UNITED STATES


SECURITIES AND
EXCHANGE COMMISSION


Washington,
D.C. 20549





Form
10-Q


(Mark
One)


x  QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934





For the
quarterly period ended September 29, 2010


or





 ̈   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. Employerincorporation or organization)
            Identification No.)3535 Harbor Blvd., Suite 100Costa Mesa, California
            92626(Address of principal executive offices)
            (Zip Code)





(714)
599-5000


(Registrant’s
telephone number, including area code)





Not
Applicable


(Former
name, former address and former fiscal year, if changed since 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 x No  ̈





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit
and post such files).     Yes  ̈    No
 ̈





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting
company.  See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” 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 12, 2010, 100 shares of the registrant’s common stock were
outstanding.








TABLE
OF CONTENTS




Item
              
              
              PagePART
      I – FINANCIAL INFORMATION1.
              
              Condensed
      Consolidated Financial Statements (Unaudited)
              32.
              
              Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
              193.
              
              Quantitative
      and Qualitative Disclosures About Market Risk
              314.
              
              Controls
      and Procedures
              31PART
      II – OTHER INFORMATION1.
              
              Legal
      Proceedings
              321A.
              
              Risk
      Factors
              325.
              
              Other
      Information
              336.
              
              Exhibits
              34








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 30,
                
                
                SEPTEMBER 29,2009
                
                
                2010ASSETSCURRENT
      ASSETS:Cash
      and cash equivalents
                
                $
                11,277
                
                
                $
                12,059Restricted
      cash
                
                
                131
                
                
                
                131Accounts
      and other receivables-net
                
                
                9,607
                
                
                
                3,708Inventories
                
                
                1,606
                
                
                
                1,447Prepaid
      expenses and other current assets
                
                
                5,262
                
                
                
                4,716Deferred
      income taxes
                
                
                327
                
                
                
                327Total
      current assets
                
                
                28,210
                
                
                
                22,388PROPERTY
      OWNED—Net
                
                
                77,344
                
                
                
                73,067PROPERTY
      HELD UNDER CAPITAL LEASES—Net
                
                
                524
                
                
                
                424GOODWILL
                
                
                249,924
                
                
                
                249,924DOMESTIC
      TRADEMARKS
                
                
                91,788
                
                
                
                91,788OTHER
      INTANGIBLE ASSETS—Net
                
                
                1,900
                
                
                
                1,587OTHER
      ASSETS
                
                
                12,200
                
                
                
                10,322TOTAL
      ASSETS
                
                $
                461,890
                
                
                $
                449,500





See
      notes to condensed consolidated financial statements
      (unaudited).
            (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 30,
                  
                  
                  SEPTEMBER 29,2009
                  
                  
                  2010LIABILITIES
      AND STOCKHOLDER'S EQUITYCURRENT
      LIABILITIES:Current
      portion of obligations under capital leases
                  
                  $
                  341
                  
                  
                  $
                  206Current
      portion of PIK Notes (2014 Notes)
                  
                  
                  -
                  
                  
                  
                  10,600Accounts
      payable
                  
                  
                  20,607
                  
                  
                  
                  11,628Accrued
      salaries
                  
                  
                  4,289
                  
                  
                  
                  2,732Accrued
      vacation
                  
                  
                  2,010
                  
                  
                  
                  2,021Accrued
      insurance
                  
                  
                  1,545
                  
                  
                  
                  2,047Accrued
      income taxes payable
                  
                  
                  15
                  
                  
                  
                  35Accrued
      interest
                  
                  
                  3,432
                  
                  
                  
                  11,460Accrued
      advertising
                  
                  
                  96
                  
                  
                  
                  135Other
      accrued expenses and current liabilities
                  
                  
                  5,239
                  
                  
                  
                  5,845Total
      current liabilities
                  
                  
                  37,574
                  
                  
                  
                  46,709NONCURRENT
      LIABILITIES:Senior
      secured notes (2012 Notes)
                  
                  
                  130,407
                  
                  
                  
                  130,878Senior
      unsecured notes payable (2013 Notes)
                  
                  
                  106,347
                  
                  
                  
                  106,473PIK
      Notes (2014 Notes)-less current portion
                  
                  
                  29,342
                  
                  
                  
                  18,971Obligations
      under capital leases—less current portion
                  
                  
                  1,763
                  
                  
                  
                  1,610Deferred
      income taxes
                  
                  
                  37,776
                  
                  
                  
                  38,743Other
      intangible liabilities—net
                  
                  
                  3,998
                  
                  
                  
                  3,431Other
      noncurrent liabilities
                  
                  
                  10,673
                  
                  
                  
                  10,721Total
      noncurrent liabilities
                  
                  
                  320,306
                  
                  
                  
                  310,827COMMITMENTS
      AND CONTINGENCIESSTOCKHOLDER'S
      EQUITYCommon
      stock, $.01 par value—100 shares authorized;  100 shares issued
      and outstanding
                  
                  
                  -
                  
                  
                  
                  -Additional
      paid-in-capital
                  
                  
                  199,733
                  
                  
                  
                  200,173Accumulated
      deficit
                  
                  
                  (95,723
                  )
                  
                  
                  (108,209
                  )Total
      stockholder's equity
                  
                  
                  104,010
                  
                  
                  
                  91,964TOTAL
      LIABILITIES AND STOCKHOLDER’S EQUITY
                  
                  $
                  461,890
                  
                  
                  $
                  449,500





See
      notes to condensed consolidated financial statements
      (unaudited).
            (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
                  
                  
                  39 Weeks EndedSeptember 30,
                  
                  
                  September 29,
                  
                  
                  September 30,
                  
                  
                  September 29,2009
                  
                  
                  2010
                  
                  
                  2009
                  
                  
                  2010OPERATING
      REVENUE:Restaurant
      revenue
                  
                  $
                  63,740
                  
                  
                  $
                  63,756
                  
                  
                  $
                  197,444
                  
                  
                  $
                  193,686Franchise
      revenue
                  
                  
                  4,764
                  
                  
                  
                  4,457
                  
                  
                  
                  14,357
                  
                  
                  
                  13,754Total
      operating revenue
                  
                  
                  68,504
                  
                  
                  
                  68,213
                  
                  
                  
                  211,801
                  
                  
                  
                  207,440OPERATING
      EXPENSES:Product
      cost
                  
                  
                  20,587
                  
                  
                  
                  19,919
                  
                  
                  
                  63,747
                  
                  
                  
                  60,465Payroll
      and benefits
                  
                  
                  16,621
                  
                  
                  
                  17,359
                  
                  
                  
                  52,391
                  
                  
                  
                  52,266Depreciation
      and amortization
                  
                  
                  3,015
                  
                  
                  
                  2,755
                  
                  
                  
                  8,651
                  
                  
                  
                  7,949Other
      operating expenses
                  
                  
                  23,544
                  
                  
                  
                  23,285
                  
                  
                  
                  74,090
                  
                  
                  
                  70,271Total
      operating expenses
                  
                  
                  63,767
                  
                  
                  
                  63,318
                  
                  
                  
                  198,879
                  
                  
                  
                  190,951OPERATING
      INCOME
                  
                  
                  4,737
                  
                  
                  
                  4,895
                  
                  
                  
                  12,922
                  
                  
                  
                  16,489INTEREST
      EXPENSE—Net
                  
                  
                  9,075
                  
                  
                  
                  9,506
                  
                  
                  
                  23,501
                  
                  
                  
                  27,981OTHER
      EXPENSE
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  443
                  
                  
                  
                  -OTHER
      INCOME
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (452
                  )
                  
                  
                  -LOSS
      BEFORE PROVISION FOR INCOME TAXES
                  
                  
                  (4,338
                  )
                  
                  
                  (4,611
                  )
                  
                  
                  (10,570
                  )
                  
                  
                  (11,492
                  )PROVISION
      FOR INCOME TAXES
                  
                  
                  306
                  
                  
                  
                  221
                  
                  
                  
                  19,848
                  
                  
                  
                  994NET
      LOSS
                  
                  $
                  (4,644
                  )
                  
                  $
                  (4,832
                  )
                  
                  $
                  (30,418
                  )
                  
                  $
                  (12,486
                  )





See notes
to condensed consolidated financial statements (unaudited).


5




EPL
INTERMEDIATE, INC.


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





CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)


(Amounts
in thousands)




39 Weeks EndedSeptember 30,
                        
                        
                        September 29,2009
                        
                        
                        2010CASH
      FLOWS - OPERATING ACTIVITIES:Net
      loss
                        
                        $
                        (30,418
                        )
                        
                        $
                        (12,486
                        )Adjustments
      to reconcile net loss to net cash provided by operating
      activities:Depreciation
      and amortization
                        
                        
                        8,651
                        
                        
                        
                        7,949Stock-based
      compensation expense
                        
                        
                        390
                        
                        
                        
                        563Interest
      accretion
                        
                        
                        3,336
                        
                        
                        
                        826Loss
      on disposal of assets
                        
                        
                        -
                        
                        
                        
                        274Gain
      on repurchase of bonds
                        
                        
                        (452
                        )
                        
                        
                        -Asset
      impairment
                        
                        
                        3,200
                        
                        
                        
                        1,490Closed
      store reserve
                        
                        
                        -
                        
                        
                        
                        1,147Amortization
      of deferred financing costs
                        
                        
                        2,799
                        
                        
                        
                        2,230Amortization
      of favorable / unfavorable leases
                        
                        
                        (142
                        )
                        
                        
                        (254
                        )Deferred
      income taxes
                        
                        
                        19,173
                        
                        
                        
                        967Change
      in fair value of interest rate swap
                        
                        
                        231
                        
                        
                        
                        -Changes
      in operating assets and liabilities:Accounts
      and other receivables-net
                        
                        
                        (599
                        )
                        
                        
                        5,899Inventories
                        
                        
                        125
                        
                        
                        
                        159Prepaid
      expenses and other current assets
                        
                        
                        (1,000
                        )
                        
                        
                        546Income
      taxes receivable / payable
                        
                        
                        636
                        
                        
                        
                        20Other
      long term assets
                        
                        
                        (141
                        )
                        
                        
                        (361
                        )Accounts
      payable
                        
                        
                        2,606
                        
                        
                        
                        (9,037
                        )Accrued
      salaries and vacation
                        
                        
                        (595
                        )
                        
                        
                        (1,546
                        )Accrued
      insurance
                        
                        
                        (167
                        )
                        
                        
                        502Other
      accrued expenses and current and noncurrent liabilities
                        
                        
                        5,739
                        
                        
                        
                        7,575Net
      cash provided by operating activities
                        
                        
                        13,372
                        
                        
                        
                        6,463CASH
      FLOWS -INVESTING ACTIVITIESPurchase
      of property
                        
                        
                        (7,449
                        )
                        
                        
                        (5,273
                        )Proceeds
      from asset disposition
                        
                        
                        -
                        
                        
                        
                        3Restricted
      cash
                        
                        
                        (131
                        )
                        
                        
                        -Net
      cash used in investing activities
                        
                        
                        (7,580
                        )
                        
                        
                        (5,270
                        )CASH
      FLOWS - FINANCING ACTIVITIESRepurchase
      of common stock
                        
                        
                        (881
                        )
                        
                        
                        (123
                        )Payment
      of obligations under capital leases
                        
                        
                        (475
                        )
                        
                        
                        (288
                        )Proceeds
      from borrowings
                        
                        
                        133,850
                        
                        
                        
                        -Payments
      on debt
                        
                        
                        (108,603
                        )
                        
                        
                        -Repurchase
      of notes
                        
                        
                        (1,470
                        )
                        
                        
                        -Deferred
      financing costs
                        
                        
                        (9,238
                        )
                        
                        
                        -Net
      cash provided by (used in) financing activities
                        
                        
                        13,183
                        
                        
                        
                        (411
                        )





See
      notes to condensed consolidated financial statements
      (unaudited).
            (continued)


6





EPL
INTERMEDIATE, INC.


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





CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)


(Amounts
in thousands)




39 Weeks EndedSeptember
      30,
                
                
                September
      29,2009
                
                
                2010INCREASE
      IN CASH AND CASH EQUIVALENTS
                
                $
                18,975
                
                
                $
                782CASH
      AND CASH EQUIVALENTS—Beginning
      of period
                
                
                1,076
                
                
                
                11,277CASH
      AND CASH EQUIVALENTS—End
      of period
                
                $
                20,051
                
                
                $
                12,059SUPPLEMENTAL
      DISCLOSURE OF CASH FLOWINFORMATION—Cash
      paid during the period for:Interest
                
                $
                9,008
                
                
                $
                16,900Income
      taxes, net
                
                $
                38
                
                
                $
                7SUPPLEMENTAL
      SCHEDULE OF NON-CASH ACTIVITIES:Unpaid
      purchases of property and equipment
                
                $
                356
                
                
                $
                87





See
      notes to the condensed consolidated financial statements
      (unaudited).
            (concluded)





7





EPL
INTERMEDIATE, INC.


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





NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)





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 accounting
principles generally accepted in the United States of America for interim
financial information and 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 unaudited 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 or any other future
periods.





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 30, 2009 (File No. 333-115644) as filed with the
Securities and Exchange Commission (the “Commission”) on March 30,
2010.





Intermediate
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 99% owned by Trimaran Pollo Partners, LLC (the “LLC”). The Company’s
activities are performed principally through Intermediate’s wholly-owned
subsidiary, EPL, which develops, franchises, licenses, and operates
quick-service restaurants under the name El Pollo Loco®.





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 2009, which ended December 30, 2009,
was a 52-week fiscal year.  Fiscal year 2010, which will end December
29, 2010, is also a 52-week year.





2.
Cash





Concentration
of credit risk





The
Company maintains all of its cash at one commercial bank.  Balances on
deposit are insured by the Federal Deposit Insurance Corporation (FDIC) up to
specified limits.  The Company’s cash balances in excess of the FDIC limits
are uninsured.





