Move over chicken, there’s a new star in town.
El Pollo Loco, the California-based chain known for its chicken dishes, discovered success with the launch of its Shredded Beef Birria lineup, an LTO that debuted in mid-March.
Birria is served in tacos, quesadillas, and burritos, with a side of chips and salsa and consommé for dipping. El Pollo CEO Larry Roberts said the brand identified it as a rising trend in the California food scene several years ago.
Shredded Beef Birria exemplifies El Pollo's goal of combining its Mexican roots with the culinary culture of Los Angeles, the chief executive explained.
“The timing of the offer could not have been better for us as it coincided with the completion of new marketing strategies that have combined to make Shredded Beef Birria one of, if not the most, successful new product launches we have ever implemented,” he said during the chain’s Q1 earnings call. “Not only did we increase our marketing spend on social media, we created new, unique content across the major social media platforms, enabling us to send targeted messages to various user groups, particularly to our younger consumers.”
One of the main platforms El Pollo targeted was TikTok, where the brand created a “dip-n-drip” campaign to promote the new Shredded Beef Birria items. The fast casual tapped multiple influencers to reach a wide audience, and the results were impressive. The campaign received more than 21 million social media impressions and spawned thousands of pieces of organic, user-generated content by customers. The brand has over 125,000 followers on TikTok, and the El Pollo hashtag has more than 120 million views.
“The Shredded Beef Birria product and our messaging clearly resonated with our customers as we experienced a strong acceleration in our birria sales even before our TV marketing went live,” Roberts said.
Social media impressions aren’t the only indication of success. Shredded Beef Birria mixed as much as 12.5 percent, which drove new company, franchise, and system sales records three weeks in a row during March and April. Sales mix remained above 10 percent for six straight weeks. Additionally, the Shredded Beef Birria Burrito was promoted on National Burrito Day, resulting in a record sales day.
The product launch worked so well that El Pollo is testing the use of birria for future LTOs to further diversify the menu.
Birria’s strength showed in the results for Q1. Comp restaurant sales were up 7.8 percent during the quarter, which included a 2.3 percent bump at company-owned restaurants and an 11.5 percent increase at franchise locations.
Roberts said the brand is continuing to invest in loyalty, delivery, and digital marketing platforms to improve user experience. E-commerce mixes more than 12 percent and delivery accounts for 8 percent of sales.
“Needless to say, we are very excited by our marketing initiatives and believe that they will continue generating strong sales results,” he said.
While numbers surrounding the birria launch were promising, El Pollo is still having trouble staffing units. The brand is taking action to recruit, train, and retain team members with wage adjustments, retention bonuses, and revamped training programs.
“We believe the strategic initiatives we put in place are gaining traction and positioning the El Pollo Loco brand to capture the opportunities ahead,” he said.
Commodity inflation during Q1 was around 18 percent, and it’s expected to be between 18 and 21 percent for the remainder of the year. To combat some of these pressures, the brand will take more price. Effective pricing for Q1 was 8.2 percent, and is projected to be around 9 percent for the full year. In addition to pricing actions, the brand is testing several cost-reduction initiatives.
El Pollo opened three units during the quarter, one in Las Vegas (company-owned) and two in California (franchise). For all of 2022, the fast casual wants to open three to six corporate stores and six to 10 franchise restaurants. Remodeling in 2022 will be emphasized as well, with 10-15 company outlets and 20-30 franchises undergoing changes.
Total revenue increased 2.2 percent to $110.1 million, but company-operated revenue was slightly down for the quarter at $94 million compared to $94.2 million during the same period last year. Roberts said this was due in large part to the sale of eight company-owned restaurants to a franchisee.
While company-operated revenue was down, franchise revenue was $9.3 million during Q1 compared to $7.6 million in the prior-year period. Roberts credited the boost to the opening of four new franchise restaurants.