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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended December 29, 2004

OR

For the transition period from              to             

Commission file number 333-115486

El Pollo Loco, Inc.

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code (949) 399-2000

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: none

(Title of class)

(Title of class)

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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).    Yes  ¨    No  x

The common stock of the registrant is not publicly traded. Therefore, the aggregate market value is not readily determinable.

An aggregate of 100 shares of common stock of the registrant were outstanding as of March 29, 2005.

Documents Incorporated By Reference

None.

TABLE OF CONTENTS

FORM 10-K

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PART 1

Item 1. Business

Our Company

We are the nation’s leading quick service restaurant (“QSR”) chain specializing in marinated, flame-grilled chicken. In fiscal year 2004, we had an approximately 4.0% market share of the aggregate sales of the top seven chicken QSR chains nationwide. Our chicken is marinated fresh each day, cooked in-restaurant on grills directly in front of our customers and served directly off the grill. We serve our authentic recipe flame-grilled chicken in individual and family-size meals, and it is the key ingredient in a wide variety of contemporary Mexican-influenced entrees, including specialty chicken burritos, chicken quesadillas, Pollo Salads and Pollo Bowl® chicken bowls. Our brand concept and price points are strategically positioned to straddle the QSR and fast casual segments of the restaurant industry. We offer our customers healthy, freshly prepared food typically found in fast casual restaurants, but with the convenience and value typically available only at traditional QSR chains.

As of December 29, 2004, our restaurant system consisted of 137 company-operated and 185 franchised locations. Our 322 restaurants are located principally in California with additional restaurants in Arizona, Nevada and Texas. Our typical restaurant is a free-standing building with drive-thru capability that ranges in size from 2,200 to 2,600 square feet with seating for approximately 60 customers. In fiscal 2004, the average unit volume (“AUV”) for our company-operated restaurants was approximately $1.5 million, compared to $1.4 million in fiscal 2003. According to Restaurant Trends, for fiscal year 2003, our AUV was the seventh highest AUV of any QSR chain in the greater Los Angeles designated market area, or the greater Los Angeles area, and according to Nation’s Restaurant News, the fifth highest AUV for QSR chains nationwide in 2003. Our restaurants system wide have demonstrated simple unweighted average same store sales growth of 4.9% for the five most recently completed fiscal years. Same store sales for restaurants system wide grew by 0.6%, 4.2% and 6.0% for fiscal years 2002, 2003 and 2004, respectively, in each case relative to the prior year.

Our authentic concept originated in Guasave, Mexico in 1975 and the first U.S. El Pollo Loco® restaurant was opened in Los Angeles in 1980. Our menu features approximately 50 items and we are continually developing new menu offerings. Individual and family-size meal quantities of our marinated, flame-grilled chicken are popular with our customers for restaurant dining or home meal replacement during dinnertime, while other more portable chicken-based Mexican entrees, such as burritos, quesadillas, Pollo Bowl chicken bowls and made-to-order Pollo Salads appeal to customers at lunch-time or on the go. The breadth of our menu helps to generate significant customer traffic throughout the day and a balanced mix between lunch and dinner sales. We believe we have a high average check due to the large, bundled meals we offer. For fiscal 2004, the average customer transaction in our restaurants was $8.67, which is higher than that of a typical QSR restaurant.

Industry Overview

According to the National Restaurant Association, a restaurant industry trade association, QSR restaurant sales are projected to increase 4.7% to $134.2 billion in 2005 from 2004.

According to Consumer Reports on Eating Share Trends, a market research service that monitors consumer purchases at restaurants, QSR sales growth has outpaced the total restaurant industry in eleven out of the 15 years from 1990 to 2004, making it the second fastest growing segment within the restaurant industry. The QSR segment and the restaurant market are growing as the aging of the baby boomer population has led to an increase in the restaurant market’s share of consumer dollars spent on food from 36.8% in 1955 to 46.9% in 2003, which percentage is expected to increase to 53% by 2010, based on industry surveys.

The fast casual segment of the restaurant industry, estimated at $7.5 billion by Technomic, Inc., a marketing research firm serving the food and food service industries, is small but growing rapidly. Growth of the fast casual segment is driven by the growing number of consumers who demand casual-dining quality food and dining experience in a quick and convenient QSR delivery format and at a near-QSR price.

According to the U.S. Department of Agriculture, annual per capita consumption of chicken in the United States increased 69.6% from 1982 to 2003, while annual per capita consumption of beef declined 14.5% and pork increased 8.0%, respectively. Consumer awareness of the health and nutritional characteristics of chicken is a major factor influencing the growth in chicken consumption. Such health and nutritional characteristics include lower levels of fat, cholesterol and calories per pound relative to beef and pork. In addition, we believe that consumers are moving away from fried chicken towards other healthier cooking alternatives.

Business Strengths

Market Leader with Well Positioned Brand. We are the chicken QSR market leader in the greater Los Angeles area with 244 system wide restaurants and an estimated 44% share of the market, according to Sandelman & Associates, Inc. Quick-Track Executive Report for 2004. Our share of the chicken QSR market in the greater Los Angeles area exceeds KFC’s despite having approximately 13% fewer units in 2003 (the last full year for which we have data). According to Sandelman Associates, Inc., during 2004, our customers averaged 22.7% more visits per month than KFC’s customers. Also according to Sandelman Associates, Inc., we have achieved 97% brand awareness in the greater Los Angeles area, based on name recognition from a list of QSR chains. We believe our ability to grow and compete successfully in this area, one of the most competitive QSR markets in the country, shows the potential for our brand concept nationwide.

We believe our brand concept is well positioned between the QSR and fast casual segments of the restaurant industry. We believe our authentic Mexican heritage cooking method and health-conscious food made fresh to order set us apart from the standard QSR competition, while our convenience and value proposition differentiate us from our fast casual competition.

Proven Business Model with Attractive Restaurant Economics. In fiscal 2004, the AUV for our company-operated restaurants was approximately $1.5 million, compared to $1.4 million in fiscal 2003, which was among the highest AUV of any QSR chain in the greater Los Angeles area and nationally in 2003, according to Restaurant Trends.