Liquidity





The
Company’s principal liquidity requirements are to service its debt and meet
capital expenditure needs. At September 29, 2010, the Company’s total debt was
$268.7 million. Assuming the Company does not repurchase any of the outstanding
2014 Notes (as defined below), in May 2011 Intermediate is required to make a
mandatory redemption of a portion of its 2014 Notes at an estimated cost of
approximately $10.6 million along with the interest payment that will then be
due.  The Company’s ability to make payments on its indebtedness and to
fund planned capital expenditures will depend on available cash and its ability
to generate adequate cash flows in the future, which, to a certain extent, is
subject to general economic, financial, competitive, legislative, regulatory and
other factors that are beyond the Company’s control. Based on current
operations,  the Company believes that its cash flow from operations,
available cash of $12.1 million at September 29, 2010, available borrowings
under the credit facility (which availability was approximately $6.1 million at
September 29, 2010), and funds from CAC will be adequate to meet the Company’s
liquidity needs for the next 12 months.  Under the covenants governing the
Company’s outstanding Notes, EPL is limited on the amount that it can distribute
to Intermediate, including amounts that Intermediate could use to fund its debt
service.  The Company’s results of operations as well as current
economic and constrained liquidity conditions could make it more difficult or
costly to obtain additional debt financing or to refinance its existing debt
when it becomes necessary (assuming such financing is then available to the
Company), or could otherwise make alternative sources of liquidity or financing
costly or unavailable.


8


3. Restricted cash





As of
December 30, 2009 and September 29, 2010, the Company had recorded $0.1 million
as restricted cash on the accompanying condensed consolidated balance
sheet.  This amount serves as collateral to Bank of America for the
Company’s Bank of America company credit cards as of  September 29,
2010 as the Company transferred its banking relationship from Bank of America to
another commercial bank.





4.
Other Intangible Assets and Liabilities





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





December 30, 2009
                  
                  September 29, 2010Gross
                  
                  
                  
                  Net
                  
                  Gross
                  
                  
                  
                  NetCarrying
                  
                  Accumulated
                  
                  Carrying
                  
                  Carrying
                  
                  Accumulated
                  
                  CarryingAmount
                  
                  Amortization
                  
                  Amount
                  
                  Amount
                  
                  Amortization
                  
                  AmountFavorable
      leasehold interest
                  
                  $
                  5,862
                  
                  
                  $
                  (3,962
                  )
                  
                  $
                  1,900
                  
                  
                  $
                  5,862
                  
                  
                  $
                  (4,275
                  )
                  
                  $
                  1,587Unfavorable
      leasehold interest liability
                  
                  $
                  (9,156
                  )
                  
                  $
                  5,158
                  
                  
                  $
                  (3,998
                  )
                  
                  $
                  (9,156
                  )
                  
                  $
                  5,725
                  
                  
                  $
                  (3,431
                  )





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 and is shown as other intangible assets-net on the
accompanying condensed consolidated balance sheets.





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.  This amount is shown as
other intangible liabilities-net on the accompanying condensed consolidated
balance sheets. Net amortization for other intangible assets and liabilities was
$201,000 for the 39-week period ended September 30, 2009 and $254,000 for the
39-week period ended September 29, 2010.




The
estimated net amortization credits for the Company’s favorable and unfavorable
leasehold interests for each of the five succeeding fiscal years is as follows
(in thousands):




Year Ending December2010
      (September 30 – December 29)
                              
                              $
                              (73
                              )2011
                              
                              
                              (290
                              )2012
                              
                              
                              (275
                              )2013
                              
                              
                              (213
                              )2014
                              
                              
                              (227
                              )2015
                              
                              
                              (156
                              )





5.
Asset Impairment





The
Company reviews its long-lived assets for impairment on a
restaurant-by-restaurant basis whenever events or changes in circumstances
indicate that the carrying value of certain assets may not be recoverable. 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 $2.0 million in March 2009 for two under-performing
company-operated stores that continue to be operated and $1.2 million in
September 2009 for four under-performing company-operated stores of which three
continue to be operated.  The Company recorded an impairment charge of
approximately $1.3 million in June 2010 for one under-performing
company-operated store that continues to be operated and $0.2 million in
September 2010 for one under-performing company store that continues to be
operated.  These impairment charges are included in other operating
expenses in the accompanying condensed consolidated statements of
operations.





6.
Fair Value Measurement





The
Company’s financial assets and liabilities, which include financial instruments
as defined by Accounting Standards Codification (ASC) 820 Fair Value
Measurements and Disclosures, to Certain Financial Instruments, include cash and
cash equivalents, restricted cash, accounts receivable, accounts payable and
certain accrued expenses, long-term debt and derivatives. The Company believes
the carrying amounts of cash and cash equivalents, restricted cash, accounts
receivable, accounts payable and certain accrued expenses approximate fair value
due to their short term maturities. Long term debt is considered by the Company
to be representative of current market rates. Accordingly, the Company estimates
that the recorded amounts approximate fair market value.


9




7. Stock-Based Compensation





As of
September 29, 2010, options to purchase 277,633 shares of common stock of CAC
were outstanding, including 58,606 options that were 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 sixth or seventh
anniversary of the grant date or vesting 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 of the
common stock on the date of grant.





Changes
in stock options for the thirty-nine weeks ended September 29, 2010 are as
follows:





Weighted-AverageRemainingWeighted-
                  Average
                
                
                Contractual
                  Life
                
                Aggregate
                  IntrinsicShares
                
                
                Exercise Price
                
                
                (in Years)
                
                ValueOutstanding—December
      30, 2009
                
                
                289,217
                
                
                $
                71.22Grants
      (weighted-average fair value of $20.21 per share)
                
                
                2,225
                
                
                $
                46.00Exercised
                
                
                (7,134
                )
                
                $
                3.84Canceled
                
                
                (6,675
                )
                
                $Outstanding—September
      29, 2010
                
                
                277,633
                
                
                $
                72.53
                
                
                
                4.8
                
                
                $
                2,125,054Vested
      and expected to vest – September 29, 2010
                
                
                274,246
                
                
                $
                72.53
                
                
                
                4.8
                
                
                $
                2,125,054Exercisable –
      September 29, 2010
                
                
                58,606
                
                
                $
                9.74
                
                
                
                1.5
                
                
                $
                2,125,054





The
intrinsic value is calculated as the difference between the estimated market
value as of September 29, 2010 and the exercise price of options that are
outstanding and exercisable.





As of
September 29, 2010, there was total unrecognized compensation expense of $2.2
million related to unvested stock options, which the Company expects to
recognize over a weighted-average period of 2.7 years or earlier in the event of
an initial public offering of our common stock or change in
control.





In
accordance with the Restricted Stock Plan adopted in 2008, the Company granted
404 shares in 2009 of which 50% vested in January 2010 and granted 598 shares in
the first quarter of 2010, none of which have vested.  The restricted
stock expense recorded in the thirty-nine weeks ended September 29, 2010 related
to these vested shares was immaterial.





1,000
shares of common stock of CAC were issued to a director during the second
quarter of 2010.  In accordance with this issuance, compensation
expense of $46,000 was recognized during the second quarter of
2010.


10


8. Commitments and Contingencies





Legal
Matters





As
previously disclosed in earlier reports filed with the Securities and Exchange
Commission, the Company entered into an agreement in the fourth quarter of 2009
to settle for $8.0 million a purported class action lawsuit brought by former
managers Haroldo Elias, Marco Ramirez and Javier Rivera. The Company funded the
settlement on January 14, 2010 and the Superior Court of the State of
California, County of Los Angeles, granted final approval of the class wide
settlement and entered Final Judgment at a hearing on April 20,
2010.  This settlement also included and settled the previously
disclosed purported class action complaint filed by Salvador
Amezcua.  Total payments related to this case were $8.7
million.





In April
2007, Dora Santana filed a purported class action 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 have agreed to settle
this matter for approximately $0.8 million and have executed a Settlement
Agreement. This amount was fully accrued for in the prior year and is included
in the accompanying condensed consolidated balance sheets in accounts payable as
of September 29, 2010.  The Court granted final approval of this
settlement in August 2010 and the settlement was funded on October 25,
2010.





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. The parties have agreed to settle this matter for approximately $1.9
million and have executed a Settlement Agreement. This amount was accrued for in
the prior year and is included in the accompanying condensed consolidated
balance sheets in accounts payable as of September 29, 2010.  On
October 28, 2010, the Judge ruled that the settlement was fair and granted final
approval upon successful notice to additional class members and a determination
of the fees due to the settlement administrator.  A final approval
hearing is set for January 7, 2011.





Martin
Penaloza, a former Assistant Manager, filed a purported class action on May 26,
2009 in Superior Court in Orange County, California. The claims, requested
remedies, and potential class in this case overlap those in the Delgado lawsuit
described above and will be included in that settlement.





In
September 2008, American International Specialty Lines Insurance Company
(AISLIC) from whom the Company acquired excess insurance coverage, filed an
action for declaratory judgment seeking to have the court determine that it is
not required to indemnify EPL for any amounts awarded against it (or paid in
settlement) in connection’s with the previously settled EPL-Mexico v. EPL-USA
trademark litigation.  In July 2010, the parties agreed to settle this
matter for payment to the Company of $75,000 and a waiver of fees and costs by
AISLIC.  The Company received payment from AISLIC on July 28,
2010.





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 other actions will have a material adverse effect on our financial
position, results of operations, liquidity and capital resources. A significant
increase in the number of claims or an increase in amounts owing under
successful claims could materially adversely affect our business, financial
condition, results of operation and cash flows.





Purchasing
Commitments





The
Company has long-term beverage supply agreements with certain major beverage
vendors. Pursuant to the terms of these arrangements, marketing rebates are
provided to the Company and its franchisees from the beverage vendors based upon
the dollar volume of purchases for system-wide restaurants 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 and
2012 with an estimated Company obligation totaling $3.8 million.





In March
2010, EPL executed a chicken supply contract with a vendor that has pricing
relatively flat compared to the prior year’s expired contract.  This
agreement has a balance of approximately 17 months remaining for chicken
purchases totaling approximately $15.2 million.  Additionally, EPL
has a balance of approximately 5 months remaining on contracts with certain
other vendors for chicken totaling approximately $12.0 million.





EPL has a
fixed price steak supply contract with a vendor that was entered into in January
2010.  The contract requires that the Company purchase a quantity
totaling approximately $3.7 million and expires on December 31,
2010.  At September 29, 2010, our remaining obligation under the
contract was approximately $0.9 million.


11





Contingent
Lease Obligations





As a
result of assigning our interest in obligations under real estate leases in
connection with the sale of Company-owned restaurants to some of our
franchisees, we are contingently liable on six lease
agreements.  These leases have various terms, the latest of which
expires in 2015.  As of September 29, 2010, the potential amount of
undiscounted payments we could be required to make in the event of non-payment
by the primary lessee was approximately $1.1 million.  The present
value of these potential payments discounted at our estimated pre-tax cost of
debt at September 29, 2010 was approximately $0.8 million. Our franchisees are
primarily liable on the leases.  We have cross-default provisions with
these franchisees that would put them in default of their franchise agreement in
the event of non-payment under the leases.  We believe these
cross-default provisions reduce the risk that we will be required to make
payments under these leases.  Accordingly, no liability has been
recorded on the Company’s books related to this guarantee.





9.
Senior Secured Notes (2012 Notes)





On May
22, 2009, EPL issued $132.5 million aggregate principal amount of 113⁄4% senior
secured notes due December 1, 2012 (the “2012 Notes”) in a private
placement.  EPL sold the 2012 Notes at an issue price equal to 98.0%
of the principal amount, resulting in gross proceeds to EPL of $129.9 million
before expenses and fees.  At September 29, 2010, the Company had
$130.9 million outstanding in aggregate principal amount of the 2012 Notes. The
principal value of the 2012 Notes will increase (representing accretion of
original issue discount) from the date of original issuance so that the accreted
value of the 2012 Notes will be equal to the full principal amount of $132.5
million at maturity. Interest is payable each year in June and December
beginning December 1, 2009. The 2012 Notes are guaranteed by Intermediate and
are secured by a second priority lien on substantially all of the Company’s
assets, which includes all of the outstanding common stock of
EPL.  The 2012 Notes may be redeemed at a premium, at the discretion
of EPL, after March 1, 2011, or sooner in connection with certain equity
offerings. If EPL undergoes certain changes of control, each holder of the notes
may require EPL to repurchase all or a part of its notes at a price of 101% of
the principal amount.  The Indenture governing the 2012 Notes contains
a number of covenants that, among other things, restrict, subject to certain
exceptions, EPL’s ability to incur additional indebtedness, pay dividends or
certain restricted payments, make certain investments, sell assets, create
liens, merge and enter into certain transactions with its affiliates. As of
September 29, 2010, EPL’s fixed charge coverage ratio was 1:19 to 1:00 which
does not meet the coverage ratio of 2:00 to 1:00 which EPL must meet in order to
incur additional indebtedness (other than indebtedness under our revolving
credit facility) and make dividend and other restricted payments in an aggregate
amount in excess of $2.9 million. A failure to comply with this ratio affects
only EPL's ability to incur additional indebtedness and make certain dividend
and other restricted payments, but does not constitute a default under the 2012
notes.


12





EPL
incurred direct finance costs of approximately $9.2 million in connection with
this offering and registration of these notes. These costs have been capitalized
and are included in other assets in the accompanying condensed consolidated
balance sheets, and the related amortization is reflected as a component of
interest expense in the accompanying condensed consolidated statement of
operations. The Company used the net proceeds from the 2012 Notes to repay
certain indebtedness and for general corporate purposes. In December 2009, we
completed the exchange of these notes for registered, publicly tradable notes
that have substantially identical terms of these notes.





