Consumer preferences have changed significantly during the COVID-19 pandemic, and El Pollo Loco knows this.
The company is doing everything in its power to meet those dynamics. In Q3, that came in the form of the GPS-enabled curbside pickup, which is now available at 90 percent of the system. As part of the program, customers order ahead, drive to their designated parking spot, and then the restaurant will be notified of their arrival via GPS. CEO Bernard Acoca said the launch went well and that the brand is aiming for average waiting times of one minute or less. Every new store going forward will implement the channel.
"Over time we expect an increasing number of customers to utilize curbside pickup, as it provides an additional means to conveniently and safely access our brand, especially in a COVID world,” Acoca said during the chain’s Q3 earnings call.
In Q4, El Pollo plans to meet consumers’ needs even further with the first stage of its new drive-thru initiative. According to Acoca, The company recently trained employees on proper labor deployment, drive-thru processes, side item projections and pre-packing, food preparation, and line layout. El Pollo is also testing tablets capable of processing credit card payments. It’s all in an effort to cut average wait times to 45 seconds.
Acoca said the chain is giving a “disproportionate amount” of attention toward drive-thru because the channel’s mix has grown from 45 percent to nearly 70 percent. He believes that number can rise even higher with the proper adjustments.
That focus also plays into the brand’s “restaurant of the future.” El Pollo’s rebuilds will consist of double drive-thrus and smaller dining rooms (or none at all). Acoca said that when El Pollo does build a dining room, it will come with “garage doors” that will open to more space and a patio area. The CEO added that the restaurant has a handful of models that are flexible depending on the trade area, whether it’s a drive-thru or dine-in market.
The brand will also complete two remodels in Q4, which will feature enhanced back-of-the-house technology and equipment and designated digital pickup areas in the front. In new remodels, El Pollo will look to implement digital menu boards in the drive-thru.
“I think what you're seeing is we consider what we've been encountering with COVID to be actually a blessing for us from the standpoint that we've learned a lot about what adjustments we need to make on a go-forward basis in these remodels and in this new restaurant design of the future, primarily around technology and the drive-thru what we want to really create there,” Acoca said.
In Q3, same-store sales returned to positive at 1.8 percent. That includes a 0.2 percent increase at company-owned stores and a 3 percent bump at franchises. The slight growth in corporate same-store sales comprised an 18.1 percent rise in average check, offset by a 15.2 percent decrease in transactions.
The steep difference between the two is based on geography. Seventy-three percent of company stores are in Los Angeles, which has been hit hard by the pandemic. Comparatively, only 47 percent of franchised stores are in the area. Outside of L.A., the rest of the system rose 6 percent in the third quarter. No company dining rooms are open in California, but most are in the outer markets.
The company ended Q3 with 478 stores—196 corporate and 282 franchises. The chain has temporarily halted company unit growth and doesn’t anticipate any new franchise openings in Q4. Acoca expects between three to five corporate openings in 2021 and a higher output of franchise openings after seeing only two in 2020.
CFO Laurance Roberts said El Pollo is setting itself up to aggressively push for new franchisees after hiring an outside consultant. He said some interested operators have spoken to the brand unsolicited.
“We are putting together, I'll call it the package, that we will go to market with,” Roberts said. “We have identified the markets that we're going to focus on. So, I expect by year-end, we will be out there, really starting our recruitment of franchisees, new franchisees for new markets.”
El Pollo earned $111 million in revenue, compared to $112.1 million last year. The chain also delivered a restaurant margin of 22.4 percent, which is the highest it’s seen in two years.
“Our teams continued to do a fantastic job delivering operational efficiencies with an acute focus on food and labor cost management that is readily apparent in our results,” Acoca said. “We also continue to benefit from significant average check room that is offsetting softer traffic trends and helping to drive additional labor efficiency. We believe the improvement we are seeing in our operating efficiencies will benefit us, as sales in our core L.A. market return to more normalized levels.”
El Pollo’s loyalty program reached two million members and app downloads have grown 45 percent since September. Those growing figures are primarily due to the relaunch of the loyalty program in September, which involves a sign-up offer that can be redeemed instantaneously. Additionally, members earn a $5 reward per $50 spent and receive offers based on purchase history.
In terms of menu innovation, El Pollo rolled out its L.A. Mex Burritos, which Acoca described as the “poster child for L.A. Mex cuisine.” The category reflects the healthy lifestyle of L.A. culture, which is why the launch included the Keto Certified Burrito and Chickenless Pollo Burrito, which was certified vegan by the American Vegetarian Association. Acoca said El Pollo is the only chicken brand that has rolled out a chicken alternative protein systemwide. In addition, the brand kept focus on family meals, which mixed more than 30 percent in Q3.
In Q4, El Pollo will bring back holiday favorites such as the Tamale Bowls, Pozole Verde, and Mexican Hot Chocolate.
“I continue to be very excited about the progress we've made against our transformation agenda,” Acoca said. “Our culture and brand fundamentals are now well-established and we are driving against our off-premise strategies. Our new product pipeline has never been stronger and our operations continue to improve as we institute systems and processes to ensure our customers have an exceptional experience at our restaurant.”