El Pollo Loco hit hard by unexpected pandemic-related expenses

The fast-casual chicken chain had to pay nearly $2 million during Q4 due to COVID-related leaves of absence and overtime pay.
Photo courtesy of Shutterstock

The resurgence of the pandemic, particularly in Los Angeles, has hit El Pollo Loco hard, the fast-casual chicken chain reported in a business update Tuesday.

The company incurred about $2.5 million in COVID-related expenses during the quarter ended Dec. 30, largely because of leaves of absence and overtime pay. About $1.7 million of those expenses were unexpected as of last quarter, the chain said.

“As with much of the restaurant industry, during November and December, many of our employees and customers have been impacted by the ongoing and increased spread of COVID-19, particularly in Los Angeles and the surrounding areas in which nearly 60% of our system restaurants are located,” El Pollo Loco President and CEO Bernard Acoca said in a statement.

Acoca added that the pandemic forced the chain to “implement actions in our restaurants” that negatively impacted sales and expenses.

Systemwide same-store sales for the quarter fell 0.2%, which included a 3% decline in company-operated restaurants and a 1.8% increase in franchised units.

Same-store sales in the Los Angeles area dropped 2% but increased roughly 3% in the chain’s other markets.

During the third quarter, El Pollo Loco’s same-store sales returned to positive, up 1.8% year over year.

The Costa Mesa, Calif.-based company has seen significant growth in its drive-thrus. Drive-thrus generated 40% of sales at the start of 2020 and now account for nearly 70% of total sales. Delivery and digital sales have doubled, growing to 6% and 10% of total sales, respectively, the chain said.

El Pollo Loco said it expects its Q4 revenue to be $109.5 million to $110.5 million, reflecting reduced store hours in many restaurants and temporary restaurant closures prompted by the coronavirus.

The chain recently released two new restaurant designs, one of which does not include a dining room. El Pollo Loco’s “restaurant of the future” prototypes are currently being built. The dining room-less design includes a takeout window, a dual drive-thru, parking for curbside pickup and patio seating.

El Pollo Loco has previously said it is planning to open three to five company-owned stores this year.

“We remain confident that the strategies we have in place will drive sales and profit growth once we get through the worst of the pandemic,” he said.

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