10.
Senior Unsecured Notes Payable (2013 Notes)





EPL has
outstanding $106.5 million aggregate principal amount of 113⁄4% senior notes due
November 15, 2013 (the “2013 Notes”). 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 a premium, at the discretion of the issuer.
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 and make certain dividends and
other restricted payments, among other items.  As of September 29,
2010, EPL’s fixed charge coverage ratio was 1:11 to 1:00 which does not meet the
coverage ratio of 2:00 to 1:00 which EPL must meet in order to incur additional
indebtedness (other than indebtedness under our revolving credit facility) and
make dividend and other restricted payments in an aggregate amount in excess of
$2.9 million.  A failure to comply with this ratio affects only EPL’s
ability to incur additional indebtedness and make certain dividend and other
restricted payments, but does not constitute a default under the 2013
notes.





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 condensed
consolidated balance sheets, and the related amortization is reflected as a
component of interest expense in the accompanying condensed consolidated
financial statements. The Company used the proceeds from the 2013 Notes to
refinance certain indebtedness of the Company.




The
Company purchased $2.0 million in principal amount of the 2013 Notes at a price
of $1.5 million in March 2009. The net purchase price was 74% of the principal
amount of such notes and resulted in a net gain of $0.5 million which is
included in other income in the condensed consolidated statement of operations.
The gain of $0.5 million is net of the write-off of prorated deferred finance
costs of $0.1 million.





11. Revolving Credit Facility





On May
22, 2009, EPL entered into a credit agreement (the “Credit Facility”) with
Intermediate as guarantor, Jefferies Finance LLC, as administrative and
syndication agent and the various lenders (see subsequent event Note 17). The
Credit Facility provides for a $12.5 million revolving line of credit with
borrowings (including obligations in respect of revolving loans and letters of
credit) limited at any time to the lesser of (i) $12.5 million and (ii) the
Company’s consolidated cash flow for the most recently completed trailing twelve
consecutive months and, in no event, shall obligations in respect to letters of
credit exceed an amount equal to $10 million. Utilizing the Credit Facility,
$6.4 million of letters of credit were issued and outstanding as of September
29, 2010.





The
Credit Facility bears interest, payable quarterly, at an Alternate Base Rate (as
defined in the Credit Facility) or LIBOR, at EPL's option, plus an applicable
margin. The applicable margin rate is 5.50% with respect to LIBOR and 4.50% with
respect to Alternate Base Rate advances. The Credit Facility is secured by a
first priority lien on substantially all of the Company’s assets and is
guaranteed by Intermediate. The Credit Facility matures on July 22,
2012.




The
Credit Facility contains a number of covenants that, among other things,
restrict, subject to certain exceptions, the Company’s ability to (i) incur
additional indebtedness or issue preferred stock; (ii) create liens on assets;
(iii) engage in mergers or consolidations; (iv) sell assets; (v) make certain
restricted payments; (vi) make investments, loans or advances; (vii) make
certain acquisitions; (viii) engage in certain transactions with affiliates;
(ix) change the Company’s lines of business or fiscal year; and (x) engage in
speculative hedging transactions. In addition, the Credit Facility requires
the Company to maintain, on a consolidated basis, a minimum level of
consolidated cash flow at all times. As of September 29, 2010, the Company was
in compliance with all of the financial covenants contained in the Credit
Facility and had $6.1 million available for borrowings under the revolving line
of credit.


13





12.
PIK Notes (2014 Notes)





At
September 29, 2010, Intermediate had $29.3 million outstanding in aggregate
principal amount, along with $0.3 million of the premium discussed below, of the
141⁄2% PIK notes due 2014.  No cash interest accrued on these notes
prior to November 15, 2009. Instead, the principal value of these notes
increased (representing accretion of original issue discount) from the date of
original issuance until but not including November 15, 2009 at a rate of 141⁄2%
per annum compounded annually, so that the accreted value of these notes on
November 15, 2009 was equal to the full principal amount of $29.3 million due at
maturity.




Beginning
November 15, 2009, cash interest accrued on these notes at an annual rate of
141⁄2% 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 governing these notes restricts Intermediate’s and EPL’s ability to,
among other items, incur additional indebtedness, sell assets, engage in
transactions with affiliates and issue or sell preferred stock. The indenture
governing these notes also limits the ability of Intermediate or EPL to make
payments to El Pollo Loco Holdings, Inc., the immediate parent corporation of
Intermediate.  As of September 29, 2010, the Company’s fixed charge
coverage ratio was 1:11 to 1:00 which does not meet the coverage ratio of 2:00
to 1:00 which the Company must meet in order to incur additional indebtedness
(other than indebtedness under our revolving credit facility) and make dividend
and other restricted to payments in an aggregate amount in excess of $2.9
million.  A failure to comply with this ratio affects only the
Company’s ability to incur additional indebtedness and make certain dividend and
other restricted payments and does not constitute a default under the 2014
notes.





These notes are effectively
subordinated to all existing and future indebtedness and other liabilities of
EPL. These notes are unsecured and are not guaranteed. If any of these notes are
outstanding at May 15, 2011, Intermediate 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, if any. This payment is
currently estimated to be approximately $10.6 million.  Additionally,
Intermediate may, at its discretion, redeem for a premium any or all of these
notes, subject to certain provisions contained in the indenture governing these
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.  Intermediate has no material assets or operations; 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 (see Note 10) and the 2012 Notes (see Note 9),
have restrictions that limit distributions or dividends that may be paid by EPL
to Intermediate.  See Note 14 for condensed consolidating financial
statements of Intermediate and EPL.





In
October 2006, Intermediate completed the exchange of these notes for registered,
publicly tradable notes that have substantially identical terms as these notes.
The costs incurred in connection with the registration of these notes were
capitalized and included in other assets in the consolidated balance sheets and
the related amortization was reflected as a component of interest expense in the
condensed consolidated statements of operations.





13.
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.





As of
December 30, 2009 and September 29, 2010, the Company has no material
unrecognized tax benefits.





The
Company will continue to classify income tax penalties and interest as part of
the provision for income taxes in its Condensed Consolidated Statements of
Operations. The Company has not recorded accrued interest and penalties on
uncertain tax positions as of September 29, 2010. 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 recorded a full valuation allowance on its deferred tax assets in 2009
due to uncertainties surrounding the Company’s ability to generate future
taxable income to realize such deferred income tax assets.  In evaluating
the need for a valuation allowance, the Company made judgments and estimates
related to future taxable income, the timing of the reversal of temporary
differences and facts and circumstances.  The Company continues to maintain
a full valuation allowance against its deferred tax assets as of September 29,
2010.  However, subsequent changes in facts and circumstances that affect
the Company’s judgments or estimates in determining the proper deferred tax
assets or liabilities could materially affect the valuation
allowance.


14





14.
Financial Information for Parent Guarantor and Subsidiary





The
following presents condensed consolidating financial information for the
Company, segregating: (1) Intermediate, the parent which has unconditionally
guaranteed, jointly and severally the 2012 Notes and 2013 Notes and has pledged
its investment in the common stock of EPL as collateral for the 2012 Notes; and
(2) EPL, the issuer of the 2012 Notes that also unconditionally guaranteed,
jointly and severally the 2012 Notes.  EPL is a wholly owned
subsidiary of Intermediate.





For the
Thirteen Weeks Ended September 29, 2010


(in
thousands)





ConsolidatedEPL
                  
                  
                  Intermediate
                  
                  
                  Subtotal
                  
                  
                  Eliminations
                  
                  
                  TotalRevenues
                  
                  $
                  68,213
                  
                  
                  $
                  -
                  
                  
                  $
                  68,213
                  
                  
                  $
                  -
                  
                  
                  $
                  68,213Operating
      expenses
                  
                  
                  63,311
                  
                  
                  
                  7
                  
                  
                  
                  63,318
                  
                  
                  
                  -
                  
                  
                  
                  63,318Operating
      income (loss)
                  
                  
                  4,902
                  
                  
                  
                  (7
                  )
                  
                  
                  4,895
                  
                  
                  
                  -
                  
                  
                  
                  4,895Investment
      in subsidiary
                  
                  
                  -
                  
                  
                  
                  3,454
                  
                  
                  
                  3,454
                  
                  
                  
                  (3,454
                  )
                  
                  
                  -Interest
      expense and other
                  
                  
                  8,193
                  
                  
                  
                  1,313
                  
                  
                  
                  9,506
                  
                  
                  
                  -
                  
                  
                  
                  9,506Provision
      for income taxes
                  
                  
                  163
                  
                  
                  
                  58
                  
                  
                  
                  221
                  
                  
                  
                  -
                  
                  
                  
                  221Net
      loss
                  
                  
                  (3,454
                  )
                  
                  
                  (4,832
                  )
                  
                  
                  (8,286
                  )
                  
                  
                  3,454
                  
                  
                  
                  (4,832
                  )





For the
Thirteen Weeks Ended September 30, 2009


(in
thousands)





EPL
                  
                  
                  Intermediate
                  
                  
                  Subtotal
                  
                  
                  Eliminations
                  
                  
                  Consolidated
                    TotalRevenues
                  
                  $
                  68,504
                  
                  
                  $
                  -
                  
                  
                  $
                  68,504
                  
                  
                  $
                  -
                  
                  
                  $
                  68,504Operating
      expenses
                  
                  
                  63,745
                  
                  
                  
                  22
                  
                  
                  
                  63,767
                  
                  
                  
                  -
                  
                  
                  
                  63,767Operating
      income (loss)
                  
                  
                  4,759
                  
                  
                  
                  (22
                  )
                  
                  
                  4,737
                  
                  
                  
                  -
                  
                  
                  
                  4,737Investment
      in subsidiary
                  
                  
                  -
                  
                  
                  
                  3,711
                  
                  
                  
                  3,711
                  
                  
                  
                  (3,711
                  )
                  
                  
                  -Interest
      expense and other
                  
                  
                  8,068
                  
                  
                  
                  1,007
                  
                  
                  
                  9,075
                  
                  
                  
                  -
                  
                  
                  
                  9,075Provision
      (benefit) for income taxes
                  
                  
                  402
                  
                  
                  
                  (96
                  )
                  
                  
                  306
                  
                  
                  
                  -
                  
                  
                  
                  306Net
      loss
                  
                  
                  (3,711
                  )
                  
                  
                  (4,644
                  )
                  
                  
                  (8,355
                  )
                  
                  
                  3,711
                  
                  
                  
                  (4,644
                  )


15




For the
Thirty-nine Weeks Ended September 29, 2010


(in
thousands)





ConsolidatedEPL
                    
                    
                    Intermediate
                    
                    
                    Subtotal
                    
                    
                    Eliminations
                    
                    
                    TotalRevenues
                    
                    $
                    207,440
                    
                    
                    $
                    -
                    
                    
                    $
                    207,440
                    
                    
                    $
                    -
                    
                    
                    $
                    207,440Operating
      expenses
                    
                    
                    190,863
                    
                    
                    
                    88
                    
                    
                    
                    190,951
                    
                    
                    
                    -
                    
                    
                    
                    190,951Operating
      income (loss)
                    
                    
                    16,577
                    
                    
                    
                    (88
                    )
                    
                    
                    16,489
                    
                    
                    
                    -
                    
                    
                    
                    16,489Investment
      in subsidiary
                    
                    
                    -
                    
                    
                    
                    8,892
                    
                    
                    
                    8,892
                    
                    
                    
                    (8,892
                    )
                    
                    
                    -Interest
      expense and other
                    
                    
                    24,513
                    
                    
                    
                    3,468
                    
                    
                    
                    27,981
                    
                    
                    
                    -
                    
                    
                    
                    27,981Provision
      for income taxes
                    
                    
                    956
                    
                    
                    
                    38
                    
                    
                    
                    994
                    
                    
                    
                    -
                    
                    
                    
                    994Net
      loss
                    
                    
                    (8,892
                    )
                    
                    
                    (12,486
                    )
                    
                    
                    (21,378
                    )
                    
                    
                    8,892
                    
                    
                    
                    (12,486
                    )Cash
      flow provided by (used in) operations
                    
                    
                    8,591
                    
                    
                    
                    (2,128
                    )
                    
                    
                    6,463
                    
                    
                    
                    -
                    
                    
                    
                    6,463Cash
      flow used in investing activities
                    
                    
                    (5,270
                    )
                    
                    
                    -
                    
                    
                    
                    (5,270
                    )
                    
                    
                    -
                    
                    
                    
                    (5,270
                    )Cash
      flow (used in) provided by financing activities
                    
                    
                    (2,538
                    )
                    
                    
                    2,127
                    
                    
                    
                    (411
                    )
                    
                    
                    -
                    
                    
                    
                    (411
                    )Net
      increase (decrease) in cash
                    
                    
                    783
                    
                    
                    
                    (1
                    )
                    
                    
                    782
                    
                    
                    
                    -
                    
                    
                    
                    782Cash
      and equivalents at beginning of period
                    
                    
                    11,126
                    
                    
                    
                    151
                    
                    
                    
                    11,277
                    
                    
                    
                    -
                    
                    
                    
                    11,277Cash
      and equivalents at end of period
                    
                    
                    11,909
                    
                    
                    
                    150
                    
                    
                    
                    12,059
                    
                    
                    
                    -
                    
                    
                    
                    12,059





For the
Thirty-nine Weeks Ended September 30, 2009


(in
thousands)





ConsolidatedEPL
                          
                          
                          Intermediate
                          
                          
                          Subtotal
                          
                          
                          Eliminations
                          
                          
                          TotalRevenues
                          
                          $
                          211,801
                          
                          
                          $
                          -
                          
                          
                          $
                          211,801
                          
                          
                          $
                          -
                          
                          
                          $
                          211,801Operating
      expenses
                          
                          
                          198,780
                          
                          
                          
