March 20, 2010
Franchised Units: 243
Franchise Fee: $40,000
Total Start-Up Costs: $416,850–$789,850
Royalty: 4%
Renewal Fee: $20,000
Marketing Fee: 4–5%
A regional player just five years ago, El Pollo Loco has emerged a hot name in the industry. Only four years into its expansion east of the Mississippi, El Pollo Loco, headquartered in Orange County, California, has earned a following for its citrus-marinated chicken and assortment of healthy offerings.
“We are beautifully positioned to appeal to the growing number of consumers looking for healthier options; consumers’ growing demand for bolder, spicier flavors; and the growing Hispanic population,” El Pollo Loco vice president Brian Carmichall says.
El Pollo Loco’s strong lunch and dinner dayparts propelled it to U.S. sales topping $625 million in 2008 and AUV nearing $1.7 million, a number that sits high among quick-serve brands.
Word on the Street: “El Pollo Loco is a favorite … because of its huge growth potential and because of its sales-to-investment ratio. With AUV of $1.7 million and a max start-up of $789,850, you can count on a 2:1 sales-to-investment ratio or higher,” says restaurant expert Aaron Allen, founder and CEO of the Quantified Marketing Group.
Franchised Units: 22,762
Franchise Fee: $15,000
Total Start-Up Costs: $114,800–$258,300 (traditional); $84,300–$200,100 (nontraditional)
Royalty: 8%
Renewal Fee: None
Marketing Fee: 4.5%
Smiles abound at the Connecticut headquarters of Subway, where the sandwich giant has climbed the quick-serve mountain to capture U.S. sales of $9.6 billion in 2008. The affordability of franchise entry, which sits among the lowest in the industry, and includes incentives for franchisees to open additional outlets, continues to drive the company’s remarkable ascent.
“We keep costs low because we have a simple operation … and we negotiate deals on an international level to keep standards high and costs down,” Subway’s director of development Don Fertman says, adding that the brand’s flexibility allows its outlets to find and enter unusual spaces ranging from c-stores to churches.
Word on the Street: “Subway is attractive for its low investment start-up, which opens it up to the widest base of prospective franchisees,” Allen says. “It also benefits from a clear, consistent, and extremely potent brand image. A concern for the company’s future is the encroachment issue and the continued attack of regional players with higher average unit volumes and aggressive franchise efforts.”
