2% per annum payable semi-annually in arrears on May 15
and November 15 of each year, beginning May 15, 2010. Principal is due on
November 15, 2014. The indenture restricts the ability of Intermediate and its
subsidiaries to incur additional indebtedness, sell assets, engage in
transactions with affiliates, and issue or sell preferred stock, among other
items. The indenture also limits the ability of EPL or other subsidiaries to
make dividend or other payments to Intermediate and for Intermediate to make
payments to Holdings (see Note 7).

The
2014 Notes are effectively subordinated to all existing and future indebtedness
and other liabilities of the Companys subsidiaries. The 2014 Notes are
unsecured and are not guaranteed. If any of the 2014 Notes are outstanding at
May 15, 2011, the Company is required to redeem for cash a portion of each note
then outstanding at 104.5% of the accreted value of such portion of such note,
plus accrued and unpaid interest. Additionally, the Company may, at its
discretion, redeem any or all of the 2014 Notes, subject to certain provisions.

In
October 2006, Intermediate completed the exchange of the 2014 Notes for
registered, publicly tradable notes that have substantially identical terms as
the 2014 Notes. Intermediate incurred direct costs in connection with its
registration of the 2014 Notes. These costs have been capitalized and are
included in other assets in the accompanying balance sheets.

10. Income Taxes

The
Companys taxable income or loss is included in the consolidated federal and
state income tax returns of Holdings. The Company records its provision for
income taxes based on its separate stand-alone operating results using the
asset and liability method. The Company recorded a provision for income taxes
of $0.8 million and $0.1 million for the 13-week periods ended June 30, 2006
and 2007, respectively. The effective tax rates for the 13 weeks ended June 30,
2006 and June

13

---



30, 2007, were
38.9% and 6.6%, respectively. The Company recorded a provision for income taxes
of $0.8 million and $0.3 million for the 26-week periods ended June 30, 2006
and 2007, respectively. The effective tax rates for the 26 weeks ended June 30,
2006 and 2007, were 38.9% and 17.3%, respectively. The 2007 periods effective
tax rate was impacted by an adjustment to recognize an interest deduction
related to the EPL Intermediate Discount Notes in the amount of $0.5 million
that we determined not to be subject to Applicable High Yield Discount
Obligation (AHYDO) rules in Section 163(i) of the Internal Revenue Code.

On
January 1, 2007, the Company adopted Financial Accounting Standards Board
Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48).
FIN 48 prescribes a comprehensive model of how a company should recognize,
measure, present, and disclose in its financial statements uncertain tax
positions that the company has taken or expects to take on a tax return. FIN 48
states that a tax benefit from an uncertain position may be recognized if it is
more likely than not that the position is sustainable, based upon its technical
merits. The tax benefit of a qualifying position is the largest amount of tax
benefit that is greater than 50 percent likely of being realized upon ultimate
settlement with a taxing authority having full knowledge of all relevant
information.

At
the adoption date, the Company reviewed all uncertain tax positions for all
years open to statute. The years open to statute are Calendar years 2002
through 2006. The Company has determined that there is no cumulative adjustment
for uncertain tax positions required as of January 1, 2007. There has been no
change in the FIN 48 reserve for uncertain tax positions from January 1, 2007
through June 30, 2007. The Company believes that any uncertain tax positions
are insignificant and therefore have no material impact to the Companys
consolidated financial statements. The Company estimates that the unrecognized
tax benefit as of June 30, 2007 will not change significantly within the next
twelve months. The Company will continue to classify income tax penalties and
interest as part of the provision for income taxes in its Consolidated
Statements of Income. The Company has not recorded accrued interest and
penalties on uncertain tax positions as of June 30, 2007. The Companys
liability for uncertain tax positions is reviewed periodically and is adjusted
as events occur that affect the estimated liability for additional taxes, such
as the lapsing of applicable statutes of limitations, the conclusion of tax
audits, the measurement of additional estimated liabilities based on current
calculations, the identification of new uncertain tax positions, the release of
administrative tax guidance affecting the Companys estimates of tax
liabilities, or the rendering of court decisions affecting its estimates of tax
liabilities.

11. New Accounting Pronouncements

In
September 2006, the Financial Accounting Standards Board (the FASB) issued
SFAS No. 157, Fair Value Measurements (SFAS 157). This new standard
provides guidance for using fair value to measure assets and liabilities and
information about the extent to which companies measure assets and liabilities
at fair value, the information used to measure fair value, and the effect of
fair value measurements on earnings. This framework is intended to provide
increased consistency in how fair value determinations are made under various
existing accounting standards which permit, or in some cases require, estimates
of fair market value. SFAS 157 also expands financial statement disclosure
requirements about a companys use of fair value measurements, including the
effect of such measures on earnings. The provisions of SFAS 157 are effective
for financial statements issued for fiscal years beginning after November 15,
2007. The Company is currently evaluating the impact, if any, that SFAS 157
will have on its consolidated financial position, results of operations and
cash flows.

In
June 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty
in Income (FIN 48). FIN 48 prescribes a recognition threshold and
measurement attribute for the financial statement recognition and measurement
of a tax position taken or expected to be taken in the Companys tax return.
FIN 48 also provides guidance on derecognition, classification, interest and
penalties, accounting in interim periods and disclosure requirements for
uncertain tax positions. FIN 48 is effective for fiscal years ending after
December 15, 2006. The Company determined that the adoption of FIN 48 did not
have a significant impact on its financial position or results of operations
(see Note 10).

In
February 2007, FASB issued Financial Accounting Standards No. 159, The Fair Value Option for Financial Assets and
Financial LiabilitiesIncluding an amendment of FASB Statement No. 115.This
Statement permits entities to choose to measure many financial instruments and
certain other items at fair value. The objective is to improve financial
reporting by providing entities with the opportunity to mitigate volatility in
reported earnings caused by measuring related assets and liabilities
differently without having to apply complex hedge accounting provisions. This
Statement is expected to expand the use of fair value measurement, which is
consistent with the Boards long-term measurement objectives for accounting for
financial instruments. SFAS 159 is effective as of the beginning of an entitys
first fiscal year that begins after

14

---



November 15,
2007. The Company is currently evaluating the impact, if any, that SFAS 159
will have on its consolidated financial position, results of operations and
cash flows.

12. Events Subsequent to the End of the
Second Fiscal Quarter

We
borrowed $14.5 million under our revolving credit facility in the current
period, $8.5 million of which was used to purchase three restaurants in Las
Vegas from a franchisee on June 29, 2007.

