**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 September 24, 2008




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.)****3535
                Harbor Blvd., Suite 100****Costa
                Mesa, California**
            
            **92626****(Address
                of Principal Executive Offices)**
            
            **(Zip
                Code)**




**(714)
      599-5000**


**(Registrant’s
      Telephone Number, Including Area Code)**





**Not
      Applicable**


**(Former
      Name, Address or Fiscal Year if Changed from Last Report)**





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 No x




Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, a non-accelerated filer or a smaller reporting company,
      as
      defined in Rule 12b-2 of the Exchange Act.


Large
      accelerated filer o Accelerated
      filer o Non-accelerated
      filer x Smaller
      reporting company o




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
      November 7, 2008, 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)
            32.
            
            Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operations
            143.
            
            Quantitative
                and Qualitative Disclosures About Market Risk
            234T.
            
            Controls
                and Procedures
            24**PART
                II – OTHER INFORMATION**1.
            
            Legal
                Proceedings
            251A.
            
            Risk
                Factors
            255.
            
            Other
                Information
            266.
            
            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 26,**
              **2007**
            
            **SEPTEMBER 30,**
              **2008****ASSETS**CURRENT
                ASSETS:Cash
                and cash equivalents
            
            $
            3,841
            
            $
            9,575Notes
                and accounts receivable—net
            
            
            3,631
            
            
            5,014Inventories
            
            
            1,778
            
            
            1,768Prepaid
                expenses and other current assets
            
            
            3,674
            
            
            4,502Deferred
                income taxes
            
            
            2,357
            
            
            2,357Total
                current assets
            
            
            15,281
            
            
            23,216PROPERTY
                OWNED—Net
            
            
            82,217
            
            
            84,801PROPERTY
                HELD UNDER CAPITALLEASES--Net
            
            
            1,105
            
            
            802GOODWILL
            
            
            276,911
            
            
            276,911DOMESTIC
                TRADEMARKS
            
            
            120,700
            
            
            120,700OTHER
                INTANGIBLE ASSETS—Net
            
            
            10,607
            
            
            9,481OTHER
                ASSETS
            
            
            9,607
            
            
            6,902TOTAL
                ASSETS
            
            $
            516,428
            
            $
            522,813




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 26,**
            
            **SEPTEMBER 30,****2007**
            
            **2008****LIABILITIES
                AND STOCKHOLDER'S EQUITY**CURRENT
                LIABILITIES:Revolving
                credit facility
            
            $
            2,500
            
            $
            -Current
                portion of note payable
            
            
            1,035
            
            
            1,024Current
                  portion of obligations under capital
                  leases
            
            
            1,241
            
            
            621Accounts
                payable
            
            
            13,203
            
            
            17,026Accrued
                salaries
            
            
            3,725
            
            
            3,594Accrued
                vacation
            
            
            1,936
            
            
            2,051Accrued
                insurance
            
            
            1,412
            
            
            1,102Accrued
                income taxes payable
            
            
            102
            
            
            -Accrued
                interest
            
            
            1,934
            
            
            5,149Accrued
                advertising
            
            
            180
            
            
            336Other
                accrued expenses and current liabilities
            
            
            5,076
            
            
            5,855Total
                current liabilities
            
            
            32,344
            
            
            36,758NONCURRENT
                LIABILITIES:Senior
                secured notes (2009 Notes)
            
            
            250
            
            
            250Senior
                unsecured notes (2013 Notes)
            
            
            123,843
            
            
            119,031PIK
                Notes (2014 Notes)
            
            
            30,274
            
            
            25,087Note
                payable—less current portion
            
            
            100,418
            
            
            98,586Obligations
                  under capital leases—less current
                  portion
            
            
            2,706
            
            
            2,280Deferred
                income taxes
            
            
            38,864
            
            
            34,693Other
                intangible liabilities—net
            
            
            6,047
            
            
            5,142Other
                noncurrent liabilities
            
            
            9,371
            
            
            11,168Total
                noncurrent liabilities
            
            
            311,773
            
            
            296,237COMMITMENTS
                AND CONTINGENCIESSTOCKHOLDER'S
                EQUITYCommon
                  stock, $.01 par value—20,000 shares authorized;
                  100 shares issued and outstanding
            
            
            -
            
            
            -Additional
                paid-in-capital
            
            
            176,296
            
            
            199,797Accumulated
                Deficit
            
            
            (3,985
            )
            
            (9,979
            )Total
                stockholder's equity
            
            
            172,311
            
            
            189,818TOTAL
            
            $
            516,428
            
            $
            522,813




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 OPERATIONS
                (UNAUDITED)****(Amounts
                in thousands)**




**13 Weeks Ended September 30,**
            
            **39 Weeks Ended September 30,****2007**
            
            **2008**
            
            **2007**
            
            **2008**OPERATING
                REVENUE:Restaurant
                revenue
            
            $
            67,266
            
            $
            69,653
            
            $
            194,690
            
            $
            206,806Franchise
                revenue
            
            
            5,048
            
            
            5,232
            
            
            14,149
            
            
            15,644Total
                operating revenue
            
            
            72,314
            
            
            74,885
            
            
            208,839
            
            
            222,450OPERATING
                EXPENSES:Product
                cost
            
            
            20,786
            
            
            22,711
            
            
            60,117
            
            
            66,948Payroll
                and benefits
            
            
            17,476
            
            
            18,363
            
            
            50,727
            
            
            54,506Depreciation
                and amortization
            
            
            3,014
            
            
            3,214
            
            
            8,707
            
            
            9,305Other
                operating expenses
            
            
            24,864
            
            
            24,000
            
            
            66,690
            
            
            81,667Total
                operating expenses
            
            
            66,140
            
            
            68,288
            
            
            186,241
            
            
            212,426OPERATING
                INCOME
            
            
            6,174
            
            
            6,597
            
            
            22,598
            
            
            10,024OTHER
                EXPENSE
            
            
            -
            
            
            399
            
            
            -
            
            
            399INTEREST
                EXPENSE—Net
            
            
            7,423
            
            
            6,107
            
            
            21,927
            
            
            19,724INCOME
                  (LOSS) BEFORE PROVISION FOR
                  INCOME TAXES
            
            
            (1,249
            )
            
            91
            
            
            671
            
            
            (10,099
            )PROVISION
                (BENEFIT) FOR INCOME TAXES
            
            
            2,763
            
            
            43
            
            
            3,095
            
            
            (4,105
            )NET
                INCOME (LOSS)
            
            $
            (4,012
            )
            $
            48
            
            $
            (2,424
            )
            $
            (5,994
            )




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)**




**39
                Weeks Ended September 30,****2007**
            
            **2008**CASH
                FLOWS FROM OPERATINGACTIVITIES:Net
                loss
            
            $
            (2,424
            )
            $
            (5,994
            )Adjustments
                to reconcile net income (loss) to netcash
                provided by operating activities:Depreciation
                and amortization of propertyand
                intangible assets
            
            
            8,707
            
            
            9,305Stock-based
                compensation expense
            
            
            603
            
            
            574Interest
                accretion
            
            
            3,061
            
            
            2,813(Gain)
                loss on disposal of assets
            
            
            2,558
            
            
            (538
            )Asset
                impairment
            
            
            -
            
            
            1,230Amortization
                of deferred financing costs
            
            
            1,042
            
            
            1,338Amortization
                of negative leasehold interest
            
            
            (206
            )
            
            (122
            )Deferred
                income taxes
            
            
            2,916
            
            
            (4,171
            )Excess
                tax benefits related to exercise of stock options
            
            
            -
            
            
            31Litigation
                settlement
            
            
            -
            
            
            10,924Change
                in fair value of interest rate swap
            
            
            -
            
            
            399Changes
                in operating assets and liabilities:Notes
                and accounts receivable—net
            
            
            (320
            )
            
            (1,383
            )Inventories
            
            
            (95
            )
            
            10Prepaid
                expenses and other current assets
            
            
            (226
            )
            
