Chain plans to donate 500,000 pounds of food to help the homeless
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El Pollo Loco, historically not a digital player, is ready to “turn on the delivery spigot” with plans to expand its off-premise reach by adding new partnerships with Uber Eats and Postmates in September, the company announced Thursday during its latest earnings call.
Delivery menus, including those found with current delivery partner, DoorDash, will be limited to certain menu items with a focus on family and combination meals.
Bernard Acoca, El Pollo Loco president and CEO, said those items will have “slightly” elevated pricing to preserve margins and will also feature “unique family meals and combos you can’t get elsewhere.”
The CEO said the curated menu and elevated pricing are designed to drive more profitable sales as the Costa Mesa, Calif.-based chicken chain steps up its delivery game in the coming months. Currently, delivery represents less than 2% of sales.
The company plans to launch the curated delivery program nationwide in September.
El Pollo Loco is also making foods, especially its famous citrus-marinated chicken, easier to cook as part of a strategy to simplify kitchen operations for employees.
Some of the changes include adding a new inventory management system in 120 restaurants. That system will roll out to all restaurants by the end of the year. The company is also market testing a simpler way to cook its chicken.
“We’re really maniacally focused on trying to figure out how to simplify the back of the house to make our employees’ jobs easier,” Acoca said.
The goal is to change recipes so that all foods and meals can be cooked or prepared in six steps or less. This streamlining will ultimately free up to one to two hours a day for managers, he said.
“Ultimately, we believe it will have the added benefit of lowering turnover and increasing retention,” Acoca said.
Crew turnover at the chain is at about 115%, slightly lower than the industry average, Acoca said.
The company is also launching a major philanthropy effort to reduce food waste and help the homeless.
Acoca said participating corporate and franchise restaurants will be donating leftover food to food banks and local shelters.
“We believe this is particularly important as homelessness has reached epidemic proportions in Southern California, and we are committed to doing everything we can as a brand through initiations both big and small to assist with the mounting crisis in the communities in which we do business,” Acoca said.
The chain projects donations would reach about 500,000 pounds of food over the course of the year.
Systemwide same-store sales increased 0.7% for the second quarter ended June 26. That includes a 0.4% increase at company-operated restaurants and a 0.9% increase at franchise locations. The increase in company-operated sales was driven by a 3.1% increase in average check, which included a menu price increase. Transactions dropped by 2.7%.
It was the fourth consecutive quarter of positive same-store sales for the chain, which has been on a year-long journey to improve the business through efforts that have included rebranding and new store designs. The company is also working to improve its culinary offerings.
“We know we’ve got to do more work with our innovation pipeline,” Acoca said.
The chain closed the quarter with 484 restaurants. Of those, 200 are company-operated stores.
Total revenue increased 1.9% to $113.7 million compared to $111.6 million in the same period last year. Net income of $14.1 million, or 37 cents per share, compared to an increase of $5.1 million, or 13 cents per share, for the same period, last year. The jump in profit was the result of a one-time gain of $10 million in proceeds tied to the settlement of a previously disclosed securities class action lawsuit.
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