See
Note 5 for recent developments in material litigation.

Item 2. Managements Discussion and Analysis
of Financial Condition and Results of Operations

You
should read the following discussion together with our unaudited condensed
consolidated financial statements and related notes thereto included elsewhere
in this filing.

Certain
statements contained within this report constitute forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements are those that do not relate solely to historical
fact. They include, but are not limited to, any statement that may predict,
forecast, indicate or imply future results, performance, achievements or
events. They may contain words such as believe, anticipate, expect,
estimate, intend, project, plan, will, should,
may, could or
words or phrases of similar meaning.

These
forward-looking statements reflect our current views with respect to future
events and are based on assumptions and are subject to risks and uncertainties.
Also, these forward-looking statements present our estimates and assumptions
only as of the date of this report. Except for our ongoing obligation to
disclose material information as required by federal securities laws, we do not
intend to update you concerning any future revisions to any forward-looking
statements to reflect events or circumstances occurring after the date of this
report.

Factors
that could cause actual results to differ materially from those expressed or
implied by the forward-looking statements include concerns about food-borne
illnesses; negative publicity, whether or not valid; adverse public perception
due to the occurrence of avian flu; increases in the cost of chicken; an
ultimate adverse ruling in litigation involving trademark rights in Mexico, which
could result in the imposition of significant monetary damages and the loss of
such rights; our dependence upon frequent deliveries of food and other
supplies; our sensitivity to events and conditions in the greater Los Angeles
area; our ability to open new restaurants in new and existing markets; our
reliance in part on our franchisees; our vulnerability to changes in consumer
preferences and economic conditions; our ability to compete successfully with other
quick service and fast casual restaurants; our ability to service our
indebtedness; matters relating to employment and labor laws, labor shortages or
increases in labor costs; our ability to renew leases at the end of their
terms; the impact of federal, state or local government regulations relating to
the preparation and sale of food, zoning and building codes, and employee,
environmental and other matters; and our ability to protect our name and logo
and other proprietary information. Actual results may differ materially due to
these risks and uncertainties and those described in our Annual Report on Form
10-K (File No. 333-115644) as filed with the Securities and Exchange Commission
on March 23, 2007.

We
use a 52-, 53-week fiscal year ending on the last Wednesday of the calendar
year. For simplicity of presentation, we have described the periods ended June
28, 2006 and June 27, 2007 as June 30, 2006 and 2007, respectively. In a
52-week fiscal year, each quarter includes 13 weeks of operations; in a 53-week
fiscal year, the first, second and third quarters each include 13 weeks of
operations and the fourth quarter includes 14 weeks of operations. Fiscal year
2006, which ended December 27, 2006, and fiscal year 2007, which ends December
26, 2007, are both 52-week fiscal years. References to our restaurant system
mean both company-operated and franchised restaurants. Unless otherwise
indicated, references to our restaurants or results or statistics
attributable to one or more restaurants without expressly identifying them as
company-operated, franchise or the entire restaurant system mean our
company-operated restaurants only.

15

---



Overview

EPL
Intermediate, Inc. (Intermediate) through its wholly-owned subsidiary El
Pollo Loco, Inc. (EPL and collectively with Intermediate, the Company,
we, us and our) owns, operates and franchises restaurants specializing in
marinated flame-grilled chicken. As of June 30, 2007, our restaurant system had
370 restaurants, consisting of 156 company-operated and 214 franchised
locations, located principally in California, with additional restaurants in
Arizona, Nevada, Texas, Illinois, Colorado and Connecticut. Our typical
restaurant is a freestanding building ranging from approximately 2,200 to 2,600
square feet with seating for approximately 60 customers and offering drive-thru
convenience.

Our
revenue is derived from two primary sources, company-operated restaurant
revenue and franchise revenue, the latter of which is comprised principally of
franchise royalties and to a lesser extent franchise fees and sublease rental
income. A common measure of financial performance in the restaurant industry is
same-store sales. A restaurant enters the comparable restaurant base for the
calculation of same-store sales the first full week after the 15-month
anniversary of its opening. For the 13 weeks and 26 weeks ended June 30, 2007,
same-store sales for restaurants systemwide increased 2.9% over the 13 weeks and 26 weeks
ended June 30, 2006. System-wide same-store sales include same-store sales at
all company-owned stores and franchise-owned stores, as reported by
franchisees. We use system-wide sales information in connection with store
development decisions, planning and budgeting analyses. This information is
useful in assessing consumer acceptance of our brand and facilitates an
understanding of financial performance as our franchisees pay royalties
(included in franchise revenues) and contribute to advertising pools based on a
percentage of their sales.

Increases
in company-operated restaurant revenue are due to growth in new
company-operated restaurants and to increases in same store sales, which may
include price and transaction volume increases. We implemented a menu price
increase in January 2007. We plan to open seven to ten company-operated
restaurants per year over the next few years, which is slightly higher than our
company-operated restaurant growth over the last few years. Many factors can
influence sales at all or specific restaurants, including increased
competition, strength of marketing promotions, the restaurant managers
operational execution and changes in local market conditions and demographics.

Franchise
revenue consists of royalties, initial franchise fees and franchise rental
income. Royalties average 4% of the franchisees net sales. Our franchisees
opened 17 new restaurants in fiscal 2006 and we believe they will open
approximately 20 new restaurants in fiscal 2007 and up to 40 new restaurants in fiscal 2008. Six new franchise restaurants
have opened in the first six months of fiscal 2007. We believe that new
franchise restaurant growth will increase as we sign development agreements
with experienced franchisees in new and existing markets. As of July 18, 2007,
we are legally authorized to market franchises in 50 states and we are pursuing
opportunities in a number those states. We have entered into development
agreements that have resulted in area development fees being recognized as the
related restaurants open. We sublease facilities to certain franchisees and the
sublease rent is included in our franchise revenue. This revenue exceeds rent
payments made under the leases that are included in franchise expense. Since we
do not expect to lease or sublease new properties to our franchisees as we
expand our franchise restaurants, we expect the portion of franchise revenue
attributable to franchise rental income to decrease over time.

Product
cost, which includes food and paper costs, is our largest single expense. It is
subject to increase or decrease based on commodity cost changes and depends in
part on the success of controls we have in place to manage product cost in the
restaurants. Effective March 2007, we renewed two chicken contracts with terms
ranging from one to two years at higher prices than the expiring contracts. One
of these contracts provides a floor and ceiling price for the chicken we buy
from the supplier. We implemented menu price increases of approximately 2% in
January 2007 that have partially mitigated the impact of higher chicken prices
on our profitability.