            (828
            )Income
                taxes receivable / payable
            
            
            244
            
            
            (102
            )Other
                assets
            
            
            (275
            )
            
            1,357Accounts
                payable
            
            
            2,313
            
            
            3,777Accrued
                salaries and vacation
            
            
            1,149
            
            
            (16
            )Accrued
                insurance
            
            
            394
            
            
            (310
            )Other
                accrued expenses and current and noncurrent liabilities
            
            
            4,816
            
            
            5,548Net
                cash provided by operating activities
            
            
            24,257
            
            
            23,842CASH
                FLOW FROM INVESTINGACTIVITIES:Proceeds
                from asset disposition
            
            
            8,035
            
            
            1,080Purchase
                of franchise restaurants
            
            
            (8,534
            )
            
            -Purchase
                of property
            
            
            (14,447
            )
            
            (13,157
            )Net
                cash used in investing activities
            
            
            (14,946
            )
            
            (12,077
            )CASH
                FLOWS FROM FINANCINGACTIVITIES:Proceeds
                from issuance of common stock
            
            
            -
            
            
            50Repurchase
                of common stock
            
            
            (54
            )
            
            (47
            )Excess
                tax benefits related to exercise of stock options
            
            
            -
            
            
            (31
            )Capital
                contribution
            
            
            -
            
            
            12,000Proceeds
                from borrowings
            
            
            14,500
            
            
            -Payment
                of obligations under capital leases
            
            
            (950
            )
            
            (848
            )Payments
                on debt
            
            
            (19,504
            )
            
            (4,343
            )Repurchase
                of notes
            
            
            -
            
            
            (12,812
            )Deferred
                financing costs
            
            
            (173
            )
            
            -Net
                cash used in financing activities
            
            
            (6,181
            )
            
            (6,031
            )




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)**
 
 **39 Weeks Ended September 30,****2007**
                
                
                **2008**INCREASE
                    IN CASH AND CASH EQUIVALENTS
                
                $
                3,130
                
                $
                5,734CASH
                    AND CASH EQUIVALENTS—Beginning
                    of period
                
                
                2,955
                
                
                3,841CASH
                    AND CASH EQUIVALENTS—End
                    of period
                
                $
                6,085
                
                $
                9,575SUPPLEMENTAL
                    DISCLOSURE OF CASH FLOW INFORMATION—Cash paid during the period
                    for:Interest
                    (net of amounts capitalized)
                
                $
                14,956
                
                $
                12,696Income
                    taxes
                
                $
                36
                
                $
                165SUPPLEMENTAL
                    SCHEDULE OF NON-CASH ACTIVITIES:Unpaid
                    purchases of property and equipment
                
                $
                2,348
                
                $
                46Litigation
                    settlement paid by Chicken Acquisition Corp. on behalf of the
                    Company,
                    treated as a capital contribution
                
                $
                -
                
                $
                10,924




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 jointly 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 26, 2007 (File No. 333-115644) as filed with the
      Securities and Exchange Commission (the “Commission”) on March 24, 2008.




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 2007, which ended December 26, 2007, is a 52-week fiscal
      year. Fiscal year 2008, which will end December 31, 2008, is a 53-week year.
      For
      simplicity of presentation, the Company has described the periods ended
      September 26, 2007 and September 24, 2008 as September 30, 2007 and 2008,
      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.
      Other Intangible Assets and Liabilities**




Other
      intangible assets and liabilities consist of the following (in
      thousands):


**December 26, 2007**
              
              **September 30, 2008**Gross
                Carrying
                Amount
              
              Accumulated
                Amortization
              
              Net
                Carrying
                Amount
              
              Gross
                Carrying
                Amount
              
              Accumulated
                Amortization
              
              Net
                Carrying
                AmountFranchise
                  network
              
              $
              8,000
              
              $
              (968
              )
              $
              7,032
              
              $
              8,000
              
              $
              (1,310
              )
              $
              6,690Favorable
                  leasehold interest
              
              
              5,862
              
              
              (2,287
              )
              
              3,575
              
              
              5,862
              
              
              (3,071
              )
              
              2,791Other
                  intangible assets
              
              $
              13,862
              
              $
              (3,255
              )
              $
              10,607
              
              $
              13,862
              
              $
              (4,381
              )
              $
              9,481Unfavorable
                  leasehold interest liability
              
              $
              (9,156
              )
              $
              3,109
              
              $
              (6,047
              )
              $
              (9,156
              )
              $
              4,014
              
              $
              (5,142
              )




Favorable
      leasehold interest represents the asset in excess of the approximate fair market
      value of the leases. The amount is being amortized over the approximate average
      life of the leases.




Unfavorable
      leasehold interest liability represents the liability in excess of the
      approximate fair market value of the leases. The amount is being amortized
      over
      the approximate average life of the leases. Amortization expense for other
      intangible assets and liabilities was $136,000 for the 39-week period ended
      September 30, 2007 and $221,000 for the 39-week period ended September 30,
      2008.




8


The
      estimated amortization expense for the Company’s amortizable intangible assets
      and liabilities for each of the five succeeding fiscal years is as follows
      (in
      thousands):




**Year
                Ending December 31**2008
                (October 1st–
                December 31st)
            
            $
            642009
            
            
            2542010
            
            
            1302011
            
            
            1672012
            
            
            182




**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. As a result of this review, the Company recorded an
      impairment charge of approximately $1.2 million in September 2008 for two
      under-performing company-operated stores that will continue to be operated.
      The
      impairment charges are included in other operating expenses in the accompanying
      condensed consolidated statements of operations.




**4.
      Stock-Based Compensation**




As
      of
      September 30, 2008, options to purchase 307,556 shares of common stock of CAC
      were outstanding, including 79,650 options that are fully vested. The remaining
      options 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 and vest 100% upon the occurrence of an initial public offering
      of at least $50 million or a change in control of CAC. All options were granted
      with an exercise price equal to the fair value on the date of grant.




Changes
      in stock options for the first quarter ended September 30, 2008 are as follows:





**Weighted-****Average****Remaining****Weighted-**
              **Average**
            
            **Contractual**
              **Life**
            
            **Aggregate**
                **Intrinsic****Shares**
            
            **Exercise Price**
            
            **(in
                Years)**
            
            **Value
                (000’s)**Outstanding—December
                26, 2007
            
            
            304,287
            
            $
            68.65Granted
            
            
            4,450
            
            $
            109.07Exercised
            
            
            (1,181
            )
            $
            20.60Outstanding—September
                30, 2008
            
            
            307,556
            
            $
            69.42
            
            
            6.3
            
            $
            9,792Vested
                and expected to vest - September 30, 2008
            
            
            303,803
            
            $
            69.42
            
            
            6.3
            
            $
            9,673Exercisable –
                September 30, 2008
            
            
            79,650
            
            $
            8.55
            
            
            3.1
            
            $
            7,384




The
      intrinsic value is calculated as the difference between the market value as
      of
      September 30, 2008 and the exercise price of options that are outstanding and
      exercisable.




In
      accordance with the prospective method of adoption of Statement of Financial
      Accounting Standard (“SFAS”) 123R, the Company recognized share-based
      compensation expense before tax of $191,000 and $43,000 and a corresponding
      decrease to net income of $100,000 and $27,000 during the 13 weeks ended
      September 30, 2008 and 2007, respectively, related to vesting of stock options.
      Compensation expense of $574,000 and $604,000 and a corresponding decrease
      to
      net income of $331,000 and $407,000 was recognized for the 39 weeks ended
      September 30, 2008 and 2007, respectively, related to these options.




As
      of
      September 30, 2008, there was unrecognized compensation expense of $3.3 million
      related to unvested stock options, which the Company expects to recognize over
      a
      weighted-average period of 4.3 years.