                          99
                          
                          
                          
                          198,879
                          
                          
                          
                          -
                          
                          
                          
                          198,879Operating
      income (loss)
                          
                          
                          13,021
                          
                          
                          
                          (99
                          )
                          
                          
                          12,922
                          
                          
                          
                          -
                          
                          
                          
                          12,922Investment
      in subsidiary
                          
                          
                          -
                          
                          
                          
                          19,518
                          
                          
                          
                          19,518
                          
                          
                          
                          (19,518
                          )
                          
                          
                          -Interest
      expense and other
                          
                          
                          20,566
                          
                          
                          
                          2,926
                          
                          
                          
                          23,492
                          
                          
                          
                          -
                          
                          
                          
                          23,492Provision
      for income taxes
                          
                          
                          11,973
                          
                          
                          
                          7,875
                          
                          
                          
                          19,848
                          
                          
                          
                          -
                          
                          
                          
                          19,848Net
      loss
                          
                          
                          (19,518
                          )
                          
                          
                          (30,418
                          )
                          
                          
                          (49,936
                          )
                          
                          
                          19,518
                          
                          
                          
                          (30,418
                          )Cash
      flow provided by operations
                          
                          
                          13,372
                          
                          
                          
                          -
                          
                          
                          
                          13,372
                          
                          
                          
                          -
                          
                          
                          
                          13,372Cash
      flow used in investing activities
                          
                          
                          (7,580
                          )
                          
                          
                          -
                          
                          
                          
                          (7,580
                          )
                          
                          
                          -
                          
                          
                          
                          (7,580
                          )Cash
      flow provided by financing activities
                          
                          
                          13,183
                          
                          
                          
                          -
                          
                          
                          
                          13,183
                          
                          
                          
                          -
                          
                          
                          
                          13,183Net
      increase in cash
                          
                          
                          18,975
                          
                          
                          
                          -
                          
                          
                          
                          18,975
                          
                          
                          
                          -
                          
                          
                          
                          18,975Cash
      and equivalents at beginning of period
                          
                          
                          926
                          
                          
                          
                          150
                          
                          
                          
                          1,076
                          
                          
                          
                          -
                          
                          
                          
                          1,076Cash
      and equivalents at end of period
                          
                          
                          19,901
                          
                          
                          
                          150
                          
                          
                          
                          20,051
                          
                          
                          
                          -
                          
                          
                          
                          20,051





16





As of
September 29, 2010


(in
thousands)





ConsolidatedEPL
                                
                                
                                Intermediate
                                
                                
                                Subtotal
                                
                                
                                Eliminations
                                
                                
                                TotalASSETSCurrent
      Assets
                                
                                $
                                22,698
                                
                                
                                $
                                151
                                
                                
                                $
                                22,849
                                
                                
                                $
                                (461
                                )
                                
                                $
                                22,388Investment
      in subsidiary
                                
                                
                                -
                                
                                
                                
                                119,788
                                
                                
                                
                                119,788
                                
                                
                                
                                (119,788
                                )
                                
                                
                                -Property
      and equipment
                                
                                
                                73,491
                                
                                
                                
                                -
                                
                                
                                
                                73,491
                                
                                
                                
                                -
                                
                                
                                
                                73,491Other
      assets
                                
                                
                                353,392
                                
                                
                                
                                3,218
                                
                                
                                
                                356,610
                                
                                
                                
                                (2,989
                                )
                                
                                
                                353,621Total
      assets
                                
                                
                                449,581
                                
                                
                                
                                123,157
                                
                                
                                
                                572,738
                                
                                
                                
                                (123,238
                                )
                                
                                
                                449,500LIABILITIES
      & EQUITYCurrent
      liabilities
                                
                                
                                37,513
                                
                                
                                
                                12,185
                                
                                
                                
                                49,698
                                
                                
                                
                                (2,989
                                )
                                
                                
                                46,709Non-current
      liabilities
                                
                                
                                292,280
                                
                                
                                
                                19,008
                                
                                
                                
                                311,288
                                
                                
                                
                                (461
                                )
                                
                                
                                310,827Equity
                                
                                
                                119,788
                                
                                
                                
                                91,964
                                
                                
                                
                                211,752
                                
                                
                                
                                (119,788
                                )
                                
                                
                                91,964Total
      liabilities & equity
                                
                                
                                449,581
                                
                                
                                
                                123,157
                                
                                
                                
                                572,738
                                
                                
                                
                                (123,238
                                )
                                
                                
                                449,500





As of
December 30, 2009


(in
thousands)





ConsolidatedEPL
                        
                        
                        Intermediate
                        
                        
                        Subtotal
                        
                        
                        Eliminations
                        
                        
                        TotalASSETSCurrent
      assets
                        
                        $
                        28,516
                        
                        
                        $
                        156
                        
                        
                        $
                        28,672
                        
                        
                        $
                        (462
                        )
                        
                        $
                        28,210Investment
      in subsidiary
                        
                        
                        -
                        
                        
                        
                        130,368
                        
                        
                        
                        130,368
                        
                        
                        
                        (130,368
                        )
                        
                        
                        -Property
      and equipment
                        
                        
                        77,868
                        
                        
                        
                        -
                        
                        
                        
                        77,868
                        
                        
                        
                        -
                        
                        
                        
                        77,868Other
      assets
                        
                        
                        355,541
                        
                        
                        
                        3,342
                        
                        
                        
                        358,883
                        
                        
                        
                        (3,071
                        )
                        
                        
                        355,812Total
      assets
                        
                        
                        461,925
                        
                        
                        
                        133,866
                        
                        
                        
                        595,791
                        
                        
                        
                        (133,901
                        )
                        
                        
                        461,890LIABILITIES
      & EQUITYCurrent
      liabilities
                        
                        
                        40,132
                        
                        
                        
                        514
                        
                        
                        
                        40,646
                        
                        
                        
                        (3,072
                        )
                        
                        
                        37,574Non-current
      liabilities
                        
                        
                        291,425
                        
                        
                        
                        29,342
                        
                        
                        
                        320,767
                        
                        
                        
                        (461
                        )
                        
                        
                        320,306Equity
                        
                        
                        130,368
                        
                        
                        
                        104,010
                        
                        
                        
                        234,378
                        
                        
                        
                        (130,368
                        )
                        
                        
                        104,010Total
      liabilities & equity
                        
                        
                        461,925
                        
                        
                        
                        133,866
                        
                        
                        
                        595,791
                        
                        
                        
                        (133,901
                        )
                        
                        
                        461,890


17





15.
New Accounting Pronouncements





In
October 2009, the Financial Accounting Standards Board (FASB) issued Accounting
Standards Update (ASU) No. 2009-13, Multiple-Deliverable Revenue
Arrangements—a consensus of the FASB Emerging Issues Task Force, which
amends the guidance in ASC 605, Revenue Recognition. 
ASU No. 2009-13 eliminates the residual method of accounting for revenue on
undelivered products and instead, requires companies to allocate revenue to each
of the deliverable products based on their relative selling price.  In
addition, this ASU expands the disclosure requirements regarding
multiple-deliverable arrangements.  ASU No. 2009-13 will be effective for
revenue arrangements entered into during fiscal years beginning on or after June
15, 2010.  The Company’s adoption of ASU No. 2009-13 is not expected to
have a material impact on the Company’s financial position or results of
operations.





16.
Restatement of Condensed Consolidated Financial Statements





We have
restated our accompanying 13 weeks ended and 39 weeks ended September 30, 2009
Condensed Consolidated Statements of Operations and 39 weeks ended September 29,
2009 Condensed Consolidated Statements of Cash Flows from amounts previously
reported to correct an income tax error associated with the accounting for a
full valuation allowance recorded during the second and third quarters of
2009.  The error was due to incorrectly classifying certain intangible
assets as indefinite-lived assets when the full valuation allowance was
recorded.





The
correction of the error, as reflected in our 13 weeks ended and 39 weeks ended
September 30, 2009 Condensed Consolidated Statements of Operations, decreased
our provision for income taxes and net loss for the period by
$3,116,000.  This correction also decreased our net loss and deferred
income taxes on the Condensed Consolidated Statements of Cash Flows for the 39
weeks ended September 30, 2009 by $3,116,000 as well.





The
following is a summary of effects of these changes on the 2009 Condensed
Consolidated Financial Statements:





AsCondensed
      Consolidated Statements of Operations
                          
                          Previously(In thousands)
                          
                          Reported
                          
                          
                          Adjustments
                          
                          
                          As Restated13
      Weeks Ended September 30, 2009:Provision
      for income taxes
                          
                          $
                          675
                          
                          
                          $
                          (369
                          )
                          
                          $
                          306Net
      loss
                          
                          
                          (5,013
                          )
                          
                          
                          369
                          
                          
                          
                          (4,644
                          )39
      Weeks Ended September 30, 2009:Provision
      for income taxes
                          
                          
                          22,964
                          
                          
                          
                          (3,116
                          )
                          
                          
                          19,848Net
      loss
                          
                          
                          (33,534
                          )
                          
                          
                          3,116
                          
                          
                          
                          (30,418
                          )
  AsCondensed
      Consolidated Statements of Cash Flows
                              
                              Previously(In thousands)
                              
                              Reported
                              
                              
                              Adjustments
                              
                              
                              As Restated39
      Weeks Ended September 30, 2009:Net
      loss
                              
                              $
                              (33,534
                              )
                              
                              $
                              3,116
                              
                              
                              $
                              (30,418
                              )Deferred
      income taxes
                              
                              
                              22,289
                              
                              
                              
                              (3,116
                              )
                              
                              
                              19,173


18


17. Subsequent Event





On
October 21, 2010, the Company’s Credit Facility was assigned from Jefferies
Finance LLC to GE Capital Financial, Inc.  In connection with this
assignment the parties entered into an Agency and Assignment Agreement and
Amendment No. 1 to the Credit Agreement and the Other Loan
Documents.  The terms and conditions of the Credit Facility remain
essentially the same as described in Note 11.





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





You
should read the following discussion together with our condensed consolidated
financial statements and related notes thereto included elsewhere in this
filing. The following management’s discussion and analysis gives effect to the
restatement discussed in Note 16 to the Condensed Consolidated Financial
Statements.





Certain
statements contained within this report may be deemed to constitute
“forward-looking statements” within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of
1934.  The Company intends that all such statements be subject to the
safe harbor provisions contained in those sections.  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. Forward-looking
statements generally 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
results, performance, achievements or events.  Readers are cautioned
that such forward-looking statements are subject to risks and uncertainties and
many important factors, including factors outside of the control of the Company,
could cause actual results, performance, achievements or events to differ
materially from those discussed in the forward-looking statements. 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 but are not limited to the
adverse impact of economic conditions on our operating results and financial
condition, on our ability to comply with the terms and covenants of our debt
agreements and on our ability to pay or to refinance our existing debt or to
obtain additional financing; our substantial level of indebtedness;
food-borne-illness incidents; negative publicity, whether or not valid;
increases in the cost of chicken or other product costs;  our
dependence upon frequent deliveries of food and other supplies; our
vulnerability to changes in consumer preferences and economic conditions; our
sensitivity to events and conditions in the greater Los Angeles area, our
largest market; our ability to compete successfully with other quick service and
fast casual restaurants; our ability to expand into new markets; our reliance on
our franchisees, who have also been adversely impacted by the recession; matters
relating to labor laws and the adverse impact of related litigation, including
wage and hour class actions; our ability to support our  franchise
system; our ability to renew leases at the end of their term; the impact of
applicable federal, state or local government regulations; our ability to
protect our name and logo and other proprietary information; risks
arising from the delay or inability to hire new executives for our currently
vacant President/Chief Executive Officer and Chief Marketing Officer positions
since the Company depends on the unique abilities and knowledge of its officers;litigation we face in connection with our operations and other factors,
uncertainties and risks, including those outside of our
control.  Actual results may differ materially due to various factors,
uncertainties and risks, including those described in our Annual Report on Form
10-K (File No. 333-115644) as filed with the Securities and Exchange Commission
on March 30, 2010, as updated from time to time in our quarterly reports and
current reports filed with the Commission and as updated in this Form
10-Q.  Although the Company believes that the assumptions underlying
the forward-looking statements are reasonable, any of the assumptions could
prove inaccurate and, therefore, the Company cannot assure the reader that the
results, performance, achievements or events contemplated by the forward-looking
statements will be realized in the timeframe anticipated or at
all.  In light of the significant uncertainties inherent in
forward-looking statement included herein, the inclusion of such information
should not be regarded as a representation by the Company or any other person
that the Company’s objectives or plans will be
achieved.   Accordingly, readers are cautioned not to place undue
reliance on such forward-looking statements.


19


We use 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 2009, which ended December 30, 2009, was a 52-week
fiscal year. Fiscal year 2010 which will end December 29, 2010, is also a
52-week fiscal year.





References
to “our restaurant system” or “system-wide” 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.