Payroll
and benefits make up the next largest single expense. Payroll and benefits have
been and remain subject to inflation, including salaries due to minimum wage
increases and expenses for health insurance and workers compensation
insurance. A significant number of our hourly staff are paid at rates
consistent with the applicable federal or state minimum wage and, accordingly,
increases in the minimum wage will increase our labor cost. On September 12,
2006, the state of California passed legislation increasing the minimum wage in
the state from $6.75 per hour to $7.50 per hour effective January 1, 2007.
Additionally on January 1, 2008, the minimum wage in California will go up to
$8.00 per hour. The Company implemented a menu price increase of approximately
2% at the beginning of fiscal 2007 in order to partially mitigate the impact on
profits of the minimum wage increase. Legislation was also passed raising the
federal minimum wage from $5.15 to $5.85 effective July 24, 2007 although the
impact to the Company on the increase in the federal wage rate is nominal due
to the relatively small number of Company stores outside of California.
Workers compensation insurance costs are subject to a number of factors, and
although we have seen a reduction in the number of workers

16

---



compensation
claims due to employee safety initiatives that we began implementing in fiscal
2002, we cannot predict whether this trend will continue and what the impact to
our workers compensation expense will be.

Depreciation
and amortization expense changed subsequent to our acquisition by CAC, which we
refer to as the Acquisition, a result of fair values assigned to assets
acquired and liabilities assumed at the date of the Acquisition as determined
by management with the assistance of an independent valuation company

Other
operating expenses include restaurant other operating expense, franchise
expense, and general and administrative expense.

Restaurant
other operating expense includes occupancy, advertising and other costs such as
utilities, repair and maintenance, janitorial and cleaning and operating
supplies. Occupancy expense increased subsequent to the Acquisition as a result
of the revaluation of the fair market value of leases assumed in the
Acquisition and the reduction in the annual amortization of the unfavorable
leasehold interest liability.

Franchise
expense consists primarily of rent expense that we pay to landlords associated
with leases under restaurants we are subleasing to franchisees. Franchise
expense usually fluctuates primarily as subleases expire and is to some degree
based on rents that are tied to a percentage of sales calculation. Because we
do not expect to lease or sublease new properties to our franchisees as we
expand our franchise restaurants, we expect franchise expense as a percentage
of franchise revenue to decrease over time. Expansion of our franchise
operations does not require us to incur material additional capital
expenditures.

General
and administrative expense includes all corporate and administrative functions
that support existing operations and provide the infrastructure to facilitate
our growth. These expenses have been impacted by rating agency fees, directors
and officers insurance, compliance with laws relating to corporate governance
and public disclosure, and audit fees. In addition, general and administrative
expense includes costs associated with disclosure controls and procedures and
implementing the level of internal controls required for a company with
registered securities.

Results of Operations

Our
operating results for the 13 weeks ended June 30, 2006 and 2007 are expressed
as a percentage of restaurant revenue below:

|                                     |  |                          |  |       |   |  |  |  |       |   | 
|------------------------------------ |  | ------------------------ |  | ----- | - |  |  |  | ----- | - | 
|                                     |  | 13 Weeks Ended
 June 30, | 
|                                     |  |                          | 
|                                     |  | 2006                     |  | 2007  |  
|                                     |  |                          |  |       |  
|                                    
|Income Statement Data:               |  |                          |  |       |   |  | 
|Restaurant revenue                   |  |                          |  | 100.0 | % |  |  |  | 100.0 | % | 
|Product cost                         |  |                          |  | 30.9  |   |  |  |  | 31.0  |   | 
|Payroll and benefits                 |  |                          |  | 25.7  |   |  |  |  | 26.1  |   | 
|Depreciation and amortization        |  |                          |  | 4.1   |   |  |  |  | 4.5   |   | 
|Other operating expenses             |  |                          |  | 31.3  |   |  |  |  | 32.5  |   | 
|Operating income                     |  |                          |  | 14.8  |   |  |  |  | 13.3  |   | 
|Interest expense                     |  |                          |  | 11.5  |   |  |  |  | 11.0  |   | 
|Income before income taxes           |  |                          |  | 3.3   |   |  |  |  | 2.2   |   | 
|Net income                           |  |                          |  | 2.0   |   |  |  |  | 2.1   |   | 
|Supplementary Income Statement Data: |  |                          |  |       |   |  |  |  |       |   | 
|Restaurant other operating expense   |  |                          |  | 19.6  |   |  |  |  | 21.5  |   | 
|Franchise expense                    |  |                          |  | 1.4   |   |  |  |  | 1.3   |   | 
|General and administrative expense   |  |                          |  | 10.3  |   |  |  |  | 9.7   |   | 
|Total other operating expenses       |  |                          |  | 31.3  |   |  |  |  | 32.5  |   | 

17

---



13 Weeks Ended June
30, 2007 Compared to 13 Weeks Ended June 30, 2006

Restaurant
revenue increased $3.3 million, or 5.3%, to $65.0 million for the 13 weeks
ended June 30, 2007 from $61.7 million for the 13 weeks ended June 30, 2006.
This increase was partially due to an additional $1.1 million in restaurant revenue
resulting from a 1.8% increase in company-operated same-store sales for the
2007 period from the 2006 period. The
positive impact from a price increase taken at the beginning of the year and an
increase in average check more than compensated for a transaction decline in
the second quarter. Restaurants enter the comparable restaurant base for
same-store sales the first full week after that restaurants 15-month
anniversary. The increase in restaurant revenue was also due in part to $1.8
million from nine restaurants opened in fiscal 2006 and $1.1 million from five
restaurants opened in fiscal 2007 partially offset by lost sales of $0.7
million due to the temporary closure of a restaurant due to a fire in 2007.

Franchise
revenue increased $0.5 million, or 13.2%, to $4.7 million for the 13 weeks
ended June 30, 2007 from $4.2 million for the 13 weeks ended June 30, 2006.
This increase is due to an increase in royalties resulting from a 3.8% increase
in franchise same-store sales.

Product
cost increased $1.1 million, or 5.7%, to $20.1 million for the 13 weeks ended
June 30, 2007 from $19.0 million for the 13 weeks ended June 30, 2006
reflecting increased restaurant revenue and chicken costs. These costs as a
percentage of restaurant revenue remained relatively flat at 31.0% for the 2007
period compared to 30.9% for the 2006 period.

