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: Line Item Description Company-Operated Franchised Revenues $374 $29 Operating income 62 1 Invested assets 79 2 a. Determine the profit margin for each segment. Round to one decimal place. Line Item Description Profit margin Company-Operated fill in the blank 1% Franchised fill in the blank 2% b. Determine the investment turnover for each segment. Round to two decimal places. Line Item Description Investment Turnover Company-Operated fill in the blank 3 Franchised fill in the blank 4 c. Use the DuPont formula to determine the return on investment for each segment. Round to one decimal place. Line Item Description Return on Investment Company-Operated fill in the blank 5% Franchised fill in the blank 6%

Financial And Managerial Accounting

15th Edition

ISBN:9781337902663

Author:WARREN, Carl S.

Publisher:WARREN, Carl S.

Chapter7: Internal Control And Cash

Section: Chapter Questions

Problem 4MAD

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Analyze El Pollo Loco Holdings, Inc.

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:

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

a. Determine the profit margin for each segment. Round to one decimal place.

Line Item Description	Profit margin
Company-Operated	fill in the blank 1%
Franchised	fill in the blank 2%

b. Determine the investment turnover for each segment. Round to two decimal places.

Line Item Description	Investment Turnover
Company-Operated	fill in the blank 3
Franchised	fill in the blank 4

c. Use the DuPont formula to determine the return on investment for each segment. Round to one decimal place.

Line Item Description	Return on Investment
Company-Operated	fill in the blank 5%
Franchised	fill in the blank 6%

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