Strong Same Store Sales Growth. Our restaurant system has demonstrated a simple unweighted average same store sales growth of 4.9% for the five most recently completed fiscal years. Same store sales for restaurants system wide grew by 0.6%, 4.2% and 6.0% for fiscal years 2002, 2003 and 2004, respectively, in each case relative to the prior year. We believe that this growth results from the strength and appeal of our core product, format, menu pricing and product quality. Despite a challenging operating environment for most QSR chains, we grew during fiscal 2004 as the economy rebounded and we have begun to see the positive results of our investment in new product development, customer service training and restaurant remodels.

Attractive Demographics. We believe we appeal to a wide range of customers across different ethnic, age and income demographics. A customer study that we commissioned indicated that in 2000, approximately 51% of our customers were Hispanic, 32% Caucasian, 12% African American and 4% Asian. According to the U.S. Census Bureau, the approximately 7.2 million Hispanic population in the greater Los Angeles area (as of 2003) is the fastest growing segment of the total population, having grown by 11% from 2000 to 2003 (as compared to total growth in the market of 6%), with 85% of this growth occurring in the Mexican-origin segment of the Hispanic population. The U.S. Census Bureau projects that the percentage of the U.S. population that is of Hispanic origin will increase from 12.6% in 2000 to 15.5%

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in 2010 and 20.1% by 2030. We believe that these demographic trends will allow us to grow our restaurant system in new markets and eventually nationwide. In addition, we believe our appeal across different economic demographics increases the number of markets and locations available for our restaurants and reduces our risk of restaurant closure and our exposure to fluctuations in any individual market segment.

Balanced Daypart Business. By nature of their menu design or service format, the business mix of most QSR and fast casual chains is oriented towards a specific daypart. In contrast, the breadth of our menu offerings and the convenience of our service format generate significant customer traffic throughout the day with an evenly balanced business mix between lunch and dinner. Approximately 48% of the revenues from our company-operated restaurants are generated from lunch-time and 52% from dinner-time. Lunch items range in price from $1.19 to $5.29, with dinner entrees ranging from $4.49 to $20.99. We believe that this daypart balance provides us with a more diversified revenue base and significantly improves our restaurant economics through more efficient use of physical plant and staff and a reduction of food waste.

Strong Franchise Base and Revenues. Our restaurant system has many longstanding multi-restaurant franchisees. In addition, over the past four years, we have successfully expanded our relationship with larger, more professional and well-capitalized franchising groups that have generated a consistently higher level of growth in our franchise restaurants and revenues over prior years. From December 2000 to December 2004, the average number of restaurants operated by a franchisee has grown from 2.3 to 3.4 restaurants. From fiscal 2002 to 2004 we hired two experienced franchise sales directors to accelerate our franchise development efforts with potential new multi-restaurant franchises in new and existing markets. The strength of our franchise program has positioned us for accelerated franchise restaurant growth over the next several years.

Significant Investment in Infrastructure and Brand. Despite a challenging economic environment over the past several years, we have purposefully reinvested a significant amount of capital back into our business to drive operational improvement and upgrade our brand image to remain competitive within the QSR and fast casual segments of the industry. In fiscal 2004, we spent $2.4 million in aggregate to remodel our restaurants, $2.1 million to install new restaurant computer systems and $1.4 million to install new kitchen equipment to improve the quality of our products. In 2003, we increased our general and administrative expense by more than $1.0 million to improve hospitality training, to add area leaders to improve restaurant oversight and to establish “SPECS”^SM (Standards and Procedures Educational Card System), a field training program. We believe that these investments are starting to generate returns and that they will lead to improved same store sales growth over the next several years.

Proven Management Team. Our executive management team has extensive restaurant industry experience in addition to a significant multi-industry foundation in consumer marketing, operations and finance with key positions at leading food service businesses including PepsiCo Inc., Taco Bell Corp., Applebee’s International, Inc., McDonald’s Corporation, Rubio’s Restaurants, Inc. and CKE Restaurants, Inc. Stephen E. Carley, our President and Chief Executive Officer who joined our company in April 2001, was a consumer marketing and operations veteran with General Mills, Inc., The Pillsbury Company and PepsiCo Inc. prior to gaining extensive experience in the QSR and food service industries, serving in various areas of both PepsiCo Inc. and Taco Bell Corp. during his 12 years at PepsiCo Inc. We continue to enhance the strength of our senior management team, and they currently own approximately 8.1% of stock of EPL Holdings, Inc., our indirect parent, on a fully diluted basis.

Business Strategy

Our business strategy is focused on increasing same store sales, expanding our restaurant base in a disciplined manner and continuing to improve operations while managing our cost levels.

Increase Same Store Sales. We are focused on various initiatives to maximize profitability of our existing restaurants and to increase same store sales. For example, we continue to invest

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in new product development to capitalize on our belief that our marinated, flame-grilled chicken is aligned with the long-term trend towards lighter and healthier eating as well as the growing desire for more flavorful foods. In addition, we have invested in our customer service training initiatives and added area leaders. While this increased our general and administrative expense by over $1.0 million in 2003, we believe the benefits will help generate additional revenue in both existing and new markets as we attract more customers from the fast casual segment of the market. We have almost completed the current phase of the restaurant remodeling program we began in 2000 so that our restaurants reflect the ambiance and contemporary environment demanded by today’s more discriminating fast casual customers. Over this period, we have remodeled 93 of our company-operated restaurants and our franchisees have remodeled 69 of their restaurants.

Disciplined Expansion. We plan to expand our restaurants in a disciplined manner by strategically adding both company-operated and franchised restaurants with particular emphasis on growth of our franchise restaurants going forward. We generally open four to eight company-operated restaurants per year, which is consistent with our company-operated restaurant growth since 2001. We plan to open 10 or more franchised restaurants per year with experienced and well-capitalized operators in existing and new markets. We have generated significant recent interest from experienced QSR operators to expand into new markets and entered into new development agreements for 18 restaurants during fiscal 2004. Currently, we are marketing to both new and existing franchisees in all states except Virginia, where we are awaiting approval of our application for registration of our franchise offering circular. Our emphasis on growth of our franchise restaurants allows us to increase franchise revenue with minimal additional capital investment.