Payroll
and benefit expenses increased $1.0 million, or 6.7%, to $16.9 million for the
13 weeks ended June 30, 2007 from $15.9 million for the 13 weeks ended June 30,
2006. As a percentage of restaurant revenue, these costs increased 0.4% to
26.1% in 2007 from 25.7% for the 2006 period. This increase is primarily
attributed to increased spending on manager training, the increase in minimum
wage and increased workers compensation expense in the current period.

Depreciation
and amortization increased $0.4 million, or 15.8%, to $2.9 million for the 13
weeks ended June 30, 2007 compared to $2.5 million for the 13 weeks ended June
30, 2006. These costs as a percentage of restaurant revenue increased 0.4% to
4.5% in 2007 from 4.1% for the 2006 period. The increase in depreciation
expense as a percentage of restaurant revenue is due to capital expenditures on
existing restaurants for remodels and equipment upgrades.

Other
operating expenses include restaurant other operating expense, franchise
expense, and general and administrative expense.

Restaurant
other operating expense, which includes utilities, repair and maintenance, advertising,
property taxes, occupancy and other operating expenses, increased $1.9 million,
or 15.5%, to $14.0 million for the 13 weeks ended June 30, 2007 from $12.1
million for the 13 weeks ended June 30, 2006. These costs as a percentage of
restaurant revenue increased to 21.5% for the 2007 period from 19.6% for the
2006 period. The increase in operating costs was due in part to a 1.2% increase
in advertising expense as a percentage of revenue. Advertising expense each
quarter may be above or below our planned annual rate of approximately 4%,
depending on the timing of marketing promotion and the relative weights and
price of media spending. The increase in operating costs was also due to a 0.3%
increase in occupancy costs as a percentage of revenue, which was a result of
the reduction in the annual amortization of the unfavorable leasehold interest
liability and higher rent expense. The increase in operating costs was also due
to a 0.4% increase in preopening expense as a percentage of revenue, which can fluctuate
depending on the timing of the opening of the company restaurants during the
year.

Franchise
expense consists primarily of rent expense that we pay to landlords associated
with leases under restaurants we are subleasing to franchisees. This expense
usually fluctuates primarily as subleases expire and to some degree based on
rents that are tied to a percentage of sales calculation. Franchise expense
decreased $0.1 million to $0.8 million the 13-week period ended June 30, 2007
from $0.9 million for the 2006 period.

General
and administrative expense remained flat at $6.3 million for the 13 weeks ended
June 30, 2007 and June 30, 2006. General and administrative expense as a
percentage of revenue decreased 0.6% to 9.7% for the 13 weeks ended June 30,
2007 from 10.3% for the 13 weeks ended June 30, 2006. There were increases in
salaries and wages of $0.4 million,

18

---



primarily
attributed to increased bonus expense, partially offset by a decrease in
outside services expense of $0.2 million and a decrease in expenses of $0.1
million due to a closed store reserve adjustment in the 2006 period that did
not recur in the 2007 period.

Interest
expense, net of interest income, increased $0.1 million, or 1.1%, to $7.2
million for the 13 weeks ended June 30, 2007 from $7.1 million for the 13 weeks
ended June 30, 2006. Our average debt balances for the 2007 period increased to
$265.1 million compared to $258.0 million for the 2006 period and our average
interest rate increased to 10.52% for the 2007 period compared to 10.45% for
the 2006 period.

Our
provision for income taxes consisted of income tax expense of $0.1 million and
$0.8 million for the 13-week periods ended June 30, 2007 and 2006,
respectively, for an effective tax rate of 6.6% for 2007 and 38.9% for 2006.
The 2007 periods effective tax rate was impacted by an adjustment to recognize
an interest deduction related to the EPL Intermediate Discount Notes in the amount
of $0.5 million that we determined not to be subject to Applicable High Yield
Discount Obligation (AHYDO) rules in Section 163(i) of the Internal Revenue
Code.

As
a result of the factors above, net income was $1.4 million for the 13 weeks
ended June 30, 2007 compared with $1.2 million for the 13 weeks ended June 30,
2006, or 2.1% and 2.0% as a percentage or restaurant revenue, for the 13 weeks
ended June 30, 2007 and 2006, respectively.

26 Weeks Ended June
30, 2007 Compared to 26 Weeks Ended June 30, 2006

Our
operating results for the 26 weeks ended June 30, 2006 and 2007 are expressed
as a percentage of restaurant revenue below:

|                                     |  |                          |  |       |   |  |  |  |       |   | 
|------------------------------------ |  | ------------------------ |  | ----- | - |  |  |  | ----- | - | 
|                                     |  | 26 Weeks Ended
 June 30, | 
|                                     |  |                          | 
|                                     |  | 2006                     |  | 2007  |  
|                                     |  |                          |  |       |  
|                                    
|Income Statement Data:               |  |                          |  |       |   |  | 
|Restaurant revenue                   |  |                          |  | 100.0 | % |  |  |  | 100.0 | % | 
|Product cost                         |  |                          |  | 31.5  |   |  |  |  | 30.9  |   | 
|Payroll and benefits                 |  |                          |  | 25.5  |   |  |  |  | 26.1  |   | 
|Depreciation and amortization        |  |                          |  | 4.0   |   |  |  |  | 4.5   |   | 
|Other operating expenses             |  |                          |  | 32.3  |   |  |  |  | 32.8  |   | 
|Operating income                     |  |                          |  | 13.5  |   |  |  |  | 12.9  |   | 
|Interest expense                     |  |                          |  | 11.8  |   |  |  |  | 11.4  |   | 
|Income before income taxes           |  |                          |  | 1.7   |   |  |  |  | 1.5   |   | 
|Net income                           |  |                          |  | 1.0   |   |  |  |  | 1.2   |   | 
|Supplementary Income Statement Data: |  |                          |  |       |   |  |  |  |       |   | 
|Restaurant other operating expense   |  |                          |  | 20.3  |   |  |  |  | 21.3  |   | 
|Franchise expense                    |  |                          |  | 1.5   |   |  |  |  | 1.4   |   | 
|General and administrative expense   |  |                          |  | 10.5  |   |  |  |  | 10.1  |   | 
|Total other operating expenses       |  |                          |  | 32.3  |   |  |  |  | 32.8  |   | 

Restaurant
revenue increased $6.6 million, or 5.5%, to $127.4 million for the 26 weeks
ended June 30, 2007 from $120.8 million for the 26 weeks ended June 30, 2006.
This increase was partially due to an additional $1.9 million in restaurant
revenue resulting from a 1.6% increase in company-operated same-store sales for
the 2007 period from the 2006 period. The positive impact from a price increase
taken at the beginning of the year and an increase in average check more than
compensated for a transaction decline in the second quarter. Restaurants enter
the comparable restaurant base for same-store sales the first full week after
that restaurants 15-month anniversary. The increase in restaurant revenue was
also due in part to $4.5 million from twelve restaurants opened in fiscal 2005
and 2006 and $1.2 million from five restaurants

19

---



opened in
fiscal 2007 partially offset by lost sales of $1.0 million due to the temporary
closure of a restaurant due to a fire in 2007.

