Restaurants are increasingly relying on premium pricing to offset margin-hurting third-party delivery fees. Industry leaders say busy, mobile-centric consumers are often willing to pay the higher price for convenience.
El Pollo Loco is deploying that same tactic but with a twist. The quick-service chain’s delivery menu is a carefully curated list of exclusive combo meals geared for big groups or families. The delivery only menu is designed to make money with some combo orders marked up as much as 13% to 15%.
“We charge a price premium through those third-party marketplaces,” CEO and President Bernard Acoca told investors Thursday afternoon during the brand’s third-quarter conference call.
The limited menu is improving delivery results. And, so far, consumers are not complaining, the CEO added.
“We don't see resistance necessarily from the more elevated pricing that we're charging in those channels,” Acoca said. “I think consumers there are looking to pay for convenience, first and foremost. And so we're kind of enthusiastic and excited about the progress we're making with these providers.”
The company’s other delivery strategy: cast a wide net by partnering with multiple companies.
That’s a movement picking up steam in the industry, which is pivoting from exclusive partnerships. McDonald’s, for example, is now working with DoorDash and Grubhub/Seamless, in addition to its original delivery partner Uber Eats. The CEO of Habit Restaurants, parent of Habit Burger Grill, also touted the benefits of partnering with a variety of delivery operators during its earnings call this week.
Acoca said restaurants, which started off with DoorDash, recently added Postmates and Uber Eats as options for diners. Roughly 420 restaurants systemwide are now available on all three platforms.
In December, El Pollo Loco plans to add Grubhub as a fourth option. Like the other platforms, consumers ordering from Grubhub will see a limited menu of curated high-margin items and combo meals to off-set third-party fees, the CEO said.
In its latest quarter, delivery and a new value meal contributed to positive same-store sales growth.
Specifically, the September launch of the $5 Fire-Grilled Combo meal has been a hit with guests, Acoca said. The five different combo options come with chips and a drink; each bow is engineered to be highly profitable for the brand, the CEO said.
Frictionless ordering is also on the way.
Acoca said in November, consumers will be able to use Facebook Messenger, Amazon Alexa and Apple Business Chat to order meals. For the upcoming holidays, El Pollo Loco restaurants will also launch for the first-time festive red packaging, along with two new seasonal items: pozole verde (a classic Mexican soup often made at Christmas) and Mexican hot chocolate made with Abuelita chocolate. Tamales are also returning to the menu, including a tamale bowl.
"We believe the holidays are a season El Pollo Loco can be tightly associated with and even own based on the unique products we sell and the experiences we can deliver," he said.
For the third quarter ended Sept. 25, total revenue dipped slightly to $112.1 million, compared to $112.2 million for the same period last year. Systemwide same-store sales increased 1.1%. Company stores performed slightly better, rising 1.6% versus a 0.6% gain at franchised restaurants.
Net income was $6.4 million, or 18 cents per share, compared to $6.8 million, or 17 cents per share, from the same quarter in 2018. The company closed the quarter with 485 restaurants. Of those, 284 are franchised.
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