Continue to Improve Operations and Implement Cost Controls. We are committed to continuing to improve our operational excellence while maintaining recently implemented cost controls. We have transformed daily restaurant performance information into useful management metrics for our field operators and corporate managers. In particular, our rigorous system of grading each restaurant, its general manager and supervisors across key performance metrics on an easy to understand scorecard system has generated significant operating improvements such as improved food and employee safety measures and improved customer satisfaction scores. We have also been successful in improving our operating margins through food cost variance tracking, the implementation of labor scheduling guides and a disciplined focus on reducing our exposure to workers’ compensation incidents. We are also installing new information systems to help improve our labor costs and inventory management systems to improve order accuracy and cash handling.

Restaurant Operations and Management

Our management team places tremendous emphasis on executing our company mission, which is to “Passionately Serve Perfect Pollo Every Time.” To help ensure that we deliver on this mission, we have 16 area leaders and two directors of operations that report to our vice president of operations. Each area leader typically oversees eight to nine restaurants. General managers supervise the operations of each restaurant, and they are supported by a number of restaurant managers and shift supervisors, which varies based on the sales volume of the respective restaurant. We have created a set of quantitative metrics that are used to measure the performance of both the general managers and area leaders. These metrics measure profitability, food safety, employee safety and various customer satisfaction attributes. We make this data “information that cannot be ignored” by producing a monthly scorecard, holding quarterly meetings, and considering these metrics for bonus purposes and job performance evaluations.

We strive to maintain quality and consistency in our restaurants through the careful training and supervision of personnel and the establishment of standards relating to food and beverage preparation, maintenance of facilities and conduct of personnel. Restaurant managers, many of whom are promoted from our restaurant personnel, must complete a training program of typically six to twelve weeks during which we instruct them in various areas of restaurant management, including food quality and preparation, hospitality and employee relations. We also provide restaurant managers with operations manuals relating to food preparation and operation of restaurants. These manuals are designed to ensure uniform operations, consistently high quality products and service and proper accounting for restaurant operations. We hold regular meetings of our restaurant managers to discuss new menu items and efficiency initiatives and to continue training in various aspects of business management.

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We devote considerable attention to controlling product costs, which are a significant portion of our restaurant expenses. We make extensive use of information technology to provide us with pertinent information on ideal food cost, inventory levels and inventory cost variances. We have implemented a new back office computer system that we believe will add more controls surrounding inventory and cash management.

We maintain financial and accounting controls for each of our restaurants through the use of centralized accounting and management information systems and reporting requirements. We collect sales, credit card, debit card, menu mix and related information daily for each company-operated restaurant. We provide general managers with operating statements for their respective restaurants. Cash, credit card and debit card receipts are controlled through daily deposits to local operating accounts, which are either picked-up up by armored car or deposited to our cash concentration accounts by our managers. At our support center, we use a software program to reconcile on a daily basis the sales and cash information sent electronically from our restaurants to cash detail electronically sent by our bank.

Menu and Food Preparation

Our marinated, flame-grilled chicken is the key ingredient to our menu items. Fresh chickens are marinated in our restaurants twice a day, using marination tumblers to ensure that our proprietary marinade flavors our chicken to the bone. The cooking process on our extensive grill system does not employ any timers, so our cooks must use acquired experience to turn the chicken at the proper intervals in order to deliver the golden brown crisp chicken to our customers. We believe our singular focus, from senior management down, on delivering perfect chicken creates loyalty and enthusiasm for the brand among our employees.

Our chicken is served with flour or corn tortillas, freshly prepared salsa and a wide variety of signature side orders including Spanish rice, pinto beans, creamy coleslaw and mashed potatoes. In addition to individual and family chicken meals in quantities of eight, 10 and 12 pieces, we also serve a wide variety of contemporary Mexican entrees including specialty chicken burritos, chicken quesadillas, Pollo Bowl chicken bowls, a line of fresh Pollo Salads, chicken tacos and taquitos. To complement our menu items, a salsa bar in each of our locations features several kinds of salsa prepared fresh daily with serrano chilies, cilantro and other fresh ingredients. We also serve Fosters Freeze® brand of soft-serve ice cream products in 76 of our restaurants in California and Nevada.

We are committed to serving quality chicken and Mexican food products. This process begins with the selection of fresh ingredients. In preparing menu items, we emphasize quality and freshness. We regularly inspect our vendors to ensure both that the products we purchase conform to our high quality standards and that the prices offered are competitive. We are committed to differentiating ourselves from other QSR competitors by utilizing fresh, high quality ingredients as well as by preparing most items from scratch. The menu items at each of our restaurants are prepared at that restaurant from fresh chicken and ingredients delivered several times each week.

Our food safety and quality assurance programs are designed to maintain high standards for the food products and food preparation procedures used by company-operated and franchised restaurants. We have a team of quality assurance managers that perform comprehensive restaurant and supplier audits. Quality assurance managers visit each company-operated and franchised restaurant an average of three times a year and evaluate all areas of food handling, preparation and storage. Our quality assurance team also audits our suppliers on a frequency schedule based on the potential food safety risk of each product. We also have continuous food safety employee training that pays detailed attention to product quality at every stage of the food preparation cycle.

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Purchasing

Our ability to maintain consistent quality throughout our restaurants depends in part upon the ability to acquire food products and related items from reliable sources in accordance with our specifications. We purchase our food and other supplies from various suppliers. In addition, we have a contract with one distributor for substantially all of the food and supplies, including the chicken, that our company-operated restaurants receive from our suppliers. Fresh chicken is typically delivered every other day to each restaurant. Although franchisees are not required to use this distributor or any other designated distributors, they must purchase food and supplies from company-approved suppliers.

Historically, we have been able to limit our exposure to chicken prices through contracts ranging in term from one to three years and through menu price increases. We recently entered into new contracts with terms ranging from two to three years with our primary suppliers of chicken that expire in February 2007 and February 2008. The cost of chicken under these new contracts is significantly higher than under our prior contracts. Although we raised prices in September and November 2004 to help offset the impact of the increased price of chicken, we expect that food cost as a percentage of sales will increase in fiscal 2005 as compared to fiscal 2004.