Franchise
revenue increased $0.9 million, or 11.0%, to $9.1 million for the 26 weeks
ended June 30, 2007 from $8.2 million for the 26 weeks ended June 30, 2006.
This increase is due to an increase in royalties resulting from a 3.9% increase
in franchise same-store sales.

Product
cost increased $1.3 million, or 3.5%, to $39.3 million for the 26 weeks ended
June 30, 2007 from $38.0 million for the 26 weeks ended June 30, 2006
reflecting increased restaurant revenue and chicken costs. These costs as a
percentage of restaurant revenue were 30.9% for the 2007 period compared to
31.5% for the 2006 period. The 0.6% decrease in product cost as a percentage of
restaurant revenue resulted primarily from the menu price increase taken in
January of 2007.

Payroll
and benefit expenses increased $2.5 million, or 7.8%, to $33.3 million for the
26 weeks ended June 30, 2007 from $30.8 million for the 26 weeks ended June 30,
2006. As a percentage of restaurant revenue, these costs increased 0.6% to
26.1% in 2007 from 25.5% for the 2006 period. This increase is primarily
attributed to increased spending on manager training, the increase in minimum
wage and increased workers compensation expense in the current period.

Depreciation
and amortization increased $0.8 million, or 16.7%, to $5.7 million for the 26
weeks ended June 30, 2007 compared to $4.9 million for the 26 weeks ended June
30, 2006. These costs as a percentage of restaurant revenue increased 0.5% to
4.5% in 2007 from 4.0% for the 2006 period. The increase in depreciation
expense as a percentage of restaurant revenue is due to capital expenditures on
existing restaurants for remodels and equipment upgrades.

Other
operating expenses include restaurant other operating expense, franchise
expense, and general and administrative expense.

Restaurant
other operating expense, which includes utilities, repair and maintenance,
advertising, property taxes, occupancy and other operating expenses, increased
$2.7 million, or 10.9%, to $27.2 million for the 26 weeks ended June 30, 2007
from $24.5 million for the 26 weeks ended June 30, 2006. These costs as a
percentage of restaurant revenue increased to 21.4% for the 2007 period
compared to 20.3% for the 2006 period. The increase in operating costs was due
in part to a 0.6% increase in advertising expense as a percentage of revenue.
Advertising expense each quarter may be above or below our planned annual rate
of approximately 4%, depending on the timing of marketing promotion and the
relative weights and price of media spending. The increase in operating costs
was also due to a 0.4% increase in occupancy costs as a percentage of revenue,
which was a result of the reduction in the annual amortization of the
unfavorable leasehold interest liability and higher rent expense. The increase
in operating costs was also due to a 0.1% increase in preopening expense as a
percentage of revenue, which can fluctuate depending on the timing of the
opening of the company restaurants during the year.

Franchise
expense consists primarily of rent expense that we pay to landlords associated
with leases under restaurants we are subleasing to franchisees. This expense
usually fluctuates primarily as subleases expire and to some degree based on
rents that are tied to a percentage of sales calculation. Franchise expense
remained flat at $1.8 million both 26-week periods ended June 30, 2007 and
2006.

General
and administrative expense increased $0.1 million, or 0.7%, to $12.8 million
for the 26 weeks ended June 30, 2007 from $12.7 million for the 26 weeks ended
June 30, 2006. General and administrative expense as a percentage of revenue
decreased 0.4% to 10.1% for the 2007 period from 10.5% for the 2006 period. The
increase in general and administrative expense was attributed to increased
salaries and wages of $0.6 million, primarily attributed to increased bonus
expense and increased expense related to stock options of $0.2 million,
partially offset by a decrease in outside services expense of $0.3 million, a
gain on the sale of assets in the 2007 period that did not recur in the 2006
period of $0.3 million, and a decrease in expenses of $0.1 million due to a
closed store reserve adjustment in the 2006 period that did not recur in the
2007 period.

Interest
expense, net of interest income, increased $0.3 million, or 2.0%, to $14.5
million for the 26 weeks ended June 30, 2007 from $14.2 million for the 26
weeks ended June 30, 2006. Our average debt balances for the 2007 period
increased to $266.5 million compared to $259.2 million for the 2006 period and
our average interest rate increased to 10.63% for the 2007 period compared to
10.45% for the 2006 period.

20

---



Our
provision for income taxes consisted of income tax expense of $0.3 million and
$0.8 million for the 26-week periods ended June 30, 2007 and 2006,
respectively, for an effective tax rate of 17.3% for 2007 and 38.9% for 2006.
The 2007 periods effective tax rate was impacted by an adjustment to recognize
an interest deduction related to the EPL Intermediate Discount Notes in the amount
of $0.5 million that we determined not to be subject to Applicable High Yield
Discount Obligation (AHYDO) rules in Section 163(i) of the Internal Revenue
Code.

As
a result of the factors above, net income was $1.6 million for the 26 weeks
ended June 30, 2007 compared with $1.3 million for the 26 weeks ended June 30,
2006, or 1.2% and 1.0% as a percentage or restaurant revenue, for the 26 weeks
ended June 30, 2007 and 2006, respectively.

Liquidity and Capital Resources

Our
principal liquidity requirements are to service our debt and meet our capital
expenditure needs. Our indebtedness at June 30, 2007 was $270.8 million. Our
ability to make payments on and to refinance our indebtedness, and to fund
planned capital expenditures will depend on our ability to generate cash in the
future, which, to a certain extent, is subject to general economic, financial,
competitive, legislative, regulatory and other factors that are beyond our
control. Based on our current level of operations, we believe our cash flow
from operations, available cash and available borrowings under the $25.0
million revolving portion of EPLs senior credit facility will be adequate to
meet our future liquidity needs for the next twelve months.

In
the 2007 six-month period, our capital expenditures totaled $8.5 million,
consisting of $6.9 million for new restaurants, $0.9 million for capitalized
repairs of existing sites, and $0.7 million for miscellaneous capital projects.