9





**5.
      Commitments and Contingencies**




*Legal
      Matters*




On
      or
      about April 16, 2004, former managers Haroldo Elias, Marco Ramirez and Javier
      Rivera filed a purported class action lawsuit in the Superior Court of the
      State
      of California, County of Los Angeles, against EPL 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. 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 parties are conducting limited
      discovery on the issue of class certification. While we intend to defend against
      this action vigorously, the ultimate outcome of this case is presently not
      determinable as it is in a preliminary phase. Thus, we 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 all EPL General Managers,
      filed a purported class action complaint in the Superior Court of the State
      of
      California, County of Los Angeles, against EPL. Carlos Olvera replaced Mr.
      Amezcua as the named class representative on August 16, 2006. This action
      alleges certain violations of California labor laws, including alleged improper
      classification of general managers as exempt employees. Plaintiffs’ requested
      remedies include compensatory damages, interest, certain statutory penalties,
      injunctive relief, disgorgement of profits and reasonable attorneys’ fees and
      costs. The court denied EPL’s motion to compel arbitration, and the Company has
      appealed that decision. This matter is subject to an automatic stay while the
      appeal is pending before the Court of Appeal. While we intend to defend against
      this action vigorously, the ultimate outcome of this case is presently not
      determinable as it is in a preliminary phase. Thus, we cannot at this time
      determine the likelihood of an adverse judgment or a likely range of damages
      in
      the event of an adverse judgment.





In
      2004
      El Pollo Loco Mexico, S.A. de C.V. (“EPL-Mexico”) sued EPL in U.S. District
      Court alleging breach of an agreement by EPL to exploit intellectual property
      and to develop new restaurants in Mexico (the “Mexico Litigation”).




On
      June
      18, 2008, the parties agreed to settle the Mexico Litigation and executed a
      Confidential Settlement and Release Agreement (the “Settlement Agreement”)
      pursuant to which:




·
            EPL
                paid EPL-Mexico $10,722,860 (“Settlement Payment”);·
            EPL
                assigned to EPL-Mexico the intellectual property which was the subject
                of
                the disputed contract as provided in the District Court’s
                judgment;





·
            The
                parties mutually released each other and related parties from any
                and all
                known and unknown claims relating to or arising out of the Mexico
                Litigation and the facts thereof;·
            The
                Mexico Litigation was dismissed with prejudice and the judgment against
                EPL was vacated;





·
            EPL
                received the sum of $1,087,500 plus interest previously deposited
                by it
                with the District Court in connection with the Mexico
                Litigation





The
      Settlement Payment, plus certain legal expenses of $55,000, were paid by CAC
      on
      behalf of EPL. The payment by CAC was accounted for as a capital contribution
      by
      CAC to EPL with the corresponding settlement included in other operating
      expenses in the accompanying unaudited condensed consolidated statement of
      operations. EPL’s performance under the Settlement Agreement, including the
      payment of the Settlement Payment and the assignment of the intellectual
      property, did not cause a violation of the Company’s or EPL’s covenants under
      their respective bond indentures and credit agreement. The intellectual property
      transferred to EPL-Mexico was not being used by EPL in its current business
      and
      the transfer does not affect its intellectual property rights or operations
      in
      the U.S. and countries other than Mexico.





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 Mexico Litigation which settled in June 2008. Trial began in September
      2008 and, in the initial phase, the Court issued a tentative ruling that the
      possibility of coverage existed. Trial on the remaining phases of both the
      declaratory relief and bad faith causes of action is currently in
      progress.





In
      April
      2007, Dora Santana filed a purported class action against EPL in state court
      in
      Los Angeles County on behalf of all “Assistant Shift Managers.” Plaintiff
      alleges wage and hour violations including working off the clock, failure to
      pay
      overtime, and meal break violations on behalf of the purported class, currently
      defined as all Assistant Managers from April 2003 to present. The parties are
      currently engaged in discovery on the limited issue of class certification.
      The
      Court has ordered plaintiff to file her Motion for Class Certification by
      December 16, 2008. Trial is set for April 14, 2009. While we intend to defend
      against this action vigorously, the ultimate outcome of this case is presently
      not determinable as it is in a preliminary phase. Thus, we cannot at this time
      determine the likelihood of an adverse judgment or a likely range of damages
      in
      the event of an adverse judgment.





10


On
      May
      30, 2008, Jeannette Delgado, a former Assistant Manager filed a purported class
      action on behalf of all hourly (i.e. non-exempt) employees of EPL in state
      court
      in Los Angeles County alleging violations of certain California labor laws
      and
      the California Business and Professions Code including failure to pay overtime,
      failure to provide meal periods and rest periods and unfair business practices.
      By statute, the purported class extends back four years, to May 30, 2004.
      Plaintiff’s requested remedies include compensatory and punitive damages,
      injunctive relief, disgorgement of profits and reasonable attorneys’ fees and
      costs. This lawsuit was served on the Company in early September. Thus, we
      cannot at this time determine the likelihood of an adverse judgment or a likely
      range of damages in the event of an adverse judgment.





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. The Company has not
      recorded any reserves for litigation contingencies.




*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 $6,900,000.




**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 26,
      2007 and September 30, 2008, $250,000 principal amount of the 2009 Notes was
      outstanding.




**7.
      Senior Unsecured Notes Payable (2013 Notes)**




EPL
      has
      outstanding 2013 Notes, consisting of $119.0 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.




The
      costs
      incurred in connection with the offering of the 2013 Notes 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 September
      30,
      2008, 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 $17.6 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.





11


**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. Utilizing this senior secured revolving credit facility, EPL
      issued $7.4 million of letters of credit as of September 30, 2008. Future
      principal payments under the term loan at September 30, 2008 are as follows
      (in
      thousands).




**Year
                Ending December 31**2008
                (October 1st – December 31st)
            
            $
            2562009
            
            
            1,0242010
            
            
            1,0242011
            
            
            97,306$
            99,610




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 26, 2007
      and
      September 30, 2008 was 7.70% and 5.30%, respectively. 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 September 30, 2008, EPL was in compliance with all of the
      financial covenants contained in the Credit Facility and has $17.6 million
      available for borrowings under the revolving line of credit.




To
      manage
      or reduce the interest rate risk, the Company periodically enters into interest
      rate swap transactions. The Company enters into these contracts with major
      financial institutions, which may minimize its risk of credit loss. The Company
      first began engaging in these transactions in 2002. On June 26, 2008, the
      Company entered into an interest rate swap agreement with an effective date
      of
      September 24, 2008 and a maturity date of June 30, 2010. The agreement is based
      on the notional amount of $50.0 million. Under the terms of the agreement,
      the
      Company agreed to make fixed rate payments on the notional amount on a quarterly
      basis at increasing interest rates ranging from 3.17% to 4.61%, in exchange
      for
      receiving payments on the notional amount at a floating rate based on the
      three-month LIBOR rate, on a quarterly basis. The interest rate swap agreement
      is intended to reduce interest rate risk associated with variable interest
      rate
      debt. At September 30, 2008, the fair value of the interest rate swap was
      approximately $399,000 and is included in other noncurrent liabilities on the
      accompanying consolidated balance sheet.




**9.
      PIK Notes (2014 Notes)**




At
      December 26, 2007 and September 30, 2008, the Company had $30.3 million and
      $25.1 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 $29.3 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.




12




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. The costs incurred in connection with its registration of the
      2014 Notes have been capitalized and are included in other assets in the
      accompanying balance sheets.





On
      January 25, 2008, CAC made an $8.0 million capital contribution to the Company.
      The Company used $7.9 million of these proceeds to repurchase a portion of
      the
      outstanding 2014 Notes at a price that approximated their accreted
      value.





**10.
      Income Taxes**





The
      Company’s taxable income or loss is included in the consolidated federal and
      state income tax returns of CAC. The Company records its provision for income
      taxes based on its separate stand-alone operating results using the asset and
      liability method.




The
      Company has determined that the total amount of unrecognized tax benefits as
      of
      December 26, 2007, was $2.1 million. The FIN 48 (Interpretation No. 48.
“Accounting for Uncertainty in Income Taxes”) reserve for uncertain tax
      positions was reduced as a result of changing the method of accounting for
      advance payments received from franchisees, as reflected in the 2007 Federal
      Tax
      Return. The total amount of unrecognized tax benefits as of September 30, 2008
      was $1.4 million. The Company estimates that the unrecognized tax benefit as
      of
      September 30, 2008 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 September 30, 2008. 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.