Marketing

Marketing Strategy. We strive to be the consumer’s top choice for flavor by serving indulgent but guilt-free meals, featuring our signature flame-grilled chicken, inspired by the kitchens of Mexico. We seek to build long-term relationships with consumers based on a complete brand experience. With our brand’s authentic roots and our high quality, great tasting healthy food we attempt to inspire our consumers not only to frequent the brand, but to become advocates by converting non-users into users via word-of-mouth.

We closely follow competitive trends, subscribe to secondary consumer research and conduct primary research to prioritize opportunities and stay abreast of our position in the market. Through our strategic marketing efforts and unique wholesome product offerings, we believe we have positioned ourselves into the “sweet spot” between the QSR and fast casual restaurant segments. We believe consumers find our restaurant experience superior to traditional fast food restaurants but not as high-priced and inconvenient as fast casual restaurants.

Promotional/Discount Strategy. We develop promotions designed to deliver value in a highly competitive marketplace. Each year, the calendar is divided into six promotional periods of approximately eight weeks each that feature new products, attractively priced family meal offers and/or value-added promotions. Each promotional period features an advertised focus and in-restaurant components. To avoid unprofitable discounting, we use internal modeling aids to assist the marketing team in developing promotions designed to deliver incremental sales at a profit.

Advertising Strategy. We have developed key consumer insights that define consumer segments and their motivators. Our advertising is designed to capture the emotion of the brand by stirring consumers’ passion for wholesome, flavorful food without compromising convenience. Our advertising is designed to position the brand consistent with our marketing strategy.

Our target audience is 25-49 years old. We use television and radio advertising as the primary medium in markets where there is adequate market penetration. We use in-restaurant merchandising materials to convey further the freshness and quality of the menu. We periodically use print media to introduce new products and deliver brand communication along with purchase incentives. We implement public relations activities to stretch our brand messaging into the consumer press and strengthen our ties with the community.

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Competition

The quick service restaurant industry is highly competitive and fragmented. The number, size and strength of competitors varies by region. We believe that quick service restaurant competition is based primarily on taste, quickness of service, value, name recognition, restaurant location and customer service. We believe that competition within the fast casual restaurant segment is based primarily on price, taste, quality and the freshness of the menu items and the comfort and ambiance of the restaurant environment.

Our greatest strength in this competitive environment is our high quality, great tasting healthy food. Given favorable consumer trends, including the growth of Hispanic population in many regions of the United States, impact of the Hispanic culture on food and flavors, growth of the Mexican food segment and increased interest in healthy dining, we believe we are well positioned to take advantage of these trends and continue to grow our market position in existing and new markets. We believe we can continue to increase our market share with our marketing focus on building our brand, as well as our operations focus on achieving improvements in all aspects of customer service.

We compete with national and regional quick service and fast casual restaurants. Compared to us, some of our competitors have greater financial and other resources, have been in business longer, have greater name recognition and are better established in the markets where our restaurants are located or are planned to be located.

Service Marks and Trademarks

We have registered the names El Pollo Loco, Pollo Bowl and certain other names used by our restaurants as trademarks or service marks with the United States Patent and Trademark Office and in approximately 42 foreign countries. We are not aware of any infringing uses that could reasonably be expected to materially affect our business. We believe that our trademarks and service marks are valuable to the operation of our restaurants and are important to our marketing strategy. Our policy is to pursue and maintain registration of our service marks and trademarks in those countries where our business strategy requires us to do so and to oppose vigorously any infringement or dilution of our service marks or trademarks in such countries.

The contractual rights to use the name El Pollo Loco and certain related trademarks and intellectual property in Mexico were assigned to us in 1996, pursuant to an agreement between us and a company controlled by Jose Ochoa, the founder of the first El Pollo Loco restaurant in Mexico. As consideration for the assignment of such rights, we agreed, subject to the terms and conditions of the agreement, to develop a minimum number of restaurants in Mexico by February 2006 and to pay certain fees for each such restaurant that we develop. In April 2004, El Pollo Loco, S.A. de C.V., which we refer to as EPL-Mexico, filed suit against us in state court in Laredo, Texas alleging, among other things, that we breached our agreement with EPL-Mexico by failing to develop new restaurants in Mexico and claiming that the right to use the name El Pollo Loco in Mexico should revert to EPL-Mexico. EPL-Mexico also challenged our ownership of the trademarks before the Mexican Intellectual Property Institute, which challenge was unsuccessful. The Mexican Intellectual Property Institute twice confirmed our ownership of the EPL trademarks in Mexico in 2004. We successfully removed the Texas action to federal court and we have filed a counterclaim against EPL-Mexico to defend our rights to the trademarks in Mexico. We believe that our adversary’s claims are without merit and that, based on the rights we possess pursuant to the agreement, we possess adequate legal and contractual rights to use the intellectual property in question in Mexico. However, a failure to prevail in this action could result in the loss of our ownership in Mexico of the trademarks and intellectual property at issue, which could affect our brand in the United States and elsewhere.

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Franchise Program

We use a franchising strategy as a means to accelerate our new restaurant growth in new markets with relatively minimal capital commitment. We believe we currently have solid working relationships with our franchisees. As of December 29, 2004, we had a total of 185 franchised restaurants, operated by 54 franchisees and one licensee (operating at Universal Studios Theme Park). Our franchisees range in size from single restaurant operators to our largest franchisee, who currently operates 28 restaurants. We employ five franchise consultants who work with our franchisees to maintain system wide quality. These consultants assist franchisees with new site proposals, new restaurant openings, marketing programs and ongoing operations activities.

Our standard franchise agreement gives our franchisees the right to use our trademarks, service marks, trade dress and our proprietary recipes, systems, manuals, processes and related items. We also provide our franchisees with access to training, marketing, quality control, purchasing, distribution and operations assistance. We are not obligated to and currently do not provide any direct or indirect financing or financing guarantees for our franchisees. The franchisee is required to pay an initial franchise fee of $40,000 for a 20-year franchise term per restaurant and in many cases, a renewal fee for a successor franchise agreement beyond the initial term. The franchisee is also required to pay monthly royalty fees of 4% of gross sales as well as monthly advertising fees of 4% for the Los Angeles designated market area or 5% for other markets. 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 brand.

