Dive Brief:
- El Pollo Loco plans to remodel roughly half of its system over the next four years in partnership with its franchisees, CEO Liz Williams said Thursday during an earnings call.
- The company, which posted systemwide comparable sales growth of 2.7% during the third quarter, will use a two-tiered approach with a low-cost, five-year refresh investment and a more extensive 10-year remodel investment, she said.
- El Pollo Loco shared a new restaurant design on Oct. 29 that includes an updated color palette and interiors, in addition to furniture upgrades, LED lighting and energy-efficient hoods and HVAC.
Dive Insight:
El Pollo Loco’s redesign is expected to yield the increased sales and returns that often come with remodels, Williams said. Other chains, including Wendy’s, Denny’s and Burger King have been leaning into redesigns and opening new units for the same reason. Burger King’s remodel program, which is expected to reach 400 units this year, is already leading to double-digit sales lifts, for example.
El Pollo Loco has worked on “simplifying the build structure to rethinking equipment packages, decor [and] signage design,” Williams said. The store also has a reduced footprint, but square footage wasn’t shared.
Reducing buildout costs is part of Williams’ five-part plan, which includes improved hospitality, a sharper brand position, digital focus and stronger restaurant level margins.
“Some highlights of this new prototype are this iconic design that's uniquely El Pollo Loco, a clean and simple design embracing a less is more philosophy, an evolutionary rather than revolutionary design that allows us to coalesce the system around a new prototype design and bring along past prototype designs,” Williams said.
As of May, buildout costs for a new restaurant were $2.2 million, but the chain is targeting around $1.8 million, Williams said.
“We continue to make great progress on reducing the cost of our prototype to stimulate future restaurant development,” Williams said.
El Pollo Loco has company and franchise units in the planning process using these low-cost designs. Those units will open in the next 12 to 18 months.
The company is continuing ongoing remodels based on previous prototypes and expects to complete six to eight company remodels and 35 to 40 franchise remodels for this year, CFO Ira Fils said.
“We intentionally slowed our remodel program as we are in the process of developing a new, more modern look and cost-engineered design,” Fils said. “We are very excited about this new design and we anticipate completing our first company remodel with the new design in the fourth quarter of 2024.”
Additionally, the chain will continue to employ a flexible footprint that allows it to open in various formats, including freestanding, drive-thrus, endcaps and non-traditional locations, Williams said.
El Pollo Loco currently has 495 restaurants open across seven states and expects to open its 500th location by the end of this year, according to a press release. The brand is looking into untapped markets including Boise, Idaho; El Paso, Texas; Kansas City, Missouri, and the Seattle-Tacoma area for growth next year. In 2025, the chain expects to open roughly 10 restaurants, Williams said.
“Through our renewed approach to menu innovation and brand positioning, our methodical cost savings initiatives and flexible and affordable new unit development plan, we are well positioned to capture the growth opportunities ahead and make El Pollo Loco the national fire-grilled chicken brand,” Williams said.