The
      Company is subject to taxation in the U.S. and various state jurisdictions.
      The
      Company’s tax years for 2003 through 2007 are subject to examination by various
      tax authorities. The Company is no longer subject to U.S. examination for years
      before 2004, and years before 2003 by state taxing authorities.




**11.
      New Accounting Pronouncements**




In
      April
      2008, the Financial Accounting Standards Board (the “FASB”) issued FASB Staff
      Position 142-3, *Determination
      of*  *the
      Useful Lives of Intangible Assets* (“FSP
      142-3”), which amends the factors that should be considered in developing
      renewal or extension assumptions used to determine the useful life of a
      recognized intangible asset under FASB Statement No. 142, *Goodwill
      and Other Intangible Assets* .
      The
      intent of FSP 142-3 is to improve the consistency between the useful life of
      a
      recognized intangible asset under FASB Statement No. 142 and the period of
      expected cash flows used to measure the fair value of the asset under FASB
      Statement No. 141(R) and other U.S. generally accepted accounting principles.
      FSP 142-3 is effective for fiscal years beginning after December 15, 2008 and
      for interim periods within those fiscal years. The Company does not expect
      the
      adoption of FSP 142-3 to have a material effect on its consolidated financial
      position or results of operations.





In
      March
      2008, the FASB issued Statement No. 161, “Disclosures about Derivative
      Instruments and Hedging Activities - an Amendment of FASB Statement No. 133.”
The new standard is intended to improve financial reporting about derivative
      instruments and hedging activities by requiring enhanced disclosures to enable
      investors to better understand their effects on an entity’s financial position,
      financial performance, and cash flows. It is effective for financial statements
      issued for fiscal years and interim periods beginning after November 15, 2008,
      with early application encouraged. The Company is currently evaluating the
      impact of adopting SFAS No. 161 on its financial statements.





In
      February 2008, the FASB issued FASB Staff Position No. 157-2 (“FSP 157-2”),
      which deferred the effective date for certain portions of FASB Statement No.
      157
      related to nonrecurring measurements of nonfinancial assets and liabilities.
      That provision of FASB Statement No. 157 will be effective for the Company’s
      fiscal year 2009. The Company is currently evaluating the effect, if any, that
      the adoption of FSP No. 157-2 will have on its consolidated results of
      operations, financial position and cash flows.





13


In
      December 2007, the FASB issued Statement No. 141(R), Business
      Combinations. FASB Statement No. 141(R) requires reporting entities to
      record fair value estimates of contingent consideration and certain other
      potential liabilities during the original purchase price allocation, expense
      acquisition costs as incurred and does not permit certain restructuring
      activities previously allowed under Emerging Issues Task Force 95-3 to be
      recorded as a component of purchase accounting. FASB
      Statement No. 141(R) is effective for fiscal periods beginning after
      December 15, 2008 and should be applied prospectively for all business
      acquisitions entered into after the date of adoption. We are currently
      evaluating the impact the adoption of FASB Statement No. 141(R) will
      have on our consolidated financial position or results of
      operations.





In
      December 2007, the FASB issued Statement No. 160, Noncontrolling
      Interest in Consolidated Financial Statements — an amendment of ARB
      No. 51. FASB Statement No. 160 requires (i) that
      noncontrolling (minority) interests be reported as a component of shareholders’
equity, (ii) that net income attributable to the parent and to the
      noncontrolling interest be separately identified in the consolidated statement
      of operations, (iii) that changes in a parent’s ownership interest while
      the parent retains its controlling interest be accounted for as equity
      transactions, (iv) that any retained noncontrolling equity investment upon
      the deconsolidation of a subsidiary be initially measured at fair value, and
      (v) that sufficient disclosures are provided that clearly identify and
      distinguish between the interests of the parent and the interests of the
      noncontrolling owners. FASB Statement No. 160 is effective for fiscal
      periods beginning after December 15, 2008. We are currently evaluating the
      impact the adoption of FASB Statement No. 160 will have on our
      consolidated financial position or results of operations.





**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 or other
      commodities; 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; the
      current liquidity crisis, which could impair our ability to obtain or
      refinance debt financing ;
      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 24,
      2008, as updated from time to time in our quarterly reports and current reports
      filed with the Commission. See also Part II, Item 1A of this
      report.




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 September 26,
      2007 and September 24, 2008 as September 30, 2007 and 2008, 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
      2007, which ended December 26, 2007, is a 52-week fiscal year. Fiscal year
      2008
      which will end December 31, 2008, is a 53-week fiscal year. 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.





14




**Overview**




EPL
      Intermediate, Inc. (“Intermediate”) through its wholly-owned subsidiary El Pollo
      Loco, Inc. (“EPL” and jointly with Intermediate, the “Company,” “we,” “us” and
“our”) owns, operates and franchises restaurants specializing in marinated
      flame-grilled chicken. Our restaurants are located principally in California,
      with additional restaurants in Arizona, Nevada, Texas, Illinois, Colorado,
      Connecticut, Georgia, Massachusetts, Washington, Virginia, Oregon and Utah.
      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
      store
      counts at September 30, 2008 and 2007, and December 26, 2007 are set forth
      below:





**El
      Pollo Loco Restaurants**


September 30,
              
              December 26,
              
              September 30,2007
              
              2007
              
              2008Company-owned
              
              
              154
              
              
              159
              
              
              165Franchised
              
              
              226
              
              
              230
              
              
              246System-wide
              
              
              380
              
              
              389
              
              
              411




During
      the three and nine months ended September 30, 2008, the Company opened 1 and
      6
      new restaurants, respectively. In those periods, franchisees opened 4 and 18
      new
      restaurants, respectively, and closed 2 restaurants.




We
      plan
      to open approximately ten company-operated restaurants in 2008 and a moderately
      increasing number of company-operated restaurants in succeeding years. We
      believe our franchisees will open approximately 20 new restaurants in 2008,
      a
      reduction from the 40 new restaurants we previously expected would be opened.
      The reduction is due to adverse economic and liquidity conditions which have
      caused some franchisees to delay the opening of new restaurants under existing
      development agreements. We will continue our national expansion both with
      franchised locations and company-owned stores. We currently expect to open
      approximately 10 company and 10 franchise restaurants in 2009.




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 ended September 30, 2008,
      same-store sales for restaurants system wide remained flat; for the 39 weeks
      ended September 30, 2008, same-store sales for restaurants system wide increased
      1.1%, compared to the corresponding period in 2007. 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 the number of
      company-operated restaurants and to increases in same store sales, which may
      include price and transaction volume increases. We implemented menu price
      increases in May 2008, January 2008 and January 2007. Many factors can influence
      sales at all or specific restaurants, including increased competition, strength
      of marketing promotions, the restaurant manager’s operational execution, changes
      in local market conditions and demographics and the status of the economy.
      We
      believe that consumers are being affected by the economy more dramatically
      this
      year as they struggle with the sustained impact of significant higher gasoline
      costs, rising food prices, declining home values and the prospect of a
      recession, and these factors have negatively impacted restaurant traffic.




Franchise
      revenue consists of royalties, initial franchise fees, help desk revenue and
      franchise rental income. Royalties average 4% of the franchisees’ net sales. As
      of October 1, 2008, 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.