We are the sole master licensee of the Fosters Freeze brand of soft-serve ice cream products in seven Southern California counties. Our franchisees in California and Nevada may also enter into a sublicense agreement with us under which they may sell a limited Fosters Freeze menu in their restaurant.

As a result of an initiative in the mid-1990’s to transfer certain company restaurants to new franchisees, some franchisees sublease their restaurants from us. However, most franchisees currently either purchase the real estate upon which the restaurants are operated or enter into direct leases with third-party owners of real estate.

Employees

As of February 28, 2005, we had approximately 3,800 employees, of whom approximately 3,540 were hourly restaurant employees, 136 were salaried general managers engaged in managerial capacities and 123 were corporate and office personnel. Most of our restaurant employees are employed on a part-time basis to provide services necessary during peak periods of restaurant operations. None of our employees are covered by a collective bargaining agreement. We believe that we generally have good relations with our employees.

Environmental Matters

Our operations are also subject to federal, state and local laws and regulations relating to environmental protection, including regulation of discharges into the air and water. Under various federal, state and local laws, an owner or operator of real estate may be liable for the costs of removal or remediation of hazardous or toxic substances on or in such property. Such liability may be imposed without regard to whether the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances.

Many of our properties are located on sites that we know or suspect to have been used by prior owners or operators as retail gas stations. Such properties previously contained underground storage

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tanks, and some of these properties may currently contain abandoned underground storage tanks. We are aware of contamination from a release of hazardous materials by a previous owner at two of our owned properties and one of our leased properties. We do not believe that we have contributed to the contamination at any of these properties. It is possible that petroleum products and other contaminants may have been released at other properties into the soil or groundwater. Under applicable federal and state environmental laws, we, as the current owner or operator of these sites, may be jointly and severally liable for the costs of investigation and remediation of any contamination. Although we principally lease most of these properties or when we own the property we obtain certain assurances from the prior owner or often obtain indemnity agreements from third parties, we cannot assure you that we will not be liable for environmental conditions relating to our prior, existing or future restaurants or restaurant sites. If we are found liable for the costs of remediation of contamination at any of these properties, our operating expenses would likely increase and our operating results would be materially adversely affected.

One of our leased facilities is located on a site that has been designated as a federal “Superfund site” for cleanup of hazardous substances. We do not believe that we have contributed to the contamination at this site and have not been named as a potentially responsible party with respect to this site. However, we cannot assure you that we will not be named as a potentially responsible party with respect to this site in the future. If we are named as a potentially responsible party with respect to the contamination at this site and are required to contribute to the cleanup of this site, our operating expenses would likely increase and our operating results could be materially adversely affected.

We have not conducted a comprehensive environmental review of our properties or operations. No assurance can be given that we have identified all of the potential environmental liabilities at our properties or that such liabilities would not have a material adverse effect on our financial condition.

Government Regulation

Our business is subject to extensive federal, state and local government regulation, including those relating to, among others, public health and safety, zoning and fire codes. Failure to obtain or retain food or other licenses would adversely affect the operations of our restaurants. Although we have not experienced and do not anticipate any significant problems in obtaining required licenses, permits or approvals, any difficulties, delays or failures in obtaining such licenses, permits or approvals could delay or prevent the opening of, or adversely impact the viability of, a restaurant in a particular area. We operate each of our restaurants in accordance with standards and procedures designed to comply with applicable codes and regulations.

The development and construction of additional restaurants will be subject to compliance with applicable zoning, land use and environmental regulations. We believe that federal and state environmental regulations have not had a material effect on our operations, but more stringent and varied requirements of local government bodies with respect to zoning, land use and environmental factors could delay construction and increase development costs for new restaurants.

We also are subject to the Fair Labor Standards Act, the Immigration Reform and Control Act of 1986 and various federal and state laws governing such matters as minimum wages, overtime and other working conditions. 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.

Many states, including California, and the Federal Trade Commission require franchisors to transmit specified disclosure statements to potential franchisees when offering or modifying a franchise. Some states require us to register our franchise offering documents and file our advertising material before we may offer a franchise for sale. We believe that our Uniform Franchise Offering Circular, together with any applicable state versions or supplements, complies in all material respects with both the Federal Trade Commission guidelines and all applicable state laws regulating franchising. We are marketing to both new and existing franchisees in all states except Virginia, where we are awaiting approval of our application for registration of our franchise offering circular.

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Availability of SEC Reports

We file annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K with the SEC. Members of the public may read and copy materials that we file with the SEC at the SEC’s Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. Members of the public may also obtain information on the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet web site that contains reports, proxy and information statements and other information regarding issuers, including us, that file electronically with the SEC. The address of that site is http://www.sec.gov. Our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K are not available on our Internet web site, http://www.elpolloloco.com. We have not yet updated our web site to include such reports. However, copies are available, without charge, from General Counsel, El Pollo Loco, Inc., 3333 Michelson Drive, Suite 550, Irvine, California 92612.

Restatement of Previously Issued Financial Statements

Based on a review begun in December 2004, the Company determined that its accounting for leases was in error. Upon completion of its review, the Company corrected its lease and leasehold depreciation accounting in 2004 and restated certain historical financial information for prior periods to correct errors in its lease accounting and leasehold depreciation policies.

Corrections to the Company’s lease accounting policies include adjusting lease terms, as defined in Statement of Financial Accounting Standards (SFAS) No. 13, “Accounting for Leases,” as amended, to include option renewal periods where failure to exercise such options would result in an economic penalty, recognizing the straight-line effect over the lease term of escalating rents during the option periods and recognizing the effect of pre-opening “rent holidays” over the related lease terms. In addition, the restatement includes an adjustment to depreciation expense to correct the depreciable lives being used for certain leasehold costs and improvements where the contractual term of the lease, including lease option periods for which a reasonable assurance exists that the option would be exercised, was shorter than the historical depreciation period previously used to record depreciation expense.

