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El Pollo Loco is rethinking its long-term growth strategy, pivoting to a franchise-heavy model, company executives revealed during a call with analysts Thursday.
“We have shifted gears somewhat and now expect to enter our new markets with franchise development as opposed to company-operated restaurants,” CFO Laurance Roberts said. “Consequently, we don’t have as much control over the timing. And while we are currently in active negotiation for new territories, the new market entry may flip in 2021.”
During Q4, the Costa Mesa, Calif-based fast-casual chain opened one company-operated restaurant. It plans to open three or four company stores and five to eight franchised ones during the remainder of the year.
Last year, the chain sold 16 company-operated units to franchisees and closed five locations. It ended Q4 with 195 company-operated units and 287 franchised restaurants.
Systemwide same-store sales grew 3.9% for the quarter ended Dec. 25 on a 3.6% increase for franchised restaurants and 4.3% growth for company-operated stores. Traffic climbed 2.5% for the quarter, with a 1.8% increase in average check, the company said.
Company executives attributed the chain’s robust sales growth in Q4 to an ambitious holiday promotion that created a “seasonal experience” inside each restaurant, with holiday-branded decor, menu boards, cups, packaging and point-of-sales materials. The promotions included holiday music, themed gift cards and holiday-focused menu items.
The chicken chain is also shifting its promotions away from a focus on limited-time offers toward an “evergreen platform” that is heavy on better-for-you options, such as the recent keto taco addition, CEO and President Bernard Acoca said.
“You will see a greater number of healthier options in the coming months based on our customers’ diverse lifestyles,” Acoca said.
El Pollo Loco has plans to grow its loyalty program, with a goal of having it make up 12.5% of sales by the end of the year. Rewards members’ purchases are currently 9.5% of the chain’s business. The rewards program will be relaunched in Q3 with a focus on reducing the time it takes to redeem loyalty points.
“As part of this program relaunch, we’ve identified opportunities to attract new members and drive increased frequency by lowering the reward redemption threshold,” Acoca said.
