DEF 14A: El Pollo Loco Holdings Sets Date for 2024 Annual Stockholders Meeting, Outlines Key Proposals

El Pollo Loco Holdings announces its annual stockholders meeting to be held virtually on May 28, 2024, featuring proposals ranging from director elections to equity incentive plan amendments.

Summary

• El Pollo Loco Holdings, Inc. will hold its 2024 annual meeting of stockholders virtually on May 28, 2024, at 1:00 p.m. Pacific Time.
• Stockholders will vote on the election of two Class I directors, ratification of the appointment of BDO USA, P.C. as the independent registered public accounting firm for 2024, and approval of an amendment to the Certificate of Incorporation to provide for exculpation of certain officers.
• Additionally, an advisory vote will be held to approve the compensation of named executive officers, and an amendment to the Equity Incentive Plan, including an increase in the number of shares of Common Stock reserved for issuance thereunder, will be considered.
• The board recommends voting FOR all director nominees, the ratification of BDO USA, P.C., the amendment to the Certificate of Incorporation, the compensation of named executive officers, and the amendment to the Equity Incentive Plan.
• The record date for determining stockholders entitled to notice of and to vote at the annual meeting was April 1, 2024.
• The board size will be reduced from nine to seven directors effective immediately prior to the 2024 annual meeting.

Sentiment

Score: 7

Explanation: The document presents a balanced view, highlighting both positive financial results and ongoing challenges. The focus on corporate governance and executive compensation suggests a commitment to best practices, contributing to a moderately positive sentiment.

Positives

• The board is proactively addressing corporate governance matters, including officer exculpation and equity incentives.
• The company is engaging with stockholders through a virtual annual meeting format.
• The company is seeking to align executive compensation with company performance and stockholder value.
• The company is committed to increasing diversity, both within its management team as well as on the Board of Directors.

Negatives

• The company is reducing the size of the board from nine to seven directors.
• The company is facing a challenging operating environment in the restaurant industry.

Risks

• Failure to approve the Equity Incentive Plan amendment could limit the company's ability to attract and retain key employees.
• The company's performance is subject to seasonal factors and the timing of holidays.
• The company's ability to make payments under the TRA is dependent on the ability of its subsidiaries to make distributions to it.

Future Outlook

The company remains confident that menu innovations, marketing initiatives, and a renewed focus on operational excellence will unlock the brand's long-term potential.

Management Comments

• The company continued to stay aligned around its five key operational pillars including: Attracting, hiring, and retaining top talent; EPL hospitality; Being known for our famous fire-grilled chicken; Promoting digital in service of improving the customer experience; and Expanding as an asset light company.

Industry Context

The document acknowledges the challenging operating environment faced by the restaurant industry, highlighting the importance of strategic initiatives and operational improvements.

Comparison to Industry Standards

• The Compensation Committee compared El Pollo Loco's compensation with that of a peer group including BJs Restaurants Inc., Fiesta Restaurant Group, Inc., Potbelly Corporation, Chuys Holdings, Inc., Jamba Juice Co., Red Robin Gourmet Burgers, Inc., Dennys Corporation, Krispy Kreme Doughnuts Inc., Sonic Corp., Dine Brands Global, Inc., and Noodles & Company.

Management Changes

Corporate Governance

Related Party Transactions

• The company is a party to a stockholders agreement with LLC and certain third-party investors, which provides certain rights to LLC, including registration rights for common stock owned by LLC.
• The company has entered into an income tax receivable agreement (the TRA) with its pre-IPO stockholders, including LLC, which provides for payment by the company to its pre-IPO stockholders of 85% of the amount of cash savings, if any, in federal, state, local, and foreign income tax that the company and its subsidiaries actually realize.
• On July 11, 2014, EPL and LLC entered into a Franchise Development Option Agreement (the Franchise Development Option Agreement) in connection with the development of El Pollo Loco restaurants in the New York-Newark, NY-NJ-CT-PA Combined Statistical Area (the Territory).
• On August 7, 2023, the Company entered into a Stock Repurchase Agreement with FS Equity Partners V, L.P. and FS Affiliates V, L.P., pursuant to which the Company agreed to purchase an aggregate of 2,500,000 shares of the Company's common stock from the Sellers at a price of $10.63 per share, representing the closing price of such shares as listed on Nasdaq on August 7, 2023, for a total purchase price of $26.6 million.
• Further, on November 29, 2023, the Company entered into another Stock Repurchase Agreement with FS Equity Partners V, L.P. and FS Affiliates V, L.P., pursuant to which the Company agreed to purchase an aggregate of 1,500,000 shares of the Company's common stock from the Sellers at a price of $8.40 per share, representing the closing price of such shares as listed on Nasdaq on November 29, 2023, for a total purchase price of $12,600,000.

Stakeholder Impact

• Shareholders will have the opportunity to vote on key proposals affecting the company's governance and executive compensation.
• Employees may be affected by changes to the Equity Incentive Plan.
• Executive officers may be affected by the amendment to the Certificate of Incorporation to provide for exculpation of certain officers.

Next Steps

• Stockholders to vote on the proposals at the annual meeting on May 28, 2024.
• The company will file the Amended and Restated Certificate of Incorporation with the Secretary of State of Delaware shortly after the annual meeting if the proposal to amend the Certificate of Incorporation is approved and adopted by our shareholders.

Key Dates

Keywords

Annual Meeting, Proxy Statement, Stockholders, Board of Directors, Equity Incentive Plan, Director Election, Executive Compensation, Corporate Governance