15


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. We currently have chicken supply contracts with 4 suppliers. Our
      supply contracts typically are short-term, one or two years, and provide for
      fixed or floor and ceiling prices. We implemented menu price increases in
      January 2007, January 2008 and May 2008 that have partially mitigated the impact
      of higher chicken prices. We expect the cost of chicken will continue to be
      negatively affected by the significant demand for corn and, due to competitive
      pressures, there is no assurance that we will be able to increase menu prices
      in
      the future to offset these increased costs. Corn prices, which are a primary
      feed source for chicken, have increased dramatically over the last couple of
      years. A major driver of this increase is rapidly increasing demand for corn
      from the ethanol industry. There have been many new ethanol plants opening
      in
      the United States, and most of these plants use corn as the primary source
      of
      grain to make ethanol. When farmers plant more corn to take advantage of high
      prices, they may take land for wheat, soybeans, or other crops out of production
      which could negatively impact prices for our other commodities. In addition,
      there has been a global increase in demand for corn and wheat, which has put
      pressure on grain prices worldwide. This increased demand on the nation’s corn
      crop has had and may continue to have an adverse impact on chicken
      prices.


The
      effect of higher oil prices on transportation costs also impact the cost of
      commodities. The recent reduction in oil prices may provide some relief from
      rising transportation costs in the future, but it may take some time for the
      benefit of this decrease to work its way into our commodity cost structure.





Payroll
      and benefits make up the next largest single expense. Payroll and benefits
      are
      subject to inflation, minimum wage increases and expenses for health insurance
      and workers’ compensation insurance. A significant number of our hourly staff
      are paid at 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 increased to
      $8.00 per hour. The federal minimum wage increased from $5.85 to $6.55 per
      hour
      effective July 24, 2008 and will increase to $7.25 per hour effective July
      24,
      2009. The Company implemented menu price increases in January 2007 and 2008
      and
      May 2008 in order to partially mitigate the impact of the minimum wage increase.
      Workers’ compensation insurance costs are subject to a number of factors, and
      although we have seen a reduction in the number of workers’ 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.




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.




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.





16





**Results
      of Operations**




Our
                operating results for the 13 weeks ended September 30, 2007 and 2008
                are
                expressed as a percentage of restaurant revenue
                below:





**13
                Weeks Ended****September
                30,****2007**
            
            **2008****Operating
                Statement Data:**Restaurant
                revenue
            
            
            100.0
            %
            
            100.0
            %Product
                cost
            
            
            30.9
            
            
            32.6Payroll
                and benefits
            
            
            26.0
            
            
            26.4Depreciation
                and amortization
            
            
            4.5
            
            
            4.6Other
                operating expenses
            
            
            37.0
            
            
            34.5Operating
                income
            
            
            9.2
            
            
            9.5Other
                expense
            
            
            0.0
            
            
            0.6Interest
                expense
            
            
            11.0
            
            
            8.8Income
                (loss) before income taxes
            
            
            (1.9
            )
            
            0.1Net
                income (loss)
            
            
            (6.0
            )
            
            0.1**Supplementary
                Operating Statement Data:**Restaurant
                other operating expense
            
            
            22.0
            
            
            22.9Franchise
                expense
            
            
            1.4
            
            
            1.5General
                and administrative expense
            
            
            13.6
            
            
            10.1Total
                other operating expenses
            
            
            37.0
            
            
            34.5





***13
      Weeks Ended September 30, 2008 Compared to 13 Weeks Ended September 30,
      2007***




Restaurant
      revenue increased $2.4 million, or 3.5%, to $69.7 million for the 13 weeks
      ended
      September 30, 2008 from $67.3 million for the 13 weeks ended September 30,
      2007.
      Company-operated same-store sales for the 2008 period remained flat from the
      2007 period. Restaurants enter the comparable restaurant base for same-store
      sales the first full week after that restaurant’s 15-month anniversary. The
      positive impact from price increases taken in January and May 2008,
      approximately 4.4% for the 13 weeks ended June 30, 2008, were offset by a
      transaction decline in the third quarter. The increase in restaurant revenue
      was
      due in part to $1.4 million in current year revenue from nine restaurants opened
      in 2007, $2.3 million from six restaurants opened in 2008, and $0.3 million
      from
      five restaurants acquired from a franchisee in 2007 partially offset by lost
      sales of $1.6 million due to the sale of eight company restaurants to
      franchisees in 2007. The transaction decrease reflects intense competition
      and a
      general sales softness in the QSR (quick service restaurant) industry, in part
      due to higher gas prices, recession fears and other economic factors that are
      expected to continue throughout 2008. The unemployment rate in California,
      where
      we have a large number of restaurants, was 7.7% in August 2008. This is a
      significant increase from 5.5% in August of 2007. We believe that increased
      unemployment may have an adverse impact on the number of times customers visit
      our restaurants.




Franchise
      revenue increased $0.2 million, or 3.6%, to $5.2 million for the 13 weeks ended
      September 30, 2008 from $5.0 million for the 13 weeks ended September 30, 2007.
      This increase is due primarily to increased royalties from new franchise stores
      opened in the current period.




Product
      cost increased $1.9 million, or 9.3%, to $22.7 million for the 13 weeks ended
      September 30, 2008 from $20.8 million for the 13 weeks ended September 30,
      2007.
      These costs as a percentage of restaurant revenue increased 1.7% to 32.6% for
      the 2008 period compared to 30.9% for the 2007 period. The increase is
      attributed to increased chicken and commodity costs and increased promotional
      discounting in the current period which was partially offset by the benefit
      of
      the menu price increases. We expect continued pressure on commodity costs in
      the
      fourth quarter and beyond, which will require us to initiate price increases
      to
      help protect our margins.




17


Payroll
      and benefit expenses increased $0.9 million, or 5.1%, to $18.4 million for
      the
      13 weeks ended September 30, 2008 from $17.5 million for the 13 weeks ended
      September 30, 2007. As a percentage of restaurant revenue, these costs increased
      0.4% to 26.4% for the 2008 period from 26.0% for the 2007 period. This increase
      as a percentage of restaurant revenue is primarily attributed to higher wages
      which is due in part to the increase in the minimum wage partially offset by
      the
      leverage from the menu price increases.




Depreciation
      and amortization increased $0.2 million, or 6.6%, to $3.2 million for the 13
      weeks ended September 30, 2008 compared to $3.0 million for the 13 weeks ended
      September 30, 2007. These costs as a percentage of restaurant revenue increased
      slightly to 4.6% for the 2008 period compared with 4.5% for the 2007 period.




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
      $1.1 million, or 7.4%, to $15.9 million for the 13 weeks ended September 30,
      2008 from $14.8 million for the 13 weeks ended September 30, 2007. These costs
      as a percentage of restaurant revenue increased to 22.9% for the 2008 period
      from 22.0% for the 2007 period. The increase in operating costs was due to
      a
      0.4% increase in occupancy costs as a percentage of revenue, which was primarily
      a result of higher rent expense in the current period. The increase was also
      due
      to a 0.6% increase in utilities as a percentage of revenue which was due to
      higher gas prices in the current period. The increase was also attributed to
      higher credit card fees of 0.1% as a percentage of revenue, higher janitorial
      expense of 0.2% as a percentage or revenue and higher advertising expense of
      0.1% as a percentage or revenue. Advertising expense each quarter may be above
      or below our planned annual rate of approximately 4% of revenue, depending
      on
      the timing of marketing promotion and the relative weights and price of media
      spending. The increase in restaurant other operating expense was partially
      offset by a decrease of 0.4 % in repairs and maintenance expense as a percentage
      of revenue and also a 0.4% decrease in preopening costs as a percentage or
      revenue.




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
      increased $0.1 million, or 15.8%, to $1.0 million for the 13 weeks ended
      September 30, 2008 from $0.9 million for the 13 weeks ended September 30, 2007.
      This increase was primarily attributed to increased expenses related to the
      help
      desk for the franchisees.




General
      and administrative expense decreased $2.1 million, or 23.0%, to $7.1 million
      for
      the 13 weeks ended September 30, 2008 from $9.2 million for the 13 weeks ended
      September 30, 2007. General and administrative expense as a percentage of
      revenue decreased 3.5% to 10.1% for the 13 weeks ended September 30, 2008 from
      13.6% for the 13 weeks ended September 30, 2007. The decrease was primarily
      attributed to a $2.8 million loss recognized in the 2007 period from the sale
      of
      eight company restaurants that did not occur in the 2008 period and decreased
      salaries and wages of $0.7 million primarily attributed to lower bonus expense
      in the current period. The decrease in general and administrative expense was
      partially offset by an impairment charge in the current period of $1.2 million,
      which was recorded by the Company for two under-performing company-operated
      stores that will continue to operate and also due to an increase in meetings
      expense of $0.2 million in the current period.