Cash
and cash equivalents increased $9.5 million from $3.0 million at December 27,
2006 to $12.5 million at June 30, 2007. In the first six months of fiscal 2007,
we made $1.2 million in principal repayments on EPLs loan, $5.5 million
in payments to pay off borrowings under our revolving credit facility and $12.9
million in interest payments. The interest payments related primarily to the
term loan. We also borrowed $14.5 million under our revolving credit facility,
$8.5 million of which was used to purchase three restaurants in Las Vegas from
a franchisee on June 29, 2007. We cannot assure you that
our business will generate sufficient cash flow from operations or that future
borrowings will be available to EPL under EPLs senior secured credit
facilities in an amount sufficient to enable us to service our indebtedness or
to fund our other liquidity needs. If we acquire additional restaurants from
franchisees, our debt service requirements could increase. In addition, we may
fund restaurant openings through credit received by trade suppliers and
landlord contributions. If our cash flow from operations is inadequate to meet
our obligations under our indebtedness we may need to refinance all or a
portion of our indebtedness, including the notes, on or before maturity. We
cannot assure you that we will be able to refinance any of our indebtedness on
commercially reasonable terms or at all.

As
a holding company, the stock of EPL constitutes our only material asset.
Consequently, EPL conducts all of our consolidated operations and owns
substantially all of our consolidated operating assets. Our principal source of
the cash required to pay our obligations is the cash that EPL generates from
its operations. EPL is a separate and distinct legal entity, has no obligation
to make funds available to us and currently has restrictions that limit
distributions or dividends to be paid by EPL to us. Furthermore, subject to
certain restrictions, EPL is permitted under the terms of EPLs senior secured
credit facilities and the indenture governing the 2013 Notes and 2014 Notes to
incur additional indebtedness that may severely restrict or prohibit the making
of distributions, the payment of dividends or the making of loans by EPL.

Working Capital and
Cash Flows

We
presently have, in the past have had, and may have in the future, negative
working capital balances. The working capital deficit principally is the result
of our investment to build new restaurants, remodel and replace or improve
equipment in company-operated restaurants, and to acquire new restaurant
information systems. We do not have significant receivables or inventories and
we receive trade credit based upon negotiated terms in purchasing food and
supplies. Funds available from cash sales and franchise revenue not needed
immediately to pay for food and supplies or to finance receivables or
inventories typically have been used for the capital expenditures referenced
above and/or debt service payments under our existing indebtedness. As
discussed above, we spent cash on a number of items directly or indirectly

21

---



related to our
debt financings and the Acquisition of the Company by CAC. We expect our
negative working capital balances to continue to increase, based on the
continuing growth of our business.

Operating Activities.We had net cash
provided by operating activities of $11.1 million for the 26 weeks ended June
30, 2007 compared with $9.9 million for the 26 weeks ended June 30, 2006. The
increase in cash provided by operating activities was related to increased
accounts payable balances and increases in accrued salaries and vacation
balances partially offset by changes in the income taxes payable and other
accrued expenses balances.

Investing Activities.We had net cash used
in investing activities of $7.9 million for the 26 weeks ended June 30, 2007
compared with $6.7 million for the 26 weeks ended June 30, 2006. The increase
in cash used in investing activities of $1.2 million was related to $3.8
million in increased expenditures, primarily for new store construction
partially offset by $0.6 million in proceeds received for asset dispositions
and a decrease in spending of $2.0 million for acquisition costs.

Financing Activities.We had net cash provided
by financing activities of $6.4 million for the 26 weeks ended June 30, 2007
compared with net cash used in financing activities of $5.1 million for the 26
weeks ended June 30, 2006. The increase of $11.5 million in cash provided by
financing activities in the 2007 period was primarily attributable to the draw
down of our revolving credit facility of $14.5 million and a decrease in
deferred financing costs of $1.0 million partially offset by increased payments
on debt of $3.9 million due to increased borrowings on our revolver that were
paid in the current period and also due to a 2006 principal payment that was
made in the current period.

Debt and Other
Obligations

On
November 18, 2005, EPL entered into senior secured credit facilities with
Intermediate, as parent guarantor, Merrill Lynch Capital Corporation, as administrative
agent, the other agents identified therein, Merrill Lynch & Co., Merrill
Lynch, Pierce, Fenner & Smith Incorporated and Bank of America, N.A., as
lead arrangers and book managers, and a syndicate of financial institutions and
institutional lenders. The senior secured credit facilities provide for an
$104.5 million term loan and $25.0 million in revolving availability. As of
June 30, 2007, EPL was in compliance with all of the financial covenants
contained in its senior credit facility. In March 2007 we amended the credit
facility to reduce the interest rate and to modify in our favor the terms of
certain restrictive covenants.

We
have certain land and building leases for which the building portion is treated
as a capital lease. These assets are amortized over the life of the respective
lease.

At
June 30, 2007, we had $28,227,000 outstanding in aggregate principal amount of
141⁄2% senior discount Notes due 2014. No cash interest will accrue on the 2014
Notes prior to November 15, 2009. Instead, the principal value of the 2014
Notes will increase (representing accretion of original issue discount) from
the date of original issuance until but not including November 15, 2009 at a
rate of 14 1⁄2%per annum
compounded annually, so that the accreted value of the 2014 Notes on November
15, 2009 will be equal to the full principal amount of $39,342,000 at maturity.
Beginning on November 15, 2009, cash interest will accrue on the 2014 Notes at
an annual rate of 14 1⁄2%per annum
payable semi-annually in arrears on May 15 and November 15 of each year,
beginning May 15, 2010. Principal is due on November 15, 2014 (see Note 9 to
our Consolidated Financial Statements).

At
June 30, 2007, we had $250,000 and $123,745,000 outstanding in aggregate
principal amount under our 2009 Notes and 2013 Notes, respectively (see Notes 6
and 7 to our Consolidated Financial Statements).

At
June 30, 2007, we had outstanding letters of credit totaling $7.6 million,
which served as collateral for our various workers compensation insurance
programs.

Franchisees
pay a monthly advertising fee of 4% of gross sales for the Los Angeles
designated market area or 5% of gross sales for other markets. Pursuant to our
Uniform Franchise Offering Circular, we contribute, where we have
company-operated restaurants, to the advertising fund on the same basis as
franchised restaurants. Under our franchise agreements, we are obligated to use
all advertising fees collected from franchisees to purchase, develop and engage
in advertising, public relations and marketing activities to promote the El
Pollo Loco® brand.