The Company restated its balance sheet at December 31, 2003, and the statements of income and comprehensive income, stockholder’s equity and cash flows for the years ended December 31, 2003 and December 25, 2002. We have also restated the applicable financial information for 2000, 2001, 2002 and 2003 in Item 6 of this report. The Company has not amended its previously filed Form S-4 or Quarterly Reports on Form 10-Q for the restatement, and the financial statements and related financial information contained in those reports should no longer be relied upon. Throughout this Form 10-K all referenced amounts for prior periods and prior period comparisons reflect the balances and amounts on a restated basis.

Risk Factors

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

These forward-looking statements reflect our current views with respect to future events and are based on assumptions and are subject to risks and uncertainties. Also, these forward-looking statements present our estimates and assumptions only as of the date of this report. Except for our ongoing

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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 our substantial level of indebtedness, food-borne-illness incidents, increases in the cost of chicken, 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 ability to compete successfully with other quick service and fast casual restaurants, our ability to expand into new markets, our reliance in part on our franchisees, our ability to support our expanding franchise system and litigation we face in connection with our operations. Actual results may differ materially due to these risks and uncertainties and those discussed below.

Our substantial level of indebtedness could materially and adversely affect our business, financial condition and results of operations.

We have substantial debt service obligations. As of December 29, 2004, we had approximately $126.9 million in total indebtedness outstanding. We also have the ability to borrow up to an additional $15.0 million (less the amount of letters of credit outstanding) under the revolving portion of our senior credit facility. Subject to restrictions in the indenture and our senior credit facility, we may incur additional indebtedness. Our high level of indebtedness could have important consequences to you and significant effects on our business, including the following:

We expect to use cash flow from operations to pay our expenses and amounts due under outstanding indebtedness, including interest payments on the EPL Notes. Our ability to make these payments thus depends on our future performance, which will be affected by financial, business, economic and other factors, many of which we cannot control. Our business may not generate sufficient cash flow from operations in the future and our anticipated growth in revenue and cash flow may not be realized, either or both of which could result in our being unable to repay indebtedness, including the EPL Notes, or to fund other liquidity needs. If we do not have enough money, we may be required to refinance all or part

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of our then-existing debt (including the EPL Notes), sell assets or borrow more money. We cannot assure you that we will be able to accomplish any of these alternatives on terms acceptable to us, or at all. In addition, the terms of existing or future debt agreements, including our senior credit facility and the indenture, may restrict us from adopting any of these alternatives. The failure to generate sufficient cash flow or to achieve any of these alternatives could significantly adversely affect the value of the EPL Notes and our ability to pay the amounts due under the EPL Notes.

Food-borne illness incidents could reduce our restaurant sales.

We cannot guarantee that our internal controls and training will be fully effective in preventing all food-borne illnesses. Furthermore, our reliance on third party food processors makes it difficult to monitor food safety compliance and increases the risk that food-borne illness would affect multiple locations rather than single restaurants. Some food-borne illness incidents could be caused by third party food suppliers and transporters outside of our control. New illnesses resistant to our current precautions may develop in the future, or diseases with long incubation periods could arise, that could give rise to claims or allegations on a retroactive basis. One or more instances of food-borne illness in one of our restaurants or a franchised restaurant could negatively affect our restaurant sales if highly publicized. This risk exists even if it were later determined that the illness was wrongly attributed to one of our restaurants. A number of other restaurant chains have experienced incidents related to food-borne illnesses that have a material adverse impact on their operations, and we cannot assure you that we can avoid a similar impact upon the occurrence of a similar incident at our restaurants.

Increases in the cost of chicken could materially adversely affect our business, financial condition, results of operations and cash flows.

The principal food product our company operated and franchised restaurants use is chicken, and any material increase in the cost of chicken could materially adversely affect our operating results. During 2002, 2003 and 2004, the cost of chicken included in our product cost was approximately 13.1%, 12.8% and 14.1% of our restaurant revenue. Changes in the cost of chicken can result from a number of factors, including seasonality, increases in the cost of grain, disease and other factors that affect availability and greater international demand for domestic chicken products. If we fail to anticipate and react to increasing food costs by adjusting our purchasing practices, our cost of sales may increase and our operating results could be adversely affected. We currently do not engage in futures contracts or other financial risk management strategies with respect to potential price fluctuations in the cost of food and other supplies, which we purchase at prevailing market or contracted prices. Historically, we limited our exposure to chicken prices through contracts ranging in term from one to three years. We recently entered into new contracts with terms ranging from two to three years with our primary suppliers of chicken that expire in February 2007 and February 2008. The price that we pay for chicken has increased as a result of these new contracts. If we cannot pass these price increases on to our customers, as we are attempting to do through menu price increases that we implemented in 2004, the increase in the cost of chicken would materially adversely affect our business, financial condition, results of operations and cash flows.

Failure to receive frequent deliveries of food and other supplies could materially and adversely impact our business, financial condition, results of operations and cash flows.

Our and our franchisees’ ability to maintain consistent quality menu items depends in part upon our ability to acquire fresh food products, including the highest quality whole chickens and related items from reliable sources in accordance with our specifications. Shortages or interruptions in the supply of fresh food products caused by unanticipated demand, problems in production or distribution, contamination of food products, an outbreak of poultry diseases, inclement weather or other conditions could materially adversely affect the availability, quality and cost of ingredients, which would adversely affect our business, financial condition, results of operations and cash flows. We have contracts with a limited number of suppliers of most chicken, food and other supplies for our restaurants. In addition, we have one company that distributes substantially all of the products we receive from suppliers. If that distributor or any of our

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suppliers do not perform adequately or if any one or more of such entities seeks to terminate its agreement or fails to perform as anticipated, or if there is any disruption in any of our supply or distribution relationships for any reason, it could have a material adverse effect on our business, financial condition, results of operations and cash flows. Our inability to replace our distributor and our suppliers in a short period of time on acceptable terms could increase our costs and could cause shortages at our restaurants of food and other items that may cause our company-operated or franchised restaurants to remove certain items from a restaurant’s menu or temporarily close a restaurant. If we or our franchisees temporarily close a restaurant or remove popular items from a restaurant’s menu, that restaurant may experience a significant reduction in revenue during the time affected by the shortage or thereafter, as our customers may change their dining habits as a result.