Overview





EPL
Intermediate, Inc. (“Intermediate”) through its wholly-owned subsidiary El Pollo
Loco, Inc. (“EPL” and together with Intermediate, the “Company,” “we,” “us” and
“our”) owns, operates and franchises restaurants specializing in marinated
flame-grilled chicken. Our distinct menu, inspired by the kitchens of Mexico,
features our authentic recipe flame-grilled chicken, which along with our
service format and value price points, serves to differentiate our unique
brand.  In the first half of 2010, we introduced steak products as an
additional choice for our customers.  We offer high-quality,
freshly-prepared food commonly found in fast casual restaurants, while at the
same time providing the value and convenience typically available at traditional
quick serve restaurant or QSR chains.  Our restaurants are located
principally in California, with additional restaurants in Arizona, Colorado,
Connecticut, Georgia, Illinois, Missouri, Nevada, New Jersey, Oregon, Texas,
Utah, and Virginia. 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, 2009, September 29, 2010 and December 30, 2009 are set
forth below:





El
Pollo Loco Restaurants





September 30,
                        2009
                      
                      
                      September 29,
                        2010
                      
                      
                      December 30,
                        2009Company-owned
                      
                      
                      171
                      
                      
                      
                      170
                      
                      
                      
                      172Franchised
                      
                      
                      244
                      
                      
                      
                      242
                      
                      
                      
                      243System-wide
                      
                      
                      415
                      
                      
                      
                      412
                      
                      
                      
                      415





During
the 39 weeks ended September 29, 2010, the Company did not open any new
restaurants and closed two restaurants. During this same 39 week period, our
franchisees opened two new restaurants and closed three
restaurants.





We plan
to open one company-operated restaurant in the fourth quarter of fiscal 2010.
Our franchisees opened a total of three new restaurants in fiscal 2010 (the
third restaurant opened on October 19, 2010).  The growth in new
restaurant openings and the rate of restaurant closings have been, and are
expected to continue to be, negatively impacted by the economic climate, as
discussed below.  In response to this challenging economic
environment, we are adjusting our growth strategy for the future to focus on
new
proto-type designs which are
expected to have lower construction coststhan our past restaurant
designs.





At the
end of the third quarter of 2010, we had 19 system-wide restaurants open in
markets east of the Rockies. The 19 open stores are currently experiencing a
wide range of sales volumes, and a majority of them have sales volumes that are
significantly less than the chain average due to the lack of brand awareness in
the new markets.


20


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 our 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 29, 2010,
same-store sales for system-wide restaurants decreased 2.2% compared to the
corresponding period in 2009. For the 39 weeks ended September 29, 2010,
same-store sales for system-wide restaurants decreased 4.7% compared to the
corresponding period in 2009. 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 revenue) and contribute to advertising pools based on a
percentage of their sales. Same-store sales at company-operated restaurants
decreased 1.1% for the 13 weeks ended September 29, 2010 compared to the 13
weeks ended September 30, 2009. Same-store sales at company-operated restaurants
decreased 3.3% for the 39 weeks ended September 29, 2010 compared to the 39
weeks ended September 30, 2009.




Changes
in company-operated restaurant revenue reflect changes in the number of
company-operated restaurants and changes in same-store sales, which are impacted
by price and transaction volume changes. The challenging economic conditions and
increased unemployment, especially in California where a majority of our
company-operated restaurants are located, negatively impacted our transaction
volume in the first three quarters of 2010. Consumers are eating out less, and
when they do eat out, are more sensitive to price increases and are looking for
specials and promotions. This has an impact on both same-store sales and on
restaurant margins. We believe 2010 has been as challenging as 2009 from an
economic standpoint for QSR’s making it difficult to achieve same-store sales
growth. Many factors can influence sales at all or specific restaurants,
including increased competition, strength of marketing promotions, the
restaurant manager’s operational execution and changes in local market
conditions and demographics.





Franchise
revenue consists of royalties, initial franchise fees revenue, IT support
services fees and franchise rental income. Royalties average 4% of the
franchisees’ net sales. During 2009 and the first three quarters of 2010, due to
adverse economic conditions, some of our franchises were late in the payment of
franchise fees due us and one franchisee filed for bankruptcy in 2009 (we
purchased four of its stores and five other stores were closed).   As
of September 29, 2010, we had commitments from franchisees to open 70 new
restaurants at various dates through 2024. However, the current adverse economic
and liquidity conditions have caused some franchisees to delay the opening of
new restaurants under existing development agreements or to terminate such
agreements. As a result of these conditions, we currently estimate that 8 of
those potential new restaurants could open. As of September 29, 2010 we were
legally authorized to market franchises in 36 states. We have entered into
development agreements that usually result in area development fees being
recognized as the related restaurants open. Due to the recession and associated
liquidity crisis, most of our developing franchisees are having a difficult time
obtaining financing for new restaurants. Additionally, some of our franchisees
that operate other restaurant concepts have incurred significant loss of cash
flow due to declining sales in these other concepts, as well as their El Pollo
Loco restaurants. This has had the effect of slowing development of new El Pollo
Loco restaurants, especially in new markets. In addition, the economic
conditions have had a negative effect on our ability to recruit and financially
qualify new single-unit and developing franchisees. We expect these trends to
continue through 2010 and even into 2011. We expect that many of the franchisees
who have development agreements will not be able to meet the new unit opening
dates required under their agreements. There were two franchise development
agreements that were terminated in the first quarter of 2010 and as a result,
the Company recognized approximately $240,000 of income related to those
terminations in the first quarter of 2010. No franchise development agreements
were terminated in the second quarter of 2010. In the third quarter of 2010, the
Company recognized approximately $50,000 of income related to the termination of
one franchise development agreement.





We
sublease facilities to certain franchisees and the sublease rent is included in
our franchise revenue. This revenue may exceed, equal or be less than rent
payments made under the leases that are included in franchise expense depending
on the specific location. Since we do not expect to lease or sublease new
properties to our franchisees as we expand our franchise restaurants, we expect
the portion of franchise revenue attributable to franchise rental income to
decrease over time.





Product
cost, which includes food and paper costs, is our largest single expense.
Chicken accounts for the largest part of product cost, which was approximately
12.1% of revenue for company-owned restaurants in the first 39 weeks ended
September 29, 2010. These costs are subject to increase or decrease based on
commodity cost changes and depend in part on the success of controls we have in
place to manage product cost in the restaurants. We currently have three supply
contracts for chicken. Two of the contracts have a floor and ceiling price for
chicken which expire in February 2011 and our remaining commitments to purchase
chicken under these two supply contracts totaled approximately $12.0 million at
September 29, 2010.   In March 2010, we entered into a new two year
supply contract for chicken that has a fixed price adjusted annually. This new
chicken supply contract has pricing that is relatively consistent compared to
the prior year’s expired contract and provides that we will make purchases of
chicken totaling approximately $20.3 million from the vendor over the two year
term of the contract. We also have long-term beverage supply agreements with
terms extending into 2011 and 2012 with estimated remaining obligations at
September 29, 2010 totaling $3.8 million and a fixed price steak supply contract
which expires on December 31, 2010. At September 29, 2010, we estimate that our
remaining obligation under this steak supply contract was approximately $0.9
million. For the balance of 2010, based upon current market conditions, we
currently believe that our overall product costs will in the best case remain
relatively constant, although increases are possible.


21





Payroll
and benefits make up the next largest single expense. Payroll and benefits have
been and remain subject to inflation and other increases, including minimum wage
increases and expenses for health insurance and workers’ compensation insurance.
A significant number of our hourly staff are paid at rates consistent with the
applicable federal or state minimum wage and, accordingly, increases in the
minimum wage will increase our labor cost. Should there be any increases in
minimum wages, there is no assurance that we will be able to increase menu
prices in the future to offset any of these increased costs. Workers’
compensation insurance costs are subject to a number of factors, including the
impact of legislation. Except for a slight increase which we experienced in this
quarter, we have generally seenan overall reductionover the long
termin the
number of workers’ compensation claims over time due to employee safety
initiatives that we implemented in 2002. We cannotdetermine whetherpositive trend
will continue in the futureor whether futurecosts related to
thesetypes ofclaims mayor may notincrease.We self-insure employee health benefits. We cannot estimate at this time
the effect that the recently passed healthcare reform legislation will have on
our self insurance programs or on our business, financial condition, results of
operations or cash flow, although we expect that it will increase our future
health insurance costs significantly and, accordingly, have a negative impact on
us and on some of our franchisees as we currently do not believe that all such
increased costs can be passed on to our customers through higher prices given
current economic and competitive conditions.





Depreciation
and amortization expense consists primarily of depreciation of property and
equipment of our restaurants.





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 are impacted by litigation costs, directors and
officers insurance, compliance with laws relating to corporate governance and
public disclosure, and audit and tax fees.





2010
Initiatives





In
January 2010, we introduced steak, to our menu in a limited time offer
promotion.  The citrus-marinade and signature flame-grilling technique on
our steak products provides an additional choice for our customers to enjoy, in
addition to our flame-grilled chicken products. After evaluation of the steak
products during the first quarter of 2010, the Company added steak as a
permanent choice to our menu in the second quarter of 2010. As of the 39 weeks
ended September 29, 2010, steak products were approximately 5.8% of our total
sales mix as a percent of restaurant sales.





We have
“refreshed” the majority of our company-owned stores to improve the appearance
of our units. The “refresh” scope of work may have included a fresh coat of
paint to the interior and/or exterior, wallpaper, restroom finishes, replacing
lighting fixtures and ceilings and replacing tables, chairs, and artwork in the
restaurants. As of September 29, 2010, the Company had “refreshed” approximately
115 restaurants. Our total cost to “refresh” Company stores was $3.1 million.
Additionally, 150 franchisee-owned restaurants have been scoped for the
“refresh” program. In order to conserve capital until our operating results
improve, the Company believes this is the best alternative to a complete and
more expensive “re-image” program at this time.


22




Results
of Operations





Our
operating results for the 13 weeks ended September 30, 2009 and September 29,
2010 are expressed as a percentage of restaurant revenue below:





13 Weeks EndedSeptember 30,
                  2009
                
                
                September 29,
                  2010Operating
      Statement Data:Restaurant
      revenue
                
                
                100.0
                %
                
                
                100.0
                %Product
      cost
                
                
                32.3
                
                
                
                31.2Payroll
      and benefits
                
                
                26.1
                
                
                
                27.2Depreciation
      and amortization
                
                
                4.7
                
                
                
                4.3Other
      operating expenses
                
                
                36.9
                
                
                
                36.5Operating
      income
                
                
                7.4
                
                
                
                7.7Interest
      expense-net
                
                
                14.2
                
                
                
                14.9Other
      expense
                
                
                0.0
                
                
                
                0.0Other
      income
                
                
                0.0
                
                
                
                0.0Loss
      before provision for income taxes
                
                
                (6.8
                )
                
                
                (7.2
                )Provision
      for income taxes
                
                
                0.5
                
                
                
                0.3Net
      loss
                
                
                (7.3
                )
                
                
                (7.6
                )Supplementary
      Operating Statement Data:Restaurant
      other operating expense
                
                
                24.7
                
                
                
                24.2Franchise
      expense
                
                
                1.5
                
                
                
                1.8General
      and administrative expense (1)
                
                
                10.7
                
                
                
                10.5Total
      other operating expenses
                
                
                36.9
                
                
                
                36.5





(1)
General and administrative expenses as a percent of total operating revenue for
2009 and 2010 were 10.0% and 9.8%, respectively.




13
Weeks Ended September 29, 2010 Compared to 13 Weeks Ended September 30,
2009





Restaurant
revenue remained flat at $63.7 million for the 13 weeks ended September 29, 2010
compared to the 13 weeks ended September 30, 2009. Adversely impacting
restaurant revenue was a decrease of $0.7 million in restaurant revenue
resulting from a 1.1% decrease in company-operated same-store sales for the 2010
period from the 2009 period. Restaurants enter the comparable restaurant base
for same-store sales the first full week after that restaurant’s fifteen-month
anniversary. The components of the company-operated comparable sales decrease
were attributed to a transaction decrease of 2.1%, and a check average increase
of 1.0%. Check average increased and the number of transactions decreased in the
third quarter of 2010 compared to the third quarter of 2009 mainly due to deeper
discount promotions in the third quarter of 2009 that increased traffic and
lowered check averages in that period. Company-operated same-store sales
continued to be impacted during the 2010 period by strong competition (mainly in
discounts and promotions) and a general sales softness in the QSR industry due
to higher unemployment, the challenging economic environment and other adverse
economic and consumer confidence factors which we expect to continue through the
remainder of 2010 and possibly into 2011. Another component of decreased
restaurant revenue were the lost sales of $0.6 million from the closure of one
and three company-operated restaurants in 2009 and 2010, respectively, of which
one was managed by EPL through a management agreement with a franchisee. These
decreases were offset by $0.9 million of revenue from four restaurants purchased
from a franchisee in September 2009 and $0.4 million of revenue from three
restaurants opened in fiscal 2009 that are not part of the company-operated
same-store sales base.





Franchise
revenue decreased $0.3 million, or 6.4%, to $4.5 million for the 13 weeks ended
September 29, 2010 from $4.8 million for the 13 weeks ended September 30, 2009.
This decrease is due primarily to lower franchise development fee income of $0.2
million and lower royalties of $0.1 million. The lower franchise development fee
income is mainly attributable to the $0.2 million of income recognized in the 13
weeks ended September 30, 2009 due to a termination of one franchise development
agreement. Royalties, which are based on sales, were slightly lower due to a
3.0% decrease in franchise-operated same-store sales for the 2010 period from
the 2009 period. Franchise-operated same-store sales were impacted by the same
adverse factors that affected company-operated same-store sales described above.
Additionally, franchise revenue for the third quarter of 2010 was adversely
impacted by the closure of one franchise unit in each of the first two quarters
of 2010 and eight franchise unit closures in the third quarter of 2009. The
decrease in royalty revenue due to closed units was partially offset by two
franchise-operated stores opening in the third quarter of 2009 and one new
restaurant opening in each of the second and third quarters of 2010,
respectively.


23





Product
costs decreased $0.7 million, or 3.2%, to $19.9 million for the 13 weeks ended
September 29, 2010 from $20.6 million for the 13 weeks ended September 30, 2009.
This decrease is a result of a $0.4 million net reduction in food cost and a
$0.3 million decrease in non-ingredient items during the 2010 period compared to
the 2009 period. The food cost decrease was due to lower costs for: chicken of
$0.9 million, rice of $0.1 million and beans of $0.1 million. These lower
commodity costs were partially offset by a $0.7 million increase in steak cost
due to adding this additional protein in 2010. The non-ingredient costs decrease
was mainly due to certain contracts for packaging items that were renewed in the
first quarter of 2010 with favorable pricing compared to the prior
year.





