Chain plans to launch keto and vegan burritos and will continue to offer free delivery through Postmates; July same-store sales are positive despite recent slowdown in Southern California region
El Pollo Loco is experiencing record delivery sales, driven by the brand’s free delivery offer through Postmates, which the company guarantees “for however long as necessary” during the pandemic.
Like many chains posting second-quarter earnings, April was the chicken chain’s most challenging month with system-wide same-store sales decreasing by 26%. But comps have been improving each month, CEO Bernard Acoca told investors during the chain’s second-quarter conference call.
The company closed the quarter with same-store sales down 9.7%. However, June was up 0.6%, and third-quarter comps, so far, are up roughly 3%.
But over the last seven to 10 days, the Costa Mesa, Calif.-based company said it is seeing a “softening” of sales in its core Los Angeles and Orange County markets.
“It’s tough to say at this point whether it's going to be a trend or not,” Acoca told investors. “It’s too soon to tell. But we do think that it is related to higher level of COVID cases naturally occurring in that part of the world.”
At the onset of the pandemic, Acoca said the brand shifted its focus to expand its delivery reach, create a pipeline of value meals for families, enhance its digital channels and improve efficiency at the drive-thru. All those efforts, including offering free delivery through Postmates, have helped to drive sales in a challenging COVID-19 environment, the company said.
“As a result of this free delivery program with Postmates and our other partnerships with Grubhub, DoorDash and Uber Eats, we have achieved record delivery sales with delivery as a mix of our total sales more than doubling since the beginning of the year,” Acoca said.
The company’s overall digital business has more than tripled since the second quarter of 2019 and has doubled since the beginning of this year. El Pollo Loco plans to improve its digital platform by rolling out enhancements to its loyalty program that “we believe will grow acquisition and increase engagement,” Acoca said.
The company’s app is also being modified to allow curbside pickup. The rollout begins in September.
Curbside pickup, while not new, has grown rapidly during the pandemic, especially among limited-service chains. These options, along with drive-thru ordering, are top ways consumers like to order food during the pandemic.
“We believe the addition of curbside pick-up will provide additional peace of mind for our customers to safely access our offerings as curbside service is seen as one of the safest ways to access food off-premise,” Acoca said.
According to a survey released July 30 by AlixPartners, 44% of consumers said drive-thru was the most preferred method for ordering restaurant food as the country started to reopen. Takeout/Carryout (40%) and curbside pickup (32%) were the next two popular methods for obtaining restaurant meals, according to the survey.
Delivery was the least popular ordering method; however, if consumers were going to order delivery, they indicated that they prefer ordering directly from the restaurant over third-party delivery, AlixPartners said.
New menu items are coming to El Pollo Loco in September.
Acoca said the chain is launching a new line of burritos, including vegan and keto options.
“We believe these portable on-the-go products will serve us well given the amount of business we are generating in our drive-thrus,” the CEO said.
Total revenue was $99.6 million compared to $113.7 million. Net income of $5.5 million, or 16 cents per share, compared to net income of $14.1 million, or 37 cents per share, in the prior year, same quarter. Most of the chain’s 479 restaurants remain open for carryout, mobile pickup, drive-thru and delivery orders. Virtually, all of the dining rooms remain closed with the exception of Houston.
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