22

---



As
of June 30, 2007, EPL was in compliance with all of the financial covenants
contained in its senior credit facility. As of such date we calculated all
relevant ratios under its senior credit facility as follows:

| |   |                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------
| |  | EPLs fixed
 charge coverage ratio (as such term is defined in the senior credit
 agreement) was 1.09 to 1; and
| |   |                                                                                                                  
| |  | EPLs
 leverage ratio (as such term is defined in the senior credit agreement) was
 5.12 to 1.                 

These
two ratios were permitted to be no less than 1.00 to 1, and no greater than
5.75 to 1, respectively, as of such date.

In
addition, as of June 30, 2007, we calculated our fixed charge coverage ratio
and our consolidated leverage ratio (as such terms are defined in the
indenture governing the 2014 Notes) at 1.58 to 1 and 5.78 to 1, respectively.
Similar ratios exist in the indenture governing the 2013 Notes. The indenture
permits us to incur indebtedness that (a) is contractually subordinated to the
2014 Notes, (b) has a maturity date after November 15, 2014, and (c) does not
provide for payment of cash interest prior to November 15, 2014. The indenture
also permits our restricted subsidiaries (as such term is defined in the
indenture), including EPL, to incur indebtedness if our fixed charge coverage
ratio for the most recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the date on which such
indebtedness was incurred would have been at least 2.0 to 1, and, in the case
of indebtedness incurred by us, if our consolidated leverage ratio would have
been equal to or less than 7.5 to 1, all as determined on a pro forma basis
(including a pro forma application of the net proceeds therefrom), as if such
indebtedness had been incurred at the beginning of such four-quarter period.
Since EPL does not currently meet the fixed charge coverage ratio, EPL is not
permitted to incur additional indebtedness. This restriction does not apply to
borrowings available under the revolving line of credit.

Critical Accounting Policies and Estimates

The
preparation of our financial statements requires us to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. On an ongoing basis, we evaluate our estimates and judgments,
including those related to recoverability of fixed assets, intangible assets,
closed restaurants, workers compensation insurance and contingent liabilities.
We base our estimates and judgments on historical experience and on various
other factors that we believe to be reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying values
of assets and liabilities that are not readily apparent from other sources. Actual
results may differ from these estimates under different assumptions or
conditions. A summary of our critical accounting polices and estimates is
included in our Annual Report on Form 10-K (File No. 333-115644) as filed with
the Securities and Exchange Commission on March 23, 2007.

As
further described in Part II, Item 1, in 2004, EPL-Mexico filed suit alleging,
among other things, that the Company breached its agreement with EPL-Mexico by
failing to exploit the trademarks and develop new restaurants in Mexico. A jury
trial was held in July 2007 in federal district court in Laredo, Texas. On July
26, 2007, the jury returned a verdict finding damages for EPL-Mexico in the approximate amount of $22 million.

Before
a final judgment is rendered, the Court has requested that the parties file
post-trial motions, which were due August 9, 2007. The Company believes there
are inconsistencies in the jury verdict. Further, it is the Companys
contention that two key factual findings by the jury support our position. The
first is that plaintiff knew of the injuries it alleged in this case as early
as 1997 but did not file this lawsuit until 2004, which we assert was after the
statute of limitations expired. The second is that the value of the 1996
agreement was $1,087,500. The Company deposited that same amount into the
registry of the Court two years ago, representing the buyout price in the
contract. The Company is hopeful that
the trial judge will recognize the significance of these two key jury findings
and enter a final judgment in our favor. If the Courts judgment upholds the
jurys damages findings, the Company will appeal. The failure to prevail in
this action could result in the loss of the Companys ownership in Mexico of
the El Pollo Loco trademarks and intellectual property. This could negatively
affect our brand in the United States and elsewhere. In addition, a final
adverse judgment could result in the imposition of significant monetary
damages, which could have a material adverse impact on the Companys
consolidated financial position, results of operations or cash flows.

23

---



Pursuant
to Statement of Accounting Standards No. 5, Accounting for Contingencies (FAS
5) and FASB Interpretation 14 (FIN14), two conditions must be met in order to
establish an accrual: (i) it is probable that a liability has been
incurred; and (ii) the amount of loss can be reasonably estimated.

We
believe that due to the significant points that we have for appeal in the EPL 
Mexico litigation, the likelihood of a loss is not probable even if the Court
enters a judgment that mirrors the jury verdict. Additionally, FAS 5 and FIN14
state that if a loss can be reasonably estimated, it should be recorded. Due to
the uncertainties involved in predicting possible outcomes of the judgment,
then predicting possible outcomes to the rulings on appeal that we would file
if a material adverse judgment is issued, it is our opinion that, even though
we have received an adverse jury verdict, a reasonable estimate of the loss
cannot be determined at this time. Therefore, no accrual for the EPL  Mexico
litigation has been recorded as of June 30, 2007. Once a judgment is issued,
the number of possible outcomes will be reduced, and we will then re-evaluate
whether to establish an accrual for this contingency.

Item 3. Quantitative and Qualitative
Disclosures About Market Risk

The
inherent risk in market risk sensitive instruments and positions primarily
relates to potential losses arising from adverse changes in interest rates.

We
are subject to market risk from exposure to changes in interest rates based on
our financing activities. This exposure relates to borrowings under EPLs
senior secured credit facilities that are payable at floating rates of
interest.

A
hypothetical 10% fluctuation in the variable interest rate on our existing debt
of $102.0 million as of June 30, 2007 would result in an increase or decrease
in interest expense of approximately $0.8 million in a given year. We do not
consider the change in fair value of our long-term fixed rate debt resulting
from a hypothetical 10% fluctuation in interest rates as of June 30, 2007 to be
material.

Item 4T. Controls and Procedures

Our
Chief Executive Officer and Senior Vice President of Finance have concluded
that the design and operation of our disclosure controls and procedures are
effective as of June 30, 2007. This conclusion is based on an evaluation conducted
under the supervision and with the participation of Company management.
Disclosure controls and procedures are those controls and procedures which are
designed to ensure that information required to be disclosed in our SEC filings
and submissions is accumulated and communicated to management and is recorded,
processed, summarized and reported in a timely manner and in accordance with
SEC rules and regulations.

There
have been no changes in our internal control over financial reporting that
occurred during our first 26 weeks ended June 30, 2007, that have materially
affected, or are reasonably likely to materially affect, our internal control
over financial reporting.