Product
cost as a percentage of restaurant revenue was 31.2% for the 13 weeks ended
September 29, 2010 compared to 32.3% for the 13 weeks ended September 30, 2009.
This decrease resulted primarily from lower food and non-ingredient costs
discussed above and less discounting in the current period.  The decreases
in product costs as a percentage of restaurant revenue were partially offset by
the introduction in the first quarter of 2010 of our steak products which have
lower gross margins than our overall chicken products.





Payroll
and benefit expenses increased $0.7 million, or 4.4%, to $17.3 million for the
13 weeks ended September 29, 2010 from $16.6 million for the 13 weeks ended
September 30, 2009. This increase was primarily a result of $0.6 million in
higher workers’ compensation insurance expense in 2010 compared to the 2009
period as we experienced an increase in the current quarter in the number of
workers’ compensation claims and there were reductions to the workers’
compensation reserves in the prior year period. Due to increased medical claims
in the current quarter, our health insurance costs increased by $0.4 million in
the 2010 period compared to the 2009 period. These increases were partially
offset by lower labor costs of $0.2 million due to improved labor scheduling and
lower bonuses of $0.1 million.





As a
percentage of restaurant revenue, payroll and benefit costs increased 1.1% to
27.2% for the 2010 period from 26.1% for the 2009 period mainly due to the
reason mentioned above.





Depreciation
and amortization decreased $0.3 million or 8.6%, to $3.0 million for the 13
weeks ended September 29, 2010 from $2.7 million for the 13 weeks ended
September 30, 2009.  This decrease was mainly attributed to a portion of
our point of sale equipment in our restaurants being fully depreciated and no
longer having amortization of our franchise network intangible asset that was
fully impaired in 2009. These decreases were partially offset by depreciation
from additional restaurants opened during the latter part of 2009.





Depreciation
and amortization as a percentage of restaurant revenue decreased to 4.3% for the
13 weeks ended September 29, 2010 compared with 4.7% for the 13 weeks ended
September 30, 2009 mainly due to the reasons noted above.





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, decreased
$0.3 million, or 1.8%, to $15.4 million for the 13 weeks ended September 29,
2010 from $15.7 million for the 13 weeks ended September 30, 2009. This decrease
is mainly attributed to the reasons noted below.





Restaurant
other operating expense as a percentage of restaurant revenue decreased to 24.2%
for the 2010 period from 24.7% for the 2009 period. The decrease was primarily
due to lower general liability insurance expense of $0.3 million as a result of
an overall reduction in the number of general liability claims. Additionally,
expenses for restaurant operating supplies decreased $0.1 million due to timing
of purchases and a $0.1 million decrease in pre-opening expenses which was due
to no new stores opening in the third quarter of 2010 compared to two new store
openings and four units that transferred from a franchisee to the company in the
third quarter of 2009. These decreases were partially offset by higher natural
gas and electricity expenses of $0.2 million due primarily to increased rates.





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 was
relatively flat at $1.2 million for the 13 weeks ended September 29,
2010.





General
and administrative expense decreased $0.2 million, or 2.2%, to $6.6 million for
the 13 weeks ended September 29, 2010 from $6.8 million for the 13 weeks ended
September 30, 2009. The decrease was attributed to a decrease in restaurant
asset impairment charges in the 2010 period of $1.0 million from the 2009 period
and a $0.2 million decrease in severance expense. These decreases were partially
offset by a $0.5 million increase in outside consulting services, a $0.2 million
increase in the closed store reserve for one store that was closed in the third
quarter of 2010, a $0.2 million increase in the corporate bonus accrual and
higher health insurance costs of $0.1 million mainly due to increased medical
claims.





General
and administrative expense as a percentage of total revenue decreased 0.2% to
9.8% for the 13 weeks ended September 29, 2010 from 10.0% for the 13 weeks ended
September 30, 2009. The decrease was due to the reduced general and
administrative expense noted above.


24





Interest
expense, net of interest income, increased $0.4 million, or 4.8%, to $9.5
million for the 13 weeks ended September 29, 2010 from $9.1 million for the 13
weeks ended September 30, 2009.





Despite
having a loss for the 13 weeks ended September 29, 2010 and September 30, 2009,
we had an income tax provision of $0.2 million and $0.3 million,
respectively primarily related to the effect of changes in our deferred taxes
and the related effect of maintaining a full valuation allowance against certain
of our deferred tax assets as of September 29, 2010.





As a
result of the factors noted above, we had a net loss of $4.8 million for the 13
weeks ended September 29, 2010 compared to a net loss of $4.6 million for the 13
weeks ended September 30, 2009.





Our
operating results for the 39 weeks ended September 30, 2009 and September 29,
2010 are expressed as a percentage of restaurant revenue below:





39 Weeks EndedSeptember 30,
                  2009
                
                
                September 29,
                  2010Operating
      Statement Data:Restaurant
      revenue
                
                
                100.0
                %
                
                
                100.0
                %Product
      cost
                
                
                32.3
                
                
                
                31.2Payroll
      and benefits
                
                
                26.5
                
                
                
                27.0Depreciation
      and amortization
                
                
                4.4
                
                
                
                4.1Other
      operating expenses
                
                
                37.5
                
                
                
                36.3Operating
      income
                
                
                6.5
                
                
                
                8.5Interest
      expense-net
                
                
                11.9
                
                
                
                14.4Other
      expense
                
                
                0.2
                
                
                
                0.0Other
      income
                
                
                (0.2
                )
                
                
                0.0Loss
      before provision for income taxes
                
                
                (5.4
                )
                
                
                (5.9
                )Provision  for
      income taxes
                
                
                10.1
                
                
                
                0.5Net
      loss
                
                
                (15.4
                )
                
                
                (6.4
                )Supplementary
      Operating Statement Data:Restaurant
      other operating expense
                
                
                23.6
                
                
                
                24.0Franchise
      expense
                
                
                1.5
                
                
                
                1.6General
      and administrative expense (1)
                
                
                12.4
                
                
                
                10.7Total
      other operating expenses
                
                
                37.5
                
                
                
                36.3





(1)
General and administrative expenses as a percent of total operating revenue for
2009 and 2010 were 11.6% and 10.0%, respectively.





39
Weeks Ended September 29, 2010 Compared to 39 Weeks Ended September 30,
2009




Restaurant
revenue decreased $3.7 million, or 1.9%, to $193.7 million for the 39 weeks
ended September 29, 2010 from $197.4 million for the 39 weeks ended September
30, 2009. This decrease was primarily due to a reduction of $6.4 million in
restaurant revenue resulting from a 3.3% decrease in company-operated same-store
sales for the 2010 period from the 2009 period. Restaurants enter the comparable
restaurant base for same-store sales the first full week after that restaurant’s
fifteen-month anniversary. The components of the company-operated comparable
sales decrease were attributed to a transaction decrease of 7.0%, and a check
average increase of 4.0%. Check average increased and the number of transactions
decreased in the first 39 weeks of 2010 compared to the first 39 weeks of 2009
mainly due to deeper discount promotions in the first 39 weeks
of  2009 that increased traffic and lowered check averages in that
period. The decrease was also due to lost sales of $0.8 million and $1.1 million
from the closure of one and three company-operated restaurants in 2009 and 2010,
respectively, of which one was managed by EPL through a management agreement
with a franchisee. These decreases were partially offset by $1.7 million of
revenue from seven restaurants opened in fiscal 2008 and 2009 not yet in the
comparable store base and also by $2.9 million of revenue from four restaurants
purchased from a franchisee in September 2009.





Franchise
revenue decreased $0.6 million, or 4.2%, to $13.8 million for the 39 weeks ended
September 29, 2010 from $14.4 million for the 39 weeks ended September 30, 2009.
This decrease is due primarily to lower royalties of $0.6 million and percentage
rent income of $0.2 million partially offset by higher franchise development fee
income of $0.2 million in the 2010 period compared to the 2009 period. Royalty
and percentage rent income, which are both based on sales, were lower due to a
5.7% decrease in franchise-operated same-store sales for the 2010 period from
the 2009 period. Franchise-operated same-store sales were impacted by the same
adverse factors that affected company-operated same-store sales described above.
Additionally, franchise revenue was negatively impacted by the closure
of two and ten franchise units in the 39 weeks of 2010 and in 2009,
respectively and which negative impact was partially offset by the five openings
in the 2009 period and two openings in the 2010 period,
respectively.


25


Product
costs decreased $3.2 million, or 5.1%, to $60.5 million for the 39 weeks ended
September 29, 2010 from $63.7 million for the 39 weeks ended September 30, 2009.
This decrease resulted primarily from the decline in company-operated restaurant
revenue in the 2010 period compared to the 2009 period along with lower costs of
chicken, rice and beans. We experienced a net decrease of a $2.2 million in food
cost and a $1.0 million decrease in non-ingredient items during the 2010 period
compared to the 2009 period. The food cost decrease was comprised of chicken
reduction of $4.5 million, rice reduction of $0.4 million and beans reduction of
$0.2 million and other food items of $0.5 million. These reductions were
partially offset by a $3.0 million increase in steak cost due to adding this
additional protein in the first quarter of 2010 and higher tomato costs of $0.4
million. Non-ingredient costs decreased $1.0 million due to certain contracts
for packaging items that were renewed in the first quarter of 2010 with
favorable pricing compared to the prior year.





Product
cost as a percentage of restaurant revenue was 31.2% for the 39 weeks ended
September 29, 2010 compared to 32.3% for the 39 weeks ended September 30, 2009.
This decrease resulted primarily from lower food and non-ingredient costs
discussed above and less discounting in the current period. The decreases in
product costs as a percentage of restaurant revenue were partially offset by the
introduction of our steak products in 2010 which have lower gross margins than
our overall chicken products.





Payroll
and benefit expenses decreased $0.1 million, or 0.2%, to $52.3 million for the
39 weeks ended September 29, 2010 from $52.4 million for the 39 weeks ended
September 30, 2009. The payroll decrease of approximately $0.6 million was
primarily a result of needing fewer employees to support the lower sales volume
for the 2010 period along with some enhancements we made to our labor
scheduling, which savings were partially offset by the costs incurred as a
result of four new restaurants opened and four acquired restaurants in 2009 and
the additional labor costs required to train our restaurant employees for our
new steak roll-out in January 2010. These payroll decreases were partially
offset by higher workers’ compensation expense of $0.3 million and higher health
insurance costs of $0.2 million.





As a
percentage of restaurant revenue, payroll and benefits expense increased 0.5% to
27.0% for the 2010 period from 26.5% for the 2009 period due to the decrease in
restaurant revenue and relatively fixed nature of restaurant management costs,
increased training and the other factors mentioned above.





Depreciation
and amortization decreased $0.7 million, or 8.1%, to $8.0 million for the 39
weeks ended September 29, 2010 compared to $8.7 million for the 39 weeks ended
September 30, 2009.  This decrease was mainly attributed to a portion of
our point of sale equipment in our restaurants becoming fully depreciated and no
longer having amortization expense of our franchise network intangible asset
that was fully impaired in 2009. These decreases were partially offset by new
restaurants opened.





Depreciation
and amortization as a percentage of restaurant revenue decreased to 4.1% for the
39 weeks ended September 29, 2010 compared with 4.4% for the 39 weeks ended
September 30, 2009 mainly due to the reasons noted above.





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 expense, decreased
$0.3 million or 0.6% to $46.4 million for the 39 weeks ended September 29, 2010
compared to $46.7 million for the 39 weeks ended September 30, 2009. The
decrease is mainly attributed to a decrease in general liability insurance
expense of $0.4 million as a result of an overall reduction in the number of
general liability claims, lower pre-opening store expenses due to fewer new
store openings of $0.4 million and lower advertising expense of $0.3 million.
Advertising expense each period may be above or below our planned annual rate of
4% of revenue, depending on the timing of marketing promotions and the relative
weights of advertising and prices of media spending. These decreases were
partially offset by increases in the cost of natural gas and electricity of $0.5
million and increases in repairs and maintenance expenses of $0.3
million.





Restaurant
other operating expense as a percentage of restaurant revenue increased to 24.0%
for the 2010 period from 23.6% for the 2009 period. The percentage increase was
mainly due to the combination of lower sales and increases in certain expenses
when expressed as a percentage of restaurant revenue such as occupancy which
increased 0.2% as a percentage of restaurant revenue and an increase in repairs
and maintenance of 0.2% as a percentage of restaurant revenue, and an increase
in the cost of natural gas and electricity of 0.3% as a percentage of restaurant
revenue. These increases were partially offset by lower general liability
insurance expense of 0.2% of restaurant revenue, lower store pre-opening
expenses of 0.2% of restaurant revenue and lower advertising expense of 0.1% of
restaurant revenue.


26




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 was
relatively flat at $3.1 million for the 39 weeks ended September 29,
2010.





General
and administrative expense decreased $3.8 million, or 15.3%, to $20.7 million
for the 39 weeks ended September 29, 2010 from $24.5 million for the 39 weeks
ended September 30, 2009. The decrease was mainly attributed to a decrease in
legal settlements of $2.9 million, a decrease in restaurant asset impairment of
$1.7 million and a decrease in wages and severance of $0.8 million. These
decreases were partially offset by a $1.1 million increase in our closed store
reserve for two stores we closed in 2010 and two stores which we did not open
and $0.5 million increase in outside consulting services.





General
and administrative expense as a percentage of total revenue decreased 1.6% to
10.0% for the 39 weeks ended September 29, 2010 from 11.6% for the 39 weeks
ended September 30, 2009. The decrease was mainly due to the decline in the
relative amounts spent during the periods, which decline was partially offset by
the decline in revenue, in each case for the reasons noted above.