Interest
      expense, net of interest income, decreased $1.3 million, or 17.7%, to $6.1
      million for the 13 weeks ended September 30, 2008 from $7.4 million for the
      13
      weeks ended September 30, 2007. Our average debt balances for the 2008 period
      decreased to $248.3 million compared to $265.0 million for the 2007 period
      and
      our average interest rate decreased to 9.15% for the 2008 period compared to
      10.62% for the 2007 period.




Our
      provision for income taxes consisted of an income tax expense of $43,000 and
      $2.8 million for the 13-week periods ended September 30, 2008 and 2007,
      respectively, for an effective tax rate of 47.6% for 2008 and 36.5% for
      2007. The higher expense reported in the third quarter of 2007 was due to a
      large gain on sale for tax purposes related to the sale of eight restaurants
      in
      the third quarter that created additional income tax expense as most of the
      goodwill written off for book purposes was not deductible for tax
      purposes.




As
      a
      result of the factors above we had net income of $48,000 and a net loss of
      $4.0
      million for the 13 weeks ended September 30, 2008 and 2007, respectively, or
      0.1% and (6.0)% as a percentage or restaurant revenue, for the 13 weeks ended
      September 30, 2008 and 2007, respectively.




18


***39
      Weeks Ended September 30, 2008 Compared to 39 Weeks Ended September 30,
      2007***





Our
      operating results for the 39 weeks ended September 30, 2007 and 2008 are
      expressed as a percentage of restaurant revenue below:





**39
                Weeks Ended****September
                30,****2007**
            
            **2008****Operating
                Statement Data:**Restaurant
                revenue
            
            
            100.0
            %
            
            100.0
            %Product
                cost
            
            
            30.9
            
            
            32.4Payroll
                and benefits
            
            
            26.1
            
            
            26.4Depreciation
                and amortization
            
            
            4.5
            
            
            4.5Other
                operating expenses
            
            
            34.3
            
            
            39.5Operating
                income
            
            
            11.6
            
            
            4.8Other
                expense
            
            
            0.0
            
            
            0.2Interest
                expense
            
            
            11.3
            
            
            9.5Income
                (loss) before income taxes
            
            
            0.3
            
            
            (4.9
            )Net
                loss
            
            
            (1.2
            )
            
            (2.9
            )**Supplementary
                Operating Statement Data:**Restaurant
                other operating expense
            
            
            21.6
            
            
            22.5Franchise
                expense
            
            
            1.4
            
            
            1.5General
                and administrative expense
            
            
            11.3
            
            
            15.5Total
                other operating expenses
            
            
            34.3
            
            
            39.5




Restaurant
      revenue increased $12.1 million, or 6.2%, to $206.8 million for the 39 weeks
      ended September 30, 2008 from $194.7 million for the 39 weeks ended September
      30, 2007. This increase was partially due to an additional $1.4 million in
      restaurant revenue resulting from a 0.7% increase in company-operated same-store
      sales for the 2008 period from the 2007 period. Restaurants enter the comparable
      restaurant base for same-stores sales the first full week after that
      restaurant’s 15-month anniversary. The positive impact from price increases
      taken in January and May 2008, approximately 3.5% for the 39 weeks ended
      September 30, 2008, more than compensated for a transaction decline in the
      current period. The increase in restaurant revenue was also due in part to
      $6.8
      million in current year revenue from fourteen restaurants opened in 2006 and
      2007, $4.2 million from six restaurants opened in 2008, $1.0 from a store that
      was closed for part of 2007 due to a fire and $4.4 million from five restaurants
      acquired from a franchisee in 2007 partially offset by lost sales of $5.7
      million due to the sale of eight company restaurants to franchisees in 2007.
      The
      transaction decrease reflects intense competition and a general sales softness
      in the QSR industry, in part due to higher gas prices, recession fears and
      other
      economic factors that are expected to continue throughout 2008. The unemployment
      rate in California, where we have a large number of restaurants, was 7.7% in
      August 2008. This is a significant increase from 5.5% in August of 2007. We
      believe that increased unemployment may have an adverse impact on the number
      of
      times customers visit our restaurants.




Franchise
      revenue increased $1.5 million, or 10.6%, to $15.6 million for the 39 weeks
      ended September 30, 2008 from $14.1 million for the 39 weeks ended September
      30,
      2007. This increase is primarily due to increased royalties resulting from
      a
      1.4% increase in franchise same-store sales, increased royalties from new
      franchise stores opened in the current period and to an increase in franchise
      fees due to the increased number of franchise stores opened in the current
      period.




Product
      cost increased $6.8 million, or 11.4%, to $66.9 million for the 39 weeks ended
      September 30, 2008 from $60.1 million for the 39 weeks ended September 30,
      2007.
      These costs as a percentage of restaurant revenue increased 1.5% to 32.4% for
      the 2008 period compared to 30.9% for the 2007 period. The increase is
      attributed to increased chicken and commodity costs and increased promotional
      discounting in the current period which was partially offset by the benefit
      of
      the menu price increases. We expect continued pressure on commodity costs in
      the
      fourth quarter and beyond, which will require us to initiate price increases
      to
      help protect our margins.





Payroll
      and benefit expenses increased $3.8 million, or 7.5%, to $54.5 million for
      the
      39 weeks ended September 30, 2008 from $50.7 million for the 39 weeks ended
      September 30, 2007. As a percentage of restaurant revenue, these costs increased
      0.3% to 26.4% in 2008 from 26.1% for the 2007 period. This increase as a
      percentage of restaurant revenue is primarily attributed to higher wages which
      is due in part to the increase in the minimum wage partially offset by the
      leverage from the menu price increases.




19


Depreciation
      and amortization increased $0.6 million, or 6.9%, to $9.3 million for the 39
      weeks ended September 30, 2008 compared to $8.7 million for the 39 weeks ended
      September 30, 2007. These costs as a percentage of restaurant revenue remained
      the same at 4.5% for both the 2008 and 2007 periods.




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
      $4.6 million, or 10.9%, to $46.6 million for the 39 weeks ended September 30,
      2008 from $42.0 million for the 39 weeks ended September 30, 2007. These costs
      as a percentage of restaurant revenue increased to 22.5% for the 2008 period
      from 21.6% for the 2007 period. The increase in operating costs was due to
      a
      0.4% increase in occupancy costs as a percentage of revenue, which was primarily
      a result of higher rent expense and a property tax adjustment in the current
      period. The increase was also due to a 0.4% increase in utilities as a
      percentage of revenue which was due to higher gas prices in the current period.
      The increase in restaurant other operating expense was also due in part to
      a
      0.1% increase in credit card fees as a percentage of revenue.




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
      increased $0.3 million, or 12.4%, to $3.0 million for the 39 weeks ended
      September 30, 2008 from $2.7 million for the 39 weeks ended September 30, 2007.
      This increase was due in part to increased expenses related to the help desk
      for
      the franchisees. There is a corresponding increase in franchise income related
      to the help desk.




Included
      in general and administrative expense in the 39 weeks ended September 30, 2008
      is a $10.7 million expense in the second quarter to settle the Mexico Litigation
      described in Note 5 to the unaudited condensed consolidated financial statements
      in Part I of this report. Excluding this settlement expense, general and
      administrative expense decreased $0.7 million, or 3.0%, to $21.3 million for
      the
      39 weeks ended September 30, 2008 from $22.0 million for the 39 weeks ended
      September 30, 2007. Excluding the settlement expense, general and administrative
      expense as a percentage of revenue decreased 1.0% to 10.3% for the 39 weeks
      ended September 30, 2008 from 11.3% for the 39 weeks ended September 30, 2007.
      The decrease was primarily attributed to a $2.8 million loss recognized in
      the
      2007 period from the sale of eight company restaurants that did not occur in
      the
      2008 period. The decrease in expense was partially offset by an impairment
      charge in the current period of $1.2 million, which was recorded by the Company
      for two under-performing company-operated stores that will continue to operate
      and also due to an increase in legal fees expense of $1.0 million in the current
      period which was primarily attributed to the Mexico Litigation.




