El Pollo Loco moves toward 'QSR plus' positioning

The El Pollo Loco grilled-chicken chain is ramping up growth with a new restaurant prototype and an emphasis on made-in-house quality that seeks to solidify the brand’s positioning as “quick-service plus.”

Costa Mesa, Calif.-based El Pollo Loco was hit hard during the recession, officials said, and in the past year roughly 14 restaurants closed, bringing the total to 398. In prior financial disclosures because of once-public debt, the private company reported a net loss of $38.6 million for the 12 months ended March 30, 2011, the end of the first quarter that year and the most recent report available.

In July 2011, El Pollo Loco and its parent company EPL Intermediate Inc., announced the completion of a refinancing of publicly traded bonds with private debt and an unspecified investment of capital from existing equity sponsors.

The refinancing paved the way for El Pollo Loco to work on revitalizing the brand, and 2012 has been a “year of transformation” that is paying off with transactions and guest checks now trending positive, said Mark Hardison, vice president of marketing.

In February, El Pollo Loco hired a new ad agency — Butler, Shine, Stern & Partners — and a new media campaign was launched in April with the theme “Crazy You Can Taste.”

The goal, said Hardison, was to highlight the fact that El Pollo Loco’s signature chicken is marinated and grilled in restaurants, and the made-fresh-in-house theme carries throughout the menu, from the guacamole to the salsa bar.

“That’s unusual in fast food, and we wanted to make sure we were on top of our game in that, and to take credit for it,” said Hardison. “The campaign is all about taking credit for the crazy lengths we go to [in order to] prepare high-quality food.”

Promoting freshness, value

Limited-time offers throughout the year have also helped boost sales, he added. Various $5 combination meals, such as an original Pollo Bowl served with tortillas and a small drink, have been popular, for example.

A Stuffed Quesadilla promotion in August, featuring new cheesy, protein-filled quesadillas with fresh-sliced avocado for $5.49 also did well and will return in various forms this year. Next year, it will be added as a permanent line on the menu.

In July, the chain offered a $20 three-course family meal featuring a nacho appetizer plate, eight pieces of chicken with rice and beans, tortillas and salsa, and four churros. That value-positioned three-course offer will return for the holidays, starting Nov. 20, with a sliced avocado salad appetizer, eight pieces of chicken, rice and beans, and an indulgent dessert of chocolate tortilla chips drizzled with chocolate and marshmallow sauces and dusted with powdered sugar — all for $20.

Hand-shredded beef will also be on the menu during the holidays as an LTO, featured in tacos, bowls and as a stuffed quesadilla for prices ranging from $2.79 to $5.49.

The presence of fresh-sliced avocado in dishes across the menu has also played a key role in conveying freshness, a move that was aided in part by favorable commodity pricing as a result of an abundant harvest.

Putting prep front and center

In line with the work on the menu, El Pollo Loco developed a new prototype restaurant, dubbed “Hacienda,” that will be the design for new builds going forward. The company is also remodeling existing units with the more-contemporary design. About 50 will be done by the end of this year and another 100 are scheduled for remodel next year.

Brian Carmichall, El Pollo Loco’s vice president of development, said two locations in Las Vegas, and one in Southern California, have opened with the new design, which has a roughly 2,800-square-foot format. A smaller format version is also being developed for footprints of about 2,300 square feet.

For dine-in customers, the most prominent feature of the Hacienda design is an open kitchen with grills front and center, so guests get a clear view of the flame-grilling process, said Carmichall. “We’re going back to the original equipment,” he explained. “It’s about hand crafting. We’re celebrating the work that we do.”

Other design touches, such as metalwork, lights and murals, make reference to the brand’s Mexican heritage.

Though Carmichall declined to give specific numbers, he said locations with the new design were showing an “above-industry-average” lift in sales with a “below-industry-average” investment.

In 2013, the chain is planning to open 10 to 15 new locations, mostly in the West, about half of which will be company owned and the other half franchised. By year’s end, the chain expects to add seven units, including the three ground-up prototypes. No new restaurants opened in 2011.

Borrowing from fast casual

With its renewed emphasis on in-house preparation, El Pollo Loco is not the only quick-service operator to borrow ideas from the fast-casual world. Some Wall Street analysts and investors have speculated that Taco Bell’s new Cantina Bell menu, created by celebrity chef Lorena Garcia, and the new Doritos Locos Tacos have stolen market share from competitors — though the Cantina Bell menu features little that has been prepared in house.

When asked if Taco Bell’s efforts have hurt El Pollo Loco, Hardison said, “Not at all.” In markets where both brands operate, he said, “It really hasn’t impacted our growth or the momentum of the brand. People are recognizing the quality and our authenticity resonates with the core Hispanic groups in our audience.”

Hardison said El Pollo Loco has long straddled the line between quick service and fast casual. Now the chain is working to find its place as “QSR plus,” offering the convenience of quick service with drive thrus, but without the “compromises of typical fast food,” where food is mostly reheated.

“QSR plus is the place where our brand belongs,” he said.

Contact Lisa Jennings at [email protected].
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