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Financing

El Pollo Loco feels the drag of closed dining rooms in Los Angeles

Everywhere else, comps are solidly in positive territory.
El Pollo Loco redesign
Photo courtesy of El Pollo Loco

In a sharp reminder that restaurant restrictions have yet to be eased in some key markets, El Pollo Loco aired Tuesday what it termed “a tale of two cities”: What’s happening in Los Angeles, where dining rooms are still closed, versus how sales are trending everywhere else.

Virtually all the chain’s restaurants in the metropolitan area—about 80% of the system—are still prohibited from offering dine-in service. Even though the brand has embraced drive-thrus, same-store sales for the Los Angeles units were down 5.6% during roughly the first seven weeks of the first quarter, while branches outside that market generated a year-over-year sales increase of 2.7%.

In updating financial analysts on the company’s near and longer-range prospects, El Pollo Loco executives noted that restrictions on indoor dining are expected to be partially lifted next week, with 25% of interior seating likely to be okayed for resumed use.

El Pollo Loco CEO Bernard Acoca said units in the City of Angels will likely reopen their dining rooms at those levels, even though branches have previously not opened under a 25% cap because the margins weren’t worth it.  This time around, “we think we can do that without any incremental labor,” Acoca said.

He also noted that schools in many areas are expected to reopen soon, a development likely to restore El Pollo Loco’s lunch business, a major component of its sales. Acoca explained that the pandemic’s scramble of “normal” life, particularly within Latinx communities, kept parents home with the kids instead of venturing out for a midday meal.

Acoca noted that the frequency of visits by the chain’s Latinx clientele has dipped in general, largely because of shifts in normal daily routines.

All things considered, “We are optimistic the worst is behind us, and we can now focus more of our efforts on the future,” the CEO said.

Those efforts include the switch to a new prototype that plays up El Pollo Loco’s specialization in what Acoco dubbed L.A. Mex fare, or Mexican food with a better-for-you twist.  Six units sporting the new look and format will be built during 2021, and 55 existing outlets will be retrofitted with the redesign, executives said.

“We will also broaden our reach by expanding our portfolio of better-for-you products,” Acoca said.

El Pollo Loco also plans to add topspin by focusing on trimming its drive-thru service times. Toward that end, the chain is testing the use of ordering tablets by crewmembers strolling up and down the line of cars waiting to get to the drive-thrus.

Overall for the fourth quarter ended Dec. 30, the franchisor posted a net income of $5.5 million, a 57% increase over the prior year, on revenues of $110.3 million, up 2.6%.

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