Interest
      expense, net of interest income, decreased $2.2 million, or 10.0%, to $19.7
      million for the 39 weeks ended September 30, 2008 from $21.9 million for the
      39
      weeks ended September 30, 2007. Our average debt balances for the 2008 period
      decreased to $254.6 million compared to $260.7 million for the 2007 period
      and
      our average interest rate decreased to 9.69% for the 2008 period compared to
      10.63% for the 2007 period.




Our
      provision for income taxes consisted of an income tax benefit of $4.1 million
      and income tax expense of $3.1 million for the 39-week periods ended September
      30, 2008 and 2007, respectively, for an effective tax rate of 42.4% for 2008
      and
      32.6% for 2007.




As
      a
      result of the factors above, in particular, the $10.7 million settlement
      expense, we had a net loss of $6.0 million for the 39 weeks ended September
      30,
      2008 compared with a net loss of $2.4 million for the 39 weeks ended September
      30, 2007, or (2.9)% and (1.2)% as a percentage or restaurant revenue, for the
      39
      weeks ended September 30, 2008 and 2007, respectively.





**Liquidity
      and Capital Resources**




Our
      principal sources of liquidity are cash flow from operations, a $25.0 million
      revolving credit facility, and capital contributions from our shareholder.
      Our
      principal liquidity requirements are to service our debt and meet our capital
      expenditure needs. Our indebtedness at September 30, 2008 was $246.9 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 ($17.6 million at September
      30, 2008) will be adequate to meet our future liquidity needs for at least
      the
      next twelve months. The current global crisis and resulting severely constrained
      liquidity conditions could make it more difficult for us to obtain debt
      financing or to refinance our existing debt, could increase the costs of
      borrowing, and could restrict our access to this potential source of future
      liquidity.





20




In
      December 2007, our parent company, CAC, received a capital infusion of $45.0
      million. On December 26, 2007, CAC made a $3.0 million capital contribution
      to
      EPL through intermediary subsidiaries which was used for normal operating
      purposes and capital expenditures. On January 25, 2008, CAC made an $8.0 million
      capital contribution to the Company. The Company used $7.9 million of these
      proceeds to repurchase a portion of the outstanding 14.5% senior discount notes
      due 2014 (see Note 9 to our Unaudited Condensed Consolidated Financial
      Statements) at a price that approximated their accreted value. In May of 2008,
      CAC made a $4.0 million capital contribution to the Company that was used for
      normal operating purposes. On June 18, 2008 we settled the Mexico Litigation
      as
      described in Note 5 to our unaudited condensed consolidated financial
      statements. The Settlement Payment of $10,722,860 was paid by CAC on behalf
      of
      EPL. This payment is accounted for as a capital contribution by CAC to EPL.
      The
      Company expects that CAC will make future capital contributions to the Company
      and EPL for acceleration of company-owned store growth and other corporate
      purposes.




In
      the
      2008 nine-month period, our capital expenditures totaled $13.2 million,
      consisting of $9.9 million for new restaurants, $1.3 million for capitalized
      repairs of existing sites, $1.0 million for costs related to remodeling our
      existing restaurants to comply with the federal Americans with Disabilities
      Act,
      $0.3 million for construction costs related to our new training center, and
      $0.7
      million related to other projects. We also had cash proceeds of $1.1 million
      from asset dispositions in the current period. As a result, net cash used in
      investing activities in the current period was $12.1 million.




Cash
      and
      cash equivalents increased $5.8 million from $3.8 million at December 26, 2007
      to $9.6 million at September 30, 2008. In the first nine months of 2008, we
      made
      $1.8 million in principal repayments on EPL’s term loan, and $2.5 million in
      payments to pay off borrowings under our revolving credit facility. In the
      first
      nine months of 2008 we did not have any borrowings under our revolving credit
      facility. 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 provide assurance 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 (consisting primarily of the $25.1
      million outstanding principal amount of 2014 Notes) 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 the terms of which may further 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. 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 $23.8 million for the 39 weeks
      ended September 30, 2008 compared with $24.3 million for the 39 weeks ended
      September 30, 2007. The decrease in cash provided by operating activities was
      related to increased notes and accounts receivable balances, changes in deferred
      income taxes balances, changes in gains and losses on asset disposals and the
      net loss partially offset by changes in other accrued expenses and liabilities
      and the capital contribution.




21




*Investing
      Activities.* We
      had
      net cash used in investing activities of $12.1 million for the 39 weeks ended
      September 30, 2008 compared with $14.9 million for the 39 weeks ended September
      30, 2007. The decrease in cash used in investing activities of $2.8 million
      was
      related to $1.3 million in decreased expenditures, and by $8.5 million spent
      in
      the prior period for the purchase of franchise restaurants partially offset
      by
      proceeds of $8.0 million received in the prior period for the sale of eight
      company restaurants to franchisees.





*Financing
      Activities.* We
      had
      net cash used in financing activities of $6.0 million for the 39 weeks ended
      September 30, 2008 compared with $6.2 million for the 39 weeks ended September
      30, 2007. The decrease of $0.2 million in cash used in financing activities
      in
      the 2008 period was primarily attributable to the capital contribution of $12.0
      million that was received in the current period and a decrease in debt payments
      in the current period of $15.2 million partially offset by the cash used in
      the
      repurchase of the 2014 Notes and the 2013 Notes of $12.8 million, and there
      was
      also an increase in cash in the 2007 period related to a drawdown of our
      revolving credit facility of $14.5 million that did not recur 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, and are due November 18, 2011. As of September 30, 2008, 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
      September 30, 2008, we had $25.1 million 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 $29.3 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. On January 25,
      2008, CAC made an $8.0 million capital contribution to the Company. The Company
      used $7.9 million of these proceeds to repurchase a portion of these notes
      at a
      price that approximated their accreted value.




At
      September 30, 2008, we had $250,000 and $119.0 million outstanding in aggregate
      principal amount under our 2009 Notes and 2013 Notes, respectively (see Notes
      8
      and 9 to our Unaudited Condensed Consolidated Financial Statements). On June
      25,
      2008, the Company used $2.0 million in cash from operations to repurchase a
      portion of the 2013 Notes at a price that approximated their accreted value.
      On
      September 5, 2008, the Company used $3.0 million in cash from operations to
      repurchase a portion of the 2013 Notes at a price that approximated their
      accreted value. As of September 30, 2008, we are restricted from incurring
      additional indebtedness, as EPL does not currently meet the fixed charge
      coverage ratio under the 2013 Notes. This restriction does not apply to the
      existing loan availability of $17.6 million under the revolving line of
      credit.




At
      September 30, 2008, we had outstanding letters of credit totaling $7.4 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
      Franchise Disclosure Document, 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.




As
      of
      September 30, 2008, 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:




22


·
            EPL’s
                “fixed charge coverage ratio” (as such term is defined in the senior
                credit agreement) was 1.11 to 1; and·
            EPL’s
                “leverage ratio” (as such term is defined in the senior credit agreement)
                was 4.95 to 1.




These
      two
      ratios were permitted to be no less than 1.0 to 1, and no greater than 5.00
      to
      1, respectively, as of such date.





In
      addition, as of September 30, 2008, 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 1.21 to 1 and 7.61 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, the realization of gross
      deferred tax assets, tax reserves, and contingent liabilities including the
      outcome of litigation. 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 24,
      2008. See also Note 5 to our Unaudited Condensed Consolidated Financial
      Statements.





**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 $49.6 million (current debt balance less $50.0 million covered by the
      Interest Rate Swap Agreement) as of September 30, 2008 would result in an
      increase in interest expense of approximately $0.2 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 September
      30, 2008 to be material.