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

Food service businesses are often affected by changes in consumer tastes, national, regional and local economic conditions and demographic trends. Factors such as traffic patterns, local demographics and the type, number and location of competing restaurants may adversely affect the performance of individual locations. In addition, inflation and increased food and energy costs may harm the restaurant industry in general and our locations in particular. Adverse changes in any of these factors could reduce consumer traffic or impose practical limits on pricing, which could harm our business, financial condition, results of operations and cash flows. There can be no assurance that consumers will continue to regard our products favorably or that we will be able to develop new products that appeal to consumer preferences, which could have a material adverse affect on our business. Our continued success will depend in part on our ability to anticipate, identify and respond to changing consumer preferences and economic conditions.

The geographic concentration of our restaurants makes our business vulnerable to adverse developments in the greater Los Angeles area or the state of California.

Our company-operated and franchised restaurants in the greater Los Angeles area generate, in the aggregate, approximately 88% of our annual revenues. Our business will be materially adversely affected if we experience a significant decrease in revenues from these restaurants. Changes in the demographic or economic conditions in the greater Los Angeles area or the state of California could have a material adverse effect on our business.

We may not be able to compete successfully with other quick service and fast casual restaurants.

The food service industry, and particularly the QSR and fast casual segments, is intensely competitive. In addition, the greater Los Angeles area, the primary market in which we compete, includes the most competitive Mexican QSR and fast casual markets in the country. Competition in our industry is primarily based on price, convenience, quality of service, brand recognition, restaurant location and type and quality of food. If our company-operated and franchised restaurants cannot compete successfully with other quick service and fast casual restaurants in new and existing markets, we could lose customers and our revenues may decline. Our company-operated and franchised restaurants compete with national and regional quick service and fast casual restaurant chains for customers, restaurant locations and qualified management and other restaurant staff. Compared to us, some of our competitors have greater financial and other resources, have been in business longer, have greater name recognition and are better established in the markets where our restaurants are located or are planned to be located.

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Our expansion into new markets may present additional risks that could materially adversely affect the success of our new restaurants.

We expect to enter into new geographic markets in which we have no prior operating or franchising experience. We face challenges in entering new markets, including consumers’ lack of awareness of our brand, difficulties in hiring personnel and problems due to our unfamiliarity with local real estate markets and demographics. New markets may also have different competitive conditions, consumer tastes and discretionary spending patterns than our existing markets. Any failure on our part to recognize or respond to these differences may adversely affect the success of our new restaurants. The failure of a significant number of the restaurants that we open in new markets could materially adversely affect our business, financial condition, results of operations and cash flows.

We intend to open additional restaurants, which could have a material adverse effect on the business of existing restaurants near the new restaurants and materially and adversely affect our financial condition, results of operations and cash flows.

We are reviewing additional sites for potential future El Pollo Loco restaurants. Historically, there is a “ramp-up” period of time before we expect a new El Pollo Loco restaurant to achieve our targeted level of performance. This is due to higher operating costs caused by start-up and other temporary inefficiencies associated with expanding into new markets such as lack of market familiarity and acceptance and unavailability of experienced staff. Our ability to open new restaurants is dependent upon a number of factors, many of which are beyond our control, including our ability to:

We may not be able to attract enough customers to new restaurants because potential customers may be unfamiliar with our restaurants or the atmosphere or menu of our restaurants might not appeal to them. In addition, as part of our growth strategy, we intend to open new restaurants in our existing markets. Since we typically draw customers from a relatively small radius around each of our restaurants, the operating results and comparable unit sales for existing restaurants that are near the area in which a new restaurant opens may decline, and the new restaurant itself may not be successful, due to the close proximity of other restaurants and market saturation.

Our existing business support systems, management information systems, financial controls and other systems and procedures may be inadequate to support our expansion, which could require us to incur substantial expenditures that could materially adversely affect our operating results or cash flows.

We rely in part on our franchisees, and if our franchisees cannot develop or finance new restaurants or build them on suitable sites or open them on schedule, our growth and success may be affected.

We will rely in part on our franchisees and the manner in which they operate their locations to develop and promote our business. We occasionally have disputes with our franchisees and expect such disputes to occur in the future, which could materially adversely affect our business, financial condition, results of operations and cash flows. Although we have developed criteria to evaluate and screen prospective franchisees, there can be no assurance that franchisees will have the business acumen or financial resources necessary to operate successful franchises in their franchise areas, and state franchise

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laws may limit our ability to terminate or modify these franchise arrangements. The failure of franchisees to operate franchises successfully could have a material adverse effect on us, our reputation, our brands and our ability to attract prospective franchisees and could materially adversely affect our business, financial condition, results of operations and cash flows.

Franchisees may not have access to the financial or management resources that they need to open the restaurants contemplated by their agreements with us, or be able to find suitable sites on which to develop them. Franchisees may not be able to negotiate acceptable lease or purchase terms for the sites, obtain the necessary permits and government approvals or meet construction schedules. Any of these problems could slow our growth and reduce our franchise revenues. Additionally, our franchisees depend on financing from banks and other financial institutions in order to construct and open new restaurants. Also, we sublease certain restaurants to our franchisees. If any such franchisees cannot meet their financial obligations under the sublease, or otherwise fail to honor default under the terms of the sublease, we would be financially obligated under the master lease and could be materially adversely affected. Should these conditions continue into the future, the lack of adequate financing could adversely affect the number and rate of new restaurant openings by our franchisees and adversely affect our future franchise revenues.

Failure to support our expanding franchise system could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Our disciplined growth strategy depends on expanding our franchise network, which will require the implementation of enhanced business support systems, management information systems, financial controls and other systems and procedures as well as additional management, franchise support and financial resources. We cannot assure you that we will be able to manage our expanding franchise system effectively. Failure to provide our franchisees with adequate support and resources could materially adversely affect both our new and existing franchisees as well as cause disputes between us and our franchisees and lead to material liabilities. Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Negative publicity relating to one of our restaurants, including our franchised restaurants, could reduce sales at some or all of our other restaurants.

