Operations

El Pollo Loco finds value-hunters want even more value

The fast-casual grilled-chicken chain launches a $5 Taco Tuesday promotion to spark trial after traffic plummets 7.6% in the third quarter.
A rendering of El Pollo Loco's new "less-is-more" prototype design. | Image courtesy of El Pollo Loco.

Value-oriented consumers are giving El Pollo Loco a clear message: They want more value.

So said the fast-casual chicken chain’s CEO Liz Williams on Thursday, after traffic slid 7.6% in the third quarter, despite value-for-the dollar promotions focusing on salads, burritos and bowls in the $9 to $12 price range.

“Truly fast-casual quality but at QSR prices [is] something that few QSRs can do,” Williams said, according to a transcript by financial services site AlphaSense. “While we are proud of how our salads and burritos performed, we recognize that the consumer is still under continued economic pressure and that the industry has become even more competitive with value offers at even lower prices.”

To address this, El Pollo Loco last week joined the Taco Tuesday parade with a promotion offering two tacos for $5. Rewards members get an even sweeter deal of three tacos for $5. 

After the trademark skirmish last year that freed the promotional phrase for wider use (thanks to Taco Bell), Taco Tuesday offers have become an almost standard marketing ploy among Mexican-inspired chains.

Williams said some El Pollo Loco franchisees experimented with it and found the promotion has helped create new trial. And that new trial can introduce customers to value across the menu.

“Not surprisingly, consumers are asking us to offer this promotion every day, which is something we will consider as we learn more,” she said.

The chain is also launching a $5 Pollo Bowl promotion this month that will run through January. And Williams said a strong marketing calendar is lined up for next year, though she declined to reveal details, except to say that it will focus both on innovation and value, and less on “rehits,” or reruns of popular items, which she said are losing steam.

“Underlying all of our efforts is an acknowledgment that to be successful in the long term, we need to drive improved traffic trends in 2025, and we believe we have the strategy to do just that,” said Williams.

Revenue was flat year-over-year for the quarter at $120.4 million, with systemwide same-store sales up 2.7%, though that reflected an 11.3% increase in average check, largely as a result of pricing, that was offset by the 7.6% decline in transactions. Net income declined to $6.2 million for the quarter, down from $9.2 million a year ago.

Margins, however, expanded to 16.7%, a 230-basis-point increase year-over-year, partly aided by cost-cutting efficiencies.  The company raised expectations for margin improvement, saying they expect to end the year with margins in the 16.75% to 17.25% range.

The nearly 50-year-old brand is also preparing for growth, with at least 10 restaurants on deck for next year. 

El Pollo Loco last week unveiled a new prototype restaurant design that Williams described as “modern and efficient,” with a “less-is-more philosophy.” It also reduces build-out costs.

El Pollo Loco is also looking to take advantage of restaurant chains across the industry that are shuttering units, opening up convertible real estate opportunities for the fire-grilled chicken chain, which could further lower the cost of new openings, she said.

The new refreshed design will also be incorporated into store remodels with a “low-cost five-year refresh” and a more-extensive 10-year remodel option for franchisees. The company expects about half of the chain’s 496 units will be touched over the next four years.

This year, the chain expects to complete six to eight company-owned store remodels—including the first with the new design, which is expected to open in the fourth quarter—as well as 35 to 40 franchised location remodels.

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