To
      manage
      or reduce the interest rate risk, the Company periodically enters into interest
      rate swap transactions. The Company enters into these contracts with major
      financial institutions, which may minimize its risk of credit loss. The Company
      first began engaging in these transactions in 2002. On June 26, 2008, the
      Company entered into an interest rate swap agreement with an effective date
      of
      September 24, 2008 and a maturity date of June 30, 2010. The agreement is based
      on the notional amount of $50.0 million. Under the terms of the agreement,
      the
      Company agreed to make fixed rate payments on the notional amount on a quarterly
      basis at increasing interest rates ranging from 3.17% to 4.61%, in exchange
      for
      receiving payments on the notional amount at a floating rate based on the
      three-month LIBOR rate, on a quarterly basis. The interest rate swap agreement
      is intended to reduce interest rate risk associated with variable interest
      rate
      debt. At September 30, 2008, the fair value of the interest rate swap was
      approximately $399,000 and is included in other noncurrent liabilities on the
      accompanying consolidated balance sheet.


23


**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 September 30, 2008. 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 39 weeks ended September 30, 2008.




24


**PART
      II – OTHER INFORMATION**




**Item
      1. Legal Proceedings**




The
      information set forth in Note 5 to our Unaudited Condensed Consolidated
      Financial Statements in Part I of this Report is incorporated herein by this
      reference.





Also
      see
      our Annual Report on Form 10-K for the year ended December 26, 2007 as filed
      with the SEC on March 24, 2008.





**Item
      1A. Risk Factors**





***We
      rely on our franchisees to successfully develop and operate new
      restaurants.*** ****




We
      rely
      in part on our franchisees and the manner in which they operate their locations
      to develop and promote our business. Our top ten franchisees operate
      approximately half of our franchised restaurants. A loss of, or the failure
      of,
      one or more of these franchisees could have a material adverse effect on our
      results of operations. Additionally, if one or more of these franchisees were
      to
      become insolvent or otherwise were unwilling or unable to pay us their fees,
      our
      business could be adversely affected.




As
      of
      December 26, 2007, we have executed development agreements that represent
      commitments to open 208 restaurants. These franchised restaurants will be
      located in California, Washington, Arizona, Missouri, Illinois, Georgia,
      Virginia, Utah, New York, New Jersey, Oregon, North Carolina, Florida and the
      six New England states. Although we have developed criteria to evaluate and
      screen prospective franchisees, we cannot be certain that the franchisees we
      select will have the business acumen or financial resources necessary to operate
      successful franchises in their franchise areas, and state franchise laws may
      limit our ability to terminate or modify these franchise arrangements. Moreover,
      franchisees may not successfully operate restaurants in a manner consistent
      with
      our standards and requirements, or may not hire and train qualified managers
      and
      other restaurant personnel. The failure of franchisees to operate franchises
      successfully could have a material adverse effect on us, our reputation, our
      brands and our ability to attract prospective franchisees and could materially
      adversely affect our business, financial condition, results of operations and
      cash flows.




Franchisees
      may not have access to the financial or management resources that they need
      to
      open the restaurants contemplated by their agreements with us, or be able to
      find suitable sites on which to develop them. Franchisees may not be able to
      negotiate acceptable lease or purchase terms for restaurant sites, obtain the
      necessary permits and government approvals or meet construction schedules.
      Any
      of these problems could slow our growth and reduce our franchise revenue.
      Additionally, our franchisees typically depend on financing from banks and
      other
      financial institutions, which may not always be available to them, in order
      to
      construct and open new restaurants. The lack of adequate financing could
      adversely affect the number and rate of new restaurant openings by our
      franchisees and adversely affect our future franchise revenue. Due to adverse
      economic and liquidity conditions, our franchisees are delaying the opening
      of
      new restaurants under existing development agreements, resulting in a reduction
      in the number of new franchised restaurants we expect to open in 2008 from
      40 to
      approximately 20 restaurants. These opening delays could continue in 2009 based
      on economic conditions.





Also,
      we
      sublease certain restaurants to some existing California franchisees. If any
      such franchisees cannot meet their financial obligations under the sublease,
      or
      otherwise fail to honor or default under the terms of the sublease, we would
      be
      financially obligated under the master lease and could be materially adversely
      affected.





***We
      are vulnerable to changes in consumer preferences and economic conditions that
      could harm our business, financial condition, results of operations and cash
      flow.*** ****




Food
      service businesses are often affected by changes in consumer tastes, national,
      regional and local economic conditions and demographic trends. Factors such
      as
      traffic patterns, weather, fuel prices, local demographics and the type, number
      and location of competing restaurants may adversely affect the performance
      of
      individual locations. In addition, inflation and increased food or energy costs
      may harm the restaurant industry in general and our locations in particular.
      Adverse changes in any of these factors could reduce consumer traffic or impose
      practical limits on pricing that could harm our business, financial condition,
      results of operations and cash flow. In 2008, the impact of significantly higher
      gasoline prices, rising food costs, declining home values and the prospect
      of a
      recession have negatively affected discretionary spending, which could result
      in
      reduced customer traffic at our restaurants.





25


There
      can
      be no assurance that consumers will continue to regard chicken-based or
      Mexican-inspired food favorably or that we will be able to develop new products
      that appeal to consumer preferences. Our continued success depends in part
      on
      our ability to anticipate, identify and respond to changing consumer preferences
      and economic conditions.





The
      unemployment rate in California, where we have a large number of restaurants,
      was 7.7% in August 2008, a significant increase from 5.5% in August 2007. Higher
      unemployment rates could adversely affect customer traffic.




These
      and
      other factors may have a material adverse effect on our business, financial
      condition and results of operations and you should carefully consider them.
      For
      a discussion of other potential risks and uncertainties, refer to “Risk
      Factors,” included in our Annual Report on Form 10-K for the year ended December
      26, 2007 as filed with the U.S. Securities Exchange Commission on March 24,
      2008, as updated in quarterly and current reports filed with the Commission.




**Item
      5. Other Information.**




On
      November 6, 2008, the Company issued a press release reporting results of
      operations for the third quarter ended September 30, 2008. A copy of the press
      release is being furnished as Exhibit 99.1 hereto and is incorporated herein
      by
      this reference. We do not intend for this exhibit to be incorporated by
      reference into any other filings we make with the SEC. This information is
      provided in this Report in response to Item 2.02, Results of Operations and
      Financial Condition, and Item 9.01, Financial Statements and Exhibits, of Form
      8-K in lieu of filing a Form 8-K.





**Item
      6. Exhibits.**




**Exhibit****Number**
            
            **Description
                of Documents**3.1
            
            Amended
                and Restated Bylaws of EPL Intermediate, Inc. as of October 7,
                200810.1
            
            Chicken
                Acquisition Corp. 2008 Restricted Stock Plan for Directors and related
                Restricted Stock Award Agreement31.1
            
            Certification
                Pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange
                Act of 193431.2
            
            Certification
                Pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange
                Act of 193432.1
            
            Certification
                Pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange
                Act of 193432.2
            
            Certification
                Pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange
                Act of 193499.1
            
            Press
                Release dated November 6, 2008




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:
                November 7, 2008
            By:
            /s/
                Stephen E. CarleyStephen
                E. Carley*President*By:
            /s/
                Joseph SteinJoseph
                Stein*Chief
                Financial Officer and
                Treasurer*




27




**EXHIBIT
      INDEX**




**Exhibit****Number**
            
            **Description
                of Documents**3.1
            
            Amended
                and Restated Bylaws of EPL Intermediate, Inc. as of October 7,
                200810.1
            
            Chicken
                Acquisition Corp. 2008 Restricted Stock Plan for Directors and related
                Restricted Stock Award Agreement31.1
            
            Certification
                Pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange
                Act of 193431.2
            
            Certification
                Pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange
                Act of 193432.1
            
            Certification
                Pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange
                Act of 193432.2
            
            Certification
                Pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange
                Act of 193499.1
            
            Press
                Release dated November 6, 2008





28