Interest
expense, net of interest income, increased $4.5 million, or 19.1%, to $28.0
million for the 39 weeks ended September 29, 2010 from $23.5 million for the 39
weeks ended September 30, 2009. Due to issuing $132.5 million aggregate
principal amount of 113⁄4% senior secured notes in May, 2009 and paying off our
2009 senior secured notes our average debt balances for the 39 weeks ended
September 29, 2010, increased to $268.5 million compared to $254.5 million for
the 39 weeks ended September 30, 2009.  Our average interest rate increased
to 12.61% for the 39 weeks ended September 29, 2010 compared to 10.10% for the
2009 period primarily due to the debt refinancing mentioned above.





The
Company had $0.4 million in other expense in the 2009 period related to the
change in the fair value of the interest rate swap agreement. The fixed interest
rate that the Company agreed to pay was higher than the floating rate estimated
for the life of the agreement. The Company terminated the interest rate swap
agreement in the second quarter of 2009.





The
Company had $0.5 million in other income in the 2009 period attributed to a net
gain on the repurchase of a portion of the 2013 notes. This gain was net of the
portion of the deferred finance costs associated with the notes. No bonds were
repurchased in the first 39 weeks of 2010.





Despite
having a loss for the 39 weeks ended September 29, 2010, we had an income
tax provision of $1.0 million, primarily related to the effect of changes in our
deferred taxes and the related effect of maintaining a full valuation allowance
against certain of our deferred tax assets as of September 29, 2010. For the 39
weeks ended September 30, 2009, we had an income tax provision of $19.8 million
as we recorded a valuation allowance against our deferred tax assets and the
effect of changes in our deferred taxes.





As a
result of the factors noted above, we had a net loss of $12.5 million for the 39
weeks ended September 29, 2010 compared to a net loss of $30.4 million for the
39 weeks ended September 30, 2009.





Liquidity
and Capital Resources





Our
principal liquidity requirements are to service our debt and meet our capital
expenditure needs. At September 29, 2010, our total debt was $268.7 million,
compared to $268.2 million at December 30, 2009. Assuming we do not repurchase
any of the outstanding 2014 bonds, in May 2011 Intermediate is required to make
a mandatory redemption of a portion of our 2014 Notes at an estimated cost of
approximately $10.6 million along with the interest payment that will then be
due. See “Debt and Other
Obligations” below. Our ability to make payments on our indebtedness and
to fund planned capital expenditures will depend on our available cash and our
ability to generate adequate cash flows 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 of
$12.1 million at September 29, 2010, available borrowings under our credit
facility (which availability was approximately $6.1 million at September 29,
2010), and funds from Chicken Acquisition Corp. (“CAC”) will be adequate to meet
our liquidity needs for the next 12 months. Under the covenants governing our
outstanding Notes, EPL is limited on the amount that it can distribute to
Intermediate, including amounts that Intermediate could use to fund its debt
service. Intermediate is a wholly-owned subsidiary of El Pollo Loco Holdings,
Inc., which is a wholly owned indirect subsidiary of CAC. Our results of
operations as well as current economic and constrained liquidity conditions
could make it more difficult or costly for us to obtain additional debt
financing or to refinance our existing debt when it becomes necessary (assuming
such financing is then available to the Company), or could otherwise make
alternative sources of liquidity or financing costly or unavailable. See “Debt and Other
Obligations”.




In the 39
week period ended September 29, 2010, our capital expenditures totaled $5.3
million, consisting mainly of $3.1 million for restaurant image “refreshes”,
$1.4 million for capitalized repairs of existing sites, $0.7 million for point
of sale upgrades and corporate information technology enhancements and $0.1
million for a new unit under construction. We currently expect our aggregate
capital expenditures for 2010 to be approximately $6.0 to $7.0 million in light
of a reduced number of expected new store openings in 2010 compared to prior
years and increased restaurant image “refreshes” in 2010.


27





Cash and
cash equivalents, including restricted cash, increased $0.8 million from $11.4
million at December 30, 2009 to $12.2 million at September 29, 2010. See
“Working Capital and Cash Flows” below for information explaining this increase.
We cannot provide assurance 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 facility in an amount sufficient to enable us to service
our indebtedness or to fund our other liquidity and capital 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, if necessary, on commercially reasonable terms or at
all.





As
discussed in Note 8, Commitments and Contingencies in our condensed consolidated
financial statements, we are involved in various lawsuits, including wage and
hour class action lawsuits. In order to mitigate the adverse effects of these
cases, such as on-going legal expense, diversion of management time, and the
risk of a substantial judgment against us (which could occur even if we believe
we have a strong legal basis for our position), we have in the past, and may in
the future, settle these cases. Any substantial settlement payments or damage
awards against us if the cases go to trial could have a material adverse effect
on our liquidity and financial condition. In fiscal 2009 we agreed to settle
various lawsuits for payments totaling $10.4 million of which $8.7 million were
made during the 39 weeks ended September 29, 2010. These payments were partially
offset by a $4.5 million settlement award we received in February 2010. As of
September 29, 2010, we have $2.7 million remaining to be paid on these
lawsuits.





As a
holding company, the stock of EPL constitutes our only material asset. EPL
conducts all of our consolidated operations and owns substantially all of our
consolidated operating assets. Our principal source of the cash required to pay
our obligations is the cash that EPL generates from its operations. EPL is a
separate and distinct legal entity, has no obligation to make funds available to
Intermediate and currently has restrictions that limit distributions or
dividends to be paid by EPL to Intermediate. Furthermore, subject to certain
restrictions, EPL is permitted under the terms of EPL’s senior secured credit
facilities and the indentures governing the 2012 Notes, 2013 Notes and 2014
Notes to incur additional indebtedness that may severely restrict or prohibit
EPL from making distributions or loans, or paying dividends, to Intermediate. If
we are unable to obtain cash from EPL or other sources, we will not be able to
meet our debt and other obligations. For the cash interest payment of
approximately $2.1 million that was due on May 15, 2010 for the 2014 Notes, EPL
made a cash dividend distribution to Intermediate to cover this interest
payment. As mentioned elsewhere herein, EPL may or may not make future funds
available to Intermediate to service its debt.





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 interest payments, lower sales and capital expenditures. We are able to
operate with a substantial working capital deficit mainly because (1) restaurant
revenues are received primarily on a cash or near-cash basis with a low level of
accounts receivable, (2) rapid turnover results in a limited investment in
inventories and (3) accounts payable for food and beverages usually become due
after the receipt of cash from the related sales. As a result, funds from cash
sales and franchise revenue not immediately needed to pay for food and supplies
typically have been used for capital expenditures and/or debt service payments.
We expect our negative working capital balances to continue to increase for the
remainder of 2010 based on the interest payments that are due, the continuation
of the economic downturn and its impact on our results of operations and our
plan to only open one new restaurant in the fourth quarter of 2010.





During
the 39 weeks ended September 29, 2010, our cash and cash equivalents, including
restricted cash, increased by $0.8 million to $12.2 million from the period
ended December 30, 2009. This increase was primarily due to an $8.0 million
increase in accrued interest, $4.5 million in cash received from a settlement
award, $1.4 million net amount collected on accounts receivable and $1.2 million
favorable change in prepaid assets and accrued insurance accounts, partially
offset by legal settlement payments of $8.7 million, $5.3 million used for
capital expenditures and $0.3 million of capital lease payments. The $2.3
million decline in capital expenditures for the 39 week period ended September
29, 2010 compared to comparable period in 2009 was mainly due to decreased
spending on new restaurants as we concentrated on “refreshing” the majority of
our units.





Debt
and Other Obligations





Credit
Facility





On May
22, 2009, EPL entered into a credit agreement (the “Credit Facility”) with
Intermediate as guarantor, Jefferies Finance LLC, as administrative and
syndication agent, and the various lenders. On October 21, 2010, the credit
facility was assigned from Jefferies Finance LLC to GE Capital LLC. The terms
and conditions of the credit facility remain essentially the same. The Credit
Facility provides for a $12.5 million revolving line of credit with borrowings
(including obligations in respect of revolving loans and letters of credit)
limited at any time to the lesser of (i) $12.5 million and (ii) the Company’s
consolidated cash flow for the most recently completed trailing twelve
consecutive months and, in no event, shall obligations in respect of letters of
credit exceed an amount equal to $10.0 million. EPL has $6.4 million of letters
of credit outstanding under the Credit Facility as of September 29,
2010.


28





The
Credit Facility bears interest, payable quarterly, at an Alternate Base Rate or
LIBOR, at EPL's option, plus an applicable margin. The applicable margin rate is
5.50% with respect to LIBOR and 4.50% with respect to Alternate Base Rate
advances. The Credit Facility is secured by a first priority lien on
substantially all of the Company’s assets and is guaranteed by Intermediate. The
Credit Facility matures on July 22, 2012.




The
Credit Facility contains a number of covenants that, among other things,
restrict, subject to certain exceptions, the Company’s ability to (i) incur
additional indebtedness or issue preferred stock; (ii) create liens on assets;
(iii) engage in mergers or consolidations; (iv) sell assets; (v) make certain
restricted payments; (vi) make investments, loans or advances; (vii) make
certain acquisitions; (viii) engage in certain transactions with affiliates;
(ix) change the Company’s lines of business or fiscal year; and (x) engage in
speculative hedging transactions. In addition, the Credit Agreement will require
the Company to maintain, on a consolidated basis, a minimum level of
consolidated cash flow at all times. As of September 29, 2010, the Company was
in compliance with all of the financial covenants contained in the Credit
Facility and had $6.1 million available for borrowings under the revolving line
of credit.





2012
Notes





On May
22, 2009, EPL issued $132.5 million aggregate principal amount of 11 3/4%
senior secured notes due December 1, 2012 (the “2012 Notes”) in a private
placement. EPL sold the 2012 Notes at an issue price equal to 98.0% of the
principal amount, resulting in gross proceeds to EPL of $129.9 million before
expenses and fees. Interest is payable each year in June and December beginning
December 1, 2009. The 2012 Notes are guaranteed by Intermediate and are secured
by a second priority lien on substantially all of the Company’s assets. The 2012
Notes may be redeemed at a premium, at the discretion of EPL, after March 1,
2011, or sooner in connection with certain equity offerings. If EPL undergoes
certain changes of control, each holder of the notes may require EPL to
repurchase all or a part of its notes at a price of 101% of the principal
amount. The Indenture governing the 2012 Notes contains a number of covenants
that, among other things, restrict, subject to certain exceptions, EPL’s ability
to incur additional indebtedness; pay dividends or certain restricted payments;
make certain investments; sell assets; create liens; merge; and enter into
certain transactions with its affiliates. As of September 29, 2010, we had
$130.9 million outstanding in aggregate principal amount under our 2012 Notes.
The principal value of the 2012 Notes will increase (representing accretion of
original issue discount) from the date of original issuance so that the accreted
value of the 2012 Notes will be equal to the full principal amount of $132.5
million at maturity.





EPL
incurred direct finance costs of approximately $9.2 million in connection with
sale of the 2012 Notes and the registration of these notes. These costs have
been capitalized and are included in other assets in the Company’s condensed
consolidated balance sheets, and the related amortization is reflected as a
component of interest expense in the condensed consolidated statements of
operations. The Company used the net proceeds from the 2012 Notes to repay
certain indebtedness of the Company.





As of
September 29, 2010, we calculated our “fixed charge coverage ratio”
(as defined in the indenture governing the 2012 Notes) at 1:19 to 1:00. The
indenture permits EPL to incur indebtedness or issue disqualified stock, and the
EPL’s restricted subsidiaries to incur indebtedness or issue preferred stock,
and to make dividend and other restricted payments to Intermediate, if, among
other things, our fixed charge coverage ratio for the most recently ended four
full fiscal quarters would have been at least 2:00 to 1:00, as determined on a
pro forma basis as if such indebtedness had been incurred or the disqualified
stock or the preferred stock had been issued or such dividend or other
restricted payment had been made 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 (other than indebtedness under EPL’s
revolving credit facility) and is prohibited from paying certain dividends and
restricted payments in an aggregate amount in excess of $2.9 million under the
terms of the 2012 Notes. A failure to meet the ratios affects only our ability
to incur additional indebtedness and make certain dividend and other restricted
payments, but does not constitute a default under these Notes.





2014
and 2013 Notes





On
November 18, 2005, Intermediate issued 141⁄2% senior discount notes due 2014 (the
“2014 Notes”) and EPL issued 11 3/4% senior notes due 2013 (the “2013 Notes”).
The Indentures governing the 2014 Notes and the 2013 Notes contain a number of
covenants that, among other things, restrict, subject to certain exceptions,
EPL’s, and, in the case of the 2014 Notes, Intermediate’s ability to incur
additional indebtedness; pay dividends or certain restricted payments; make
certain investments; sell assets; create liens; merge; and enter into certain
transactions with their respective affiliates.





At
September 29, 2010, Intermediate had $29.3 million outstanding in aggregate
principal amount of 2014 Notes along with $0.3 million of the premium discussed
below. No cash interest accrued on the 2014 Notes prior to November 15, 2009.
Instead, the principal value of the 2014 Notes increased (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 was
equal to the full principal amount of $29.3 million at maturity. Beginning on
November 15, 2009, interest accrues 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 2014 Notes are unsecured
and are not guaranteed. The 2014 Notes may be redeemed at a premium, at the
discretion of Intermediate. If Intermediate undergoes certain changes of
control, each holder of the 2014 Notes may require Intermediate to repurchase
all or a part of its notes at a price of 101% of the principal
amount.