PART II 
OTHER INFORMATION

Item 1. Legal Proceedings

The
contractual rights to use the name El Pollo Loco® and certain related
trademarks and intellectual property in Mexico were assigned to us in 1996,
pursuant to an agreement between the Company and a company controlled by Juan
Francisco Ochoa, the founder of the first El Pollo Loco restaurant in Mexico
and the United States. As consideration for the

24

---



assignment
of such rights, the Company agreed, subject to the terms and conditions of the
agreement, to use commercially reasonable efforts to develop a minimum number
of restaurants in Mexico by February 2006 and to pay certain fees for each such
restaurant. On March 31, 2004, EPL-Mexico filed suit alleging, among other
things, that the Company breached its agreement with EPL-Mexico by failing to
exploit the trademarks and develop new restaurants in Mexico. A jury trial was
held in July 2007 in federal district court in Laredo, Texas. The jury returned
a verdict finding damages for EPL-Mexico in the approximate amount of $22 million. Before a final judgment is rendered,
the Court has requested that the parties file post-trial motions, which are due
August 9, 2007. The Company believes there are inconsistencies in the jury
verdict. Further, it is the Companys contention that two key factual findings
by the jury support our position. The first is that plaintiff knew of the
injuries it alleged in this case as early as 1997 but did not file this lawsuit
until 2004, which we assert was after the statute of limitations expired. The
second is that the value of the 1996 agreement was $1,087,500. The Company
deposited that same amount into the registry of the Court two years ago,
representing the buyout price in the contract.
The Company is hopeful that the trial judge will recognize the
significance of these two key jury findings and enter a final judgment in our
favor. If the Courts judgment upholds the jurys damages findings, the Company
will appeal. The failure to prevail in this action could result in the loss of
the Companys ownership in Mexico of the El Pollo Loco trademarks and
intellectual property. This could negatively affect our brand in the United
States and elsewhere. In addition, a final adverse judgment could result in the
imposition of significant monetary damages, which could have a material adverse
impact on the Companys consolidated financial position, results of operations
or cash flows.

On
June 22, 2006, the Company filed a complaint for declaratory relief, breach of
written contract and bad faith against Arch Specialty Insurance Company,
seeking damages and equitable relief for Archs refusal to carry out the
obligations of its insurance contract to defend and indemnify, among other
things, the Company in the EPL-Mexico v. EPL-USA trademark litigation described
above. A voluntary mediation was held in New York City on February 5, 2007, but
the parties were unable to reach agreement. The Court vacated the trial date
and scheduled a case management conference in September 2007.

Also
see our Annual Report on Form 10-K for the year ended December 27, 2006 as
filed with the SEC on March 23, 2007.

Item 1A. Risk Factors

An ultimate adverse
ruling in litigation involving Mexico trademark rights could result in the
imposition of significant monetary damages and loss of rights to the trademarks
in Mexico.

We
are currently involved in litigation relating to our rights to use certain
trademarks and intellectual property in Mexico as discussed in Part II, Item 1
above. An ultimate adverse ruling in this litigation could result in the
imposition of significant monetary damages which could result in an event of
default under our credit facility and our long-term notes and materially,
adversely affect our liquidity, financial condition and business. In addition,
the loss of the rights to use the trademarks and intellectual property in
Mexico could adversely affect our brand in the United States and
elsewhere.

Certain
factors may have a material adverse effect on our business, financial condition
and results of operations and you should carefully consider them. For
discussion of our potential risks our uncertainties, refer to Risk Factors,
included in our Annual Report on Form 10-K for the year ended December 27, 2006
as filed with the U.S. Securities Exchange Commission on March 23, 2007.

Item 5. Other Information.

On
May 18, 2007, the Company entered into a new lease for its corporate offices
with C.J. Segerstrom & Sons. The lease is expected to commence in October
2007 and has a term of 10-1/2 years at an annual expense for financial statement purposes of approximately $323,000.

25

---



Item 6. Exhibits.

|        |  |                                                                                                         
|------- |  | --------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                         
|Number  |  | Description
 of Documents                                                                               
|        |  |                                                                                                         
|* 10.1  |  | Agreement
 with Pilgrim's Pride Corporation dated February 27, 2007                                     
|        |  |                                                                                                         
|+ 10.2  |  | Independent
 Directors Stock Plan                                                                       
|        |  |                                                                                                         
|10.3    |  | Lease dated May 18, 2007 between El Pollo Loco, Inc. and C.J. Segerstrom & Sons                         
|        |  |                                                                                                         
|31.1    |  | Certification
 of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
 Act of 2002
|        |  |                                                                                                         
|31.2    |  | Certification
 of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
 Act of 2002
|        |  |                                                                                                         
|32.1    |  | Certification
 of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley
 Act of 2002
|        |  |                                                                                                         
|32.2    |  | Certification
 of Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act
 of 2002

* Certain confidential portions of this
exhibit have been redacted and filed separately with the Commission pursuant to
a Confidential Treatment Request.

+ Management contracts, compensatory plans and arrangements.

26

---



SIGNATURES

Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

|                      |                       |                                      
|--------------------- | --------------------- | -------------------------------------
|                      | EPL INTERMEDIATE, INC
|                     
|Date: August 10, 2007 | By:                   | /s/ Stephen E. Carley                
|                      |                       |                                      
|                      |                       | Stephen E. Carley                    
|                      |                       | President                            
|                      | By:                   | /s/ Joseph Stein                     
|                      |                       |                                      
|                      |                       | Joseph Stein                         
|                      |                       | Chief Financial Officer and Treasurer

27

---



EXHIBIT INDEX

|        |  |                                                                                                         
|------- |  | --------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                         
|Number  |  | Description
 of Documents                                                                               
|        |  |                                                                                                         
|* 10.1  |  | Agreement
 with Pilgrims Pride Corporation dated February 27, 2007                                     
|        |  |                                                                                                         
|+ 10.2  |  | Independent
 Directors Stock Plan                                                                       
|        |  |                                                                                                         
|10.3    |  | Lease dated May 18, 2007 between El Pollo Loco, Inc. and C.J. Segerstrom & Sons                         
|        |  |                                                                                                         
|31.1    |  | Certification
 of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
 Act of 2002
|        |  |                                                                                                         
|31.2    |  | Certification
 of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
 Act of 2002
|        |  |                                                                                                         
|32.1    |  | Certification
 of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley
 Act of 2002
|        |  |                                                                                                         
|32.2    |  | Certification
 of Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley
 Act of 2002

* Certain confidential portions of this
exhibit have been redacted and filed separately with the Commission pursuant to
a Confidential Treatment Request.

+ Management contracts,
compensatory plans and arrangements.

28

---