El Pollo Loco Holdings, Inc. (LOCO), Spanish for “The Crazy Chicken,” operates almost 500 restaurants, approximately 40% of which are company-owned and the rest are franchises. El Pollo Loco combines the culinary traditions of Mexico and California, creating unique menu items such as their signature Chicken Avocado Burrito. The company aims to improve profitability, in part, by simplifying operations to make it easier for employees and franchisees to run the restaurants. Recent data (in millions) for company-operated and franchised restaurants are as follows:

a. Determine the profit margin for each segment.
b. Determine the investment turnover for each segment.
c. Use the DuPont formula to determine the return on investment for each segment.
d. Which segment has the highest profit margin, investment turnover, and return on investment? Explain why.
e. Why would El Pollo Loco operate company- owned restaurants?

Transcribed Image Text:

Revenues Operating income Invested assets Company-Operated $374 62 79 Franchised $29 1 2