We are, from time to time, faced with negative publicity relating to food quality, restaurant facilities, health inspection scores, employee relationships or other matters at one of our restaurants. Adverse publicity may negatively affect us, regardless of whether the allegations are valid or whether we are liable. In addition, the negative impact of adverse publicity relating to one restaurant may extend far beyond the restaurant involved to affect some or all of our other restaurants. The risk of negative publicity is particularly great with respect to our franchised restaurants because we are limited in the manner in which we can regulate them, especially on a real-time basis. A similar risk exists with respect to totally unrelated food service businesses, if customers mistakenly associate such unrelated businesses with our own operations.

Changes in employment laws may materially and adversely affect our business, financial condition, results of operations and cash flow.

Various federal and state labor laws govern the relationship with our employees and affect operating costs. These laws include minimum wage requirements, overtime, unemployment tax rates, workers’ compensation rates, citizenship requirements and other salary and benefit requirements for employees classified as non-exempt. Significant additional government-imposed increases in the following areas could materially affect our business, financial condition, operating results or cash flow:

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Labor shortages or increased labor costs could materially and adversely affect our business, financial condition, results of operations and cash flows.

Labor is a primary component in the cost of operating our company-operated and franchised restaurants. If we or our franchisees face labor shortages or increased labor costs because of increased competition for employees, higher employee turnover rates or increases in the federal minimum wage or other employee benefits costs (including costs associated with health insurance coverage), our operating expenses could increase and our growth could be adversely affected. In addition, our success depends in part upon our and our franchisees’ ability to attract, motivate and retain a sufficient number of well-qualified restaurant operators and management personnel, as well as a sufficient number of other qualified employees, including guest service and kitchen staff, to keep pace with our expansion schedule. Qualified individuals needed to fill these positions are in short supply in some geographic areas. In addition, QSR operators have traditionally experienced relatively high employee turn-over rates. Although we have not yet experienced any significant problems in recruiting or retaining employees, our and our franchisees’ ability to recruit and retain such individuals may delay the planned openings of new restaurants or result in higher employee turnover in existing restaurants, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

We and our franchisees have been affected by increasing healthcare and workers’ compensation expenses impacting business in most industries, including ours. To manage premium increases we have been required to self-insure through higher deductibles or otherwise. If we are exposed to material liabilities that are not insured it could materially adversely affect our financial condition, results of operations and cash flows.

We may be locked into long-term and non-cancelable leases and may be unable to renew leases at the end of their terms.

Many of our current leases are non-cancelable and typically have initial terms of 20 years and two or three renewal terms of five years that we may exercise at our option. Leases that we enter into in the future likely will also be long-term and non-cancelable and have similar renewal options. If we close a restaurant, we may remain committed to perform our obligations under the applicable lease, which would include, among other things, payment of the base rent for the balance of the lease term. In connection with the acquisition of the company by EPL Intermediate, Inc., we assumed obligations under leases for closed restaurants that had a net present value of $0.9 million at December 29, 2004. The circumstances surrounding these liabilities could change, which could have a material adverse effect on our business. Alternatively, at the end of the lease term and any renewal period for a restaurant, we may be unable to renew the lease without substantial additional cost, if at all. We may close or relocate the restaurant, which could subject us to construction and other costs and risks, and could have a material adverse effect on our business. Additionally, the revenue and profit, if any, generated at a relocated restaurant may not equal the revenue and profit generated at the existing restaurant. We maintain a reserve for restaurant closures, but there can be no assurance that this reserve will cover our full exposure from all restaurant closures.

We are subject to extensive government regulations that could restrict our ability to operate or sell franchises and result in claims leading to increased costs.

We are subject to extensive government regulation at a federal, state and local government level. These include, but are not limited to, regulations relating to the preparation and sale of food, zoning and building codes, franchising, land use and employee, health, sanitation and safety matters.

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We are required to obtain and maintain governmental licenses, permits and approvals. Difficulty or failure in obtaining them in the future could result in delaying or canceling the opening of new restaurants. Local authorities may suspend or deny renewal of our governmental licenses if they determine that our operations do not meet the standards for initial grant or renewal. This risk would be even higher if there were a major change in the licensing requirements affecting our types of restaurants.

We are also subject to regulation by the Federal Trade Commission and subject to state and foreign laws that govern the offer, sale, renewal and termination of franchises and our relationship with our franchisees. The failure to comply with these laws and regulations in any jurisdiction or to obtain required approvals could result in a ban or temporary suspension on future franchise sales or fines or require us to make a rescission offer to franchisees, any of which could materially adversely affect our business and operating results. Such failure could also subject us to liability to our franchisees.

In addition, the Federal Americans with Disabilities Act and similar state laws prohibit discrimination on the basis of disability in public accommodations and employment. Mandated modifications to our facilities in the future to make different accommodations for persons with disabilities could result in material unanticipated expenses.

The failure to enforce and maintain our trademarks could materially adversely affect our ability to establish and maintain brand awareness.

We have registered the names El Pollo Loco, Pollo Bowl and certain other names used by our restaurants as trademarks or service marks with the United States Patent and Trademark Office and in approximately 42 foreign countries. The success of our business strategy depends on our continued ability to use our existing trademarks and service marks in order to increase brand awareness and further develop our branded products. If our efforts to protect our intellectual property are not adequate, or if any third party misappropriates or infringes on our intellectual property, either in print, on the Internet or through other media, the value of our brands may be harmed, which could have a material adverse effect on our business, including the failure of our brands and branded products to achieve and maintain market acceptance.

The contractual rights to use the name El Pollo Loco and certain related trademarks and intellectual property in Mexico were assigned to us in 1996, pursuant to an agreement between us and a company controlled by Jose Ochoa, the founder of the first El Pollo Loco restaurant in Mexico. As consideration for the assignment of such rights, we agreed, subject to the terms and conditions of the agreement, to develop a minimum number of restaurants in Mexico by February 2006 and to pay certain fees for each such restaurant that we develop. In April 2004, El Pollo Loco, S.A. de C.V., which we refer to as EPL-Mexico, filed suit against us in state court in Laredo, Texas alleging, among other things, that we breached our agreement with EPL-Mexico by failing to develop new restaurants in Mexico and claiming that the right to use the name El Pollo Loco in Mexico should revert to EPL-Mexico. EPL-Mexico also challenged our ownership of the trademarks before the Mexican Intellectual Property Institute, which challenge was unsuccessful. The Mexican Intellectual Property Institute twice confirmed our own