29





If any of
the 2014 Notes are outstanding at May 15, 2011, Intermediate 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,
if any. Based on the principal amount of the 2014 Notes outstanding at September
29, 2010, it is estimated that we will be required to pay approximately $10.6
million in May 2011 to satisfy the mandatory redemption requirement. 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. Intermediate
has no material assets or operations; 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 2012 Notes have
restrictions that limit distributions or dividends that may be paid by EPL to
Intermediate. See Note 14 to our Condensed Consolidated Financial Statements for
condensed consolidating financial statements of Intermediate and
EPL.





As of
September 29, 2010, we had $106.5 million outstanding in aggregate principal
amount of 2013 Notes. The 2013 Notes may be redeemed at a premium, at the
discretion of EPL. If EPL undergoes certain changes of control, each holder of
the 2013 Notes may require EPL to repurchase all or a part of its notes at a
price of 101% of the principal amount.





As of
September 29, 2010, we calculated our “fixed charge coverage ratio” and our
“consolidated leverage ratio” (as defined in the indenture governing the
2014 Notes) at 1:11 to 1:00 and 6:78 to 1:00, respectively. Similar ratios exist
in the indenture governing the 2013 Notes. Under the indentures governing the
2014 Notes and 2013 Notes, we may incur indebtedness, Intermediate and EPL may
issue disqualified stock, restricted subsidiaries of EPL may issue preferred
stock, and the Company make certain dividend and other restricted payments if,
among other things,our fixed
charge coverage ratio for the most recently ended four full fiscal quarters
would have been at least 2:00 to 1:00, and if our consolidated leverage ratio
would have been equal to or less than 7:50 to 1:00, all as determined on a pro
forma basis as if such indebtedness had been incurred or the disqualified stock
or the preferred stock had been issued or such dividend or other restricted
payment had been made at the beginning of such four-quarter period. Since we do
not currently meet the fixed charge coverage ratio, EPL is not permitted to
incur additional indebtedness (other than indebtedness under EPL’s revolving
credit facility)under the
terms of the 2013 and 2014 Notes,Intermediate is
not permitted to incur additional indebtedness under the terms of the 2014
Notes, EPL is prohibited from paying certain dividends and restricted payments
under the 2013 Notes in an aggregate amount in excess of $2.9 million and
Intermediate is prohibited from paying certain dividends and restricted payments
to its parent, El Pollo Loco Holdings, Inc., under the 2014 Notes in an
aggregate amount in excess of $2.9 million. A failure to meet the ratios affects
only our ability to incur additional indebtedness and make certain dividend and
other restricted payments, but does not constitute a default under these
Notes.





Other
Obligations





At
September 29, 2010, we had outstanding letters of credit totaling $6.4 million,
which served primarily as collateral for our various workers’ compensation
insurance programs.





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





Franchisees
pay a monthly advertising fee of 4% of gross sales for the Los Angeles,
California designated market area and 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.





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 revenue 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, account
receivables, closed restaurants, workers’ compensation insurance, the cost of
our self-insured health benefits, 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 policies 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 30, 2010.


30





Litigation
Contingency





As
discussed in Note 8 to our Condensed Consolidated Financial Statements in
Part I of this Report, we are subject to employee claims against us based, among
other things, on discrimination, harassment, wrongful termination, or violation
of wage and labor laws in the ordinary course of business. These claims may
divert our financial and management resources that would otherwise be used to
benefit our operations. In recent years a number of restaurant companies have
been subject to wage and hour class action lawsuits alleging violations of
federal and state labor laws. A number of these lawsuits have resulted in the
payment of substantial damages by the defendants. We are currently a defendant
in several wage and hour class action lawsuits. Since our insurance carriers
have denied coverage of these claims, a significant judgment against us could
adversely affect our financial condition and adverse publicity resulting from
these allegations could adversely affect our business. In an effort to mitigate
these adverse consequences, we have in the past, and could in the future, seek
to settle certain of these lawsuits. The on-going expense of these lawsuits, and
any substantial settlement payment or judgment against us, could adversely
affect our business, financial condition, operating results or cash flows.
 In 2009, we accrued $10.4 million for litigation settlements of which $2.7
million remains to be paid and is included in the accompanying condensed
consolidated balance sheets in accounts payable as of September 29,
2010.





Off-Balance
Sheet and Other Arrangements





As of
September 29, 2010 and September 30, 2009, we had letters of credit outstanding
under our Credit Facility in the aggregate amount of approximately $6.4 million
and $6.3 million, respectively.





As a
result of assigning our interest in obligations under real estate leases in
connection with the sale of company-owned restaurants to some of our
franchisees, we are contingently liable on six lease agreements. These leases
have various terms, the latest of which expires in 2015. As of September 29,
2010, the potential amount of undiscounted payments we could be required to make
in the event of non-payment by the primary lessee was approximately $1.1
million. The present value of these potential payments discounted at our
estimated pre-tax cost of debt at September 29, 2010 was approximately $0.8
million. Our franchisees are primarily liable on the leases. We have
cross-default provisions with these franchisees that would put them in default
of their franchise agreement in the event of non-payment under the leases. We
believe these cross-default provisions reduce our risk that we will be required
to make payments under these leases. Accordingly, no liability has been recorded
on the Company’s books related to this guarantee.





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 facility that bears interest at floating rates. As of September
29, 2010, we had no amounts outstanding under this facility.





We
purchase food and other commodities for use in our operations based on market
prices established with our suppliers. Many of the commodities purchased by us
can be subject to volatility due to market supply and demand factors outside of
our control. To manage this risk in part, we attempt to enter into fixed price
or floor/ceiling purchase commitments, with terms typically of one to two years,
for our chicken requirements. Substantially all of our food and supplies are
available from several sources, which help to diversify our overall commodity
cost risk. In addition, we may have the ability to increase certain menu prices,
or vary certain menu items offered, in response to food commodity price
increases. We do not use financial instruments to hedge commodity prices, since
our purchase arrangements with suppliers, to the extent that we can enter into
such arrangements, help control the ultimate cost that we pay.





Item
4. Controls and Procedures





Our Chief
Executive Officer and Chief Financial Officer have concluded that the design and
operation of our disclosure controls and procedures are effective as of
September 29, 2010. 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 the reports filed or
submitted under the Securities Exchange Act of 1934, as amended (the Exchange
Act), by the issuer is recorded, processed, summarized and reported within the
time periods specified in the rules and forms of the SEC. “Disclosure controls
and procedures”  include, without limitation, controls and procedures
designed to ensure that information required to be disclosed by an issuer in its
Exchange Act reports is accumulated and communicated to the issuer’s management,
including its principal executive and financial officers, as appropriate, to
allow timely decisions regarding required disclosure.





There
have been no changes in our internal control over financial reporting that
occurred during our 39 weeks ended September 29, 2010 that materially affect, or
are reasonably likely to materially affect, our internal control over financial
reporting.


31


PART
II – OTHER INFORMATION


Item 1. Legal Proceedings





As
previously disclosed in earlier reports filed with the Securities and Exchange
Commission, the Company entered into an agreement in the fourth quarter of 2009
to settle for $8.0 million a purported class action lawsuit brought by former
managers Haroldo Elias, Marco Ramirez and Javier Rivera. The Company funded the
settlement on January 14, 2010 and the Superior Court of the State of
California, County of Los Angeles, granted final approval of the class wide
settlement and entered Final Judgment at a hearing on April 20, 2010. This
settlement also included and settled the previously disclosed purported class
action complaint filed by Salvador Amezcua. Total payments related to this case
were $8.7 million.





In April
2007, Dora Santana filed a purported class action 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 have agreed to settle
this matter for approximately $0.8 million and have executed a Settlement
Agreement. This amount was accrued in the prior year and is included in the
accompanying condensed consolidated balance sheets in accounts payable as of
September 29, 2010. The Court granted final approval of this settlement in
August 2010 and the settlement was funded on October 25, 2010.





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. The parties have agreed to settle this matter for approximately $1.9
million and have executed a Settlement Agreement. This amount was fully accrued
for in the prior year and is included in the accompanying condensed consolidated
balance sheets in accounts payable as of September 29, 2010. On October 28,
2010, the Judge ruled that the settlement was fair and granted final approval
upon successful notice to additional class members and a determination of the
fees due to the settlement administrator. A final approval hearing is set for
January 7, 2011.





Martin
Penaloza, a former Assistant Manager, filed a purported class action on May 26,
2009 in Superior Court in Orange County, California. The claims, requested
remedies, and potential class in this case overlap those in the Delgado lawsuit
described above and will be included in that settlement.





In
September 2008, American International Specialty Lines Insurance Company
(AISLIC) from whom the Company acquired excess insurance coverage, filed an
action for declaratory judgment seeking to have the court determine that it is
not required to indemnify EPL for any amounts awarded against it (or paid in
settlement) in connection’s with the previously settled EPL-Mexico v. EPL-USA
trademark litigation.  In July 2010, the parties agreed to settle this
matter for payment to the Company of $75,000 and a waiver of fees and costs by
AISLIC. The Company received payment from AISLIC on July 28, 2010.





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 other actions will have a material adverse effect on our financial
position, results of operations, liquidity and capital resources. A significant
increase in the number of claims or an increase in amounts owing under
successful claims could materially adversely affect our business, financial
condition, results of operation and cash flows.





Also see
our Annual Report on Form 10-K for the year ended December 30, 2009 as filed
with the SEC on March 30, 2010.





Item
1A. Risk Factors





The
Company’s business, financial condition and operations are subject to a number
of factors, risks and uncertainties, including those previously disclosed under
Part I. Item 1A “Risk Factors” of the Company’s annual report on Form 10-K for
the fiscal year ended December 30, 2009 as well as any amendments thereto or
additions and changes thereto contained in this quarterly report on Form 10-Q
and any subsequent filings of quarterly reports on Form 10-Q. The disclosures in
the Company’s annual report on Form 10-K, this quarterly report on Form 10-Q and
the Company’s subsequent reports and filings are not necessarily a definitive
list of all factors that may affect the Company’s business, financial condition
and future results of operations. There have been no material changes to the
risk factors as disclosed in the Company’s annual report on Form 10-K for the
fiscal year ended December 30, 2009, except as provided in any amendments
thereto and those set forth below.


32





The
delay or inability to hire new executives may have an adverse impact on our
business and results of operations.




As
previously announced by the Company, effective September 12, 2010 Stephen
Carley, the former President, Chief Executive Officer and director of the
Company, voluntarily resigned from all his positions with the Company and its
affiliates. In connection with such resignation, Stephen J. Sather was appointed
to serve as the acting President and Chief Executive Officer of the Company.
Also as previously disclosed by the Company, effective October 15, 2010 Karen
Eadon voluntarily resigned from her position as Senior Vice President, Marketing
for the Company. The Company is actively engaged in executive searches for a new
Chief Executive Officer as well as a new senior marketing officer. The Company
depends on the unique abilities and knowledge of its executive officers and
other key personnel. Though the Company is actively engaged in executive
searches to fill the positions of Chief Executive Officer and senior marketing
officer, there can be no assurance that the Company will be able to identify and
hire qualified individuals for such positions in a timely manner. An extended
period of time without a permanent Chief Executive Officer or senior marketing
officer could add uncertainty to the Company and materially and adversely affect
the Company’s business, financial condition or results of operations.
Furthermore, in recruiting new executive officers, the Company will incur
expenses related to recruiting and hiring, and possibly experience transitional
inefficiencies. In the event the Company is unable to effect a smooth transition
from its acting to a new Chief Executive Officer, the resulting disruption could
negatively impact the Company’s operations and impede the Company’s ability to
manage its business successfully and competitively.




Item
5. Other Information





On
November 12, 2010, the Company issued a press release reporting results of
operations for the third quarter and 39 weeks ended September 29, 2010. 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.





On
October 21, 2010, the Company’s Credit Facility was assigned from Jefferies
Finance LLC to GE Capital Financial, Inc. In connection with this assignment the
parties entered into an Agency and Assignment Agreement and Amendment No. 1 to
the Credit Agreement and the Other Loan Documents, which is attached hereto as
Exhibit 10.2 and incorporated herein by reference. The terms and conditions of
the Credit Facility remain essentially the same as described in Note 11 to the
Company’s Condensed Consolidated Financial Statements.


33





Item
6. Exhibits




ExhibitNumber
            
            Description of
      Documents10.1
            
            Second
      Amendment to Distribution Agreement dated as of July 30, 2010 by and among
      El Pollo Loco, Inc. and Meadowbrook Meat Company, Inc. (incorporated by
      reference to Exhibit 10.1 to the Company’s Form 8 K filed on August 10,
      2010)10.2
            
            Agency
      and Assignment Agreement and Amendment No. 1 to the Credit Agreement and
      the Other Loan Documents dated October 21, 2010 by and among GE Capital
      Financial Inc., Jefferies Finance LLC, EPL Intermediate, Inc. and El Pollo
      Loco, Inc.31.1
            
            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 12, 2010


34


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 12, 2010
            By:
            /s/ Stephen J. SatherStephen
      J. SatherActing
      President and Chief Executive OfficerBy:
            /s/ Gary CampanaroGary
      CampanaroChief
      Financial Officer and Treasurer


35





EXHIBIT
INDEX





ExhibitNumber
            
            Description of
      Documents10.1
            
            Second
      Amendment to Distribution Agreement dated as of July 30, 2010 by and among
      El Pollo Loco, Inc. and Meadowbrook Meat Company, Inc. (incorporated by
      reference to Exhibit 10.1 to the Company’s Form 8 K filed on August 10,
      2010)10.2
            
            Agency
      and Assignment Agreement and Amendment No. 1 to the Credit Agreement and
      the Other Loan Documents dated October 21, 2010 by and among GE Capital
      Financial Inc., Jefferies Finance LLC, EPL Intermediate, Inc. and El Pollo
      Loco, Inc.31.1
            
            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 12, 2010


36