El Pollo Loco is preparing for a significant brand relaunch early next year. Before it gets there, though, president and chief executive officer Bernard Acoca wants to make sure the 483-unit brand understands clearly what it stands for. It won’t hurt riding some serious sales momentum, either. El Pollo Loco’s shares skyrocketed as much as 24 percent Friday afternoon following a third-quarter where systemwide same-store sales increased 2.6 percent, including 2 percent at company stores and 3 percent at franchised. Lapping the comparable quarter’s 1.7 percent growth, El Pollo Loco stacked a solid 4.3 percent two-year picture for investors. Transactions were flat in the quarter. The chain did, however, see an uptick in comps and transactions in September and carried the upward run into Q4, Acoca said during a November 1 conference call.
El Pollo Loco also delivered better-than-expected quarterly earnings of 19 cents per share (over 18 cents) and revenues of $112.18 million.
Acoca, who joined the brand in March after serving as president of Starbucks’ Teavana brand, spent a large portion of the call discussing El Pollo Loco’s “transformation agenda,” and how it’s creating a people-first culture.
“All of our support center teams, field leaders, and franchisees have completed training on Heart-Centered Leadership, which focuses on leading with authenticity, humility, and transparency, and is about motivating and inspiring people in the right way,” he said.
Additionally, they were trained on high-impact coaching—one of the four essential roles of leadership, Acoca said.
El Pollo Loco also boosted employee engagement by using the collaborative tool Workplace by Facebook in company-run units. “It's incredibly exciting to see how our restaurant teams have embraced this dynamic, social media platform to publicize their results, share best practices, and deepen their relationships with one another,” he said.
Another change was adding Jennifer Jaffe as SVP and chief people officer—a newly created position—in August. Jaffe hailed from Estée Lauder, where she led the human resources function for Too Faced Cosmetics and oversaw the company’s acquisition by Estée Lauder in 2016.
“It's Jen's top priority to further refine and embed our culture, focusing on employee engagement, recognition, talent selection and development, and revamping our people management processes,” Acoca said. “Overall, we've made a lot of progress on seeding our culture in a fairly short period of time, and it's exciting to think about how much opportunity lays in front of us.”
El Pollo Loco even recently completed codifying its brand architecture in a brand book. “The book has already started to influence our strategic brand decisions and how we communicate the El Pollo Loco brand to consumers,” he said. “Starting in 2019, it will shape everything we do, from advertising and marketing communications to product development and store design.”
“Informing the development of our brand work is an expansive customer segmentation study that has just been completed,” he added. “The study has been instrumental in helping us identify our core customers, how they view and use us and what our biggest opportunities are with them.”
Early studies showed El Pollo Loco that Hispanic customers make up almost 50 percent of its customer base. Other data revealed that roughly 30 percent of what El Pollo Loco sells every day are family meals.
Guided by this, Acoca said the chain took near-term actions to increase its mix of Hispanic advertising. “We also included more 30-second TV ads to allow us to better tell our story and communicate our brand attributes, and we adjusted our marketing calendar to include more relevant and compelling promotions. Along with an operations own-sales mindset at the restaurant level, we believe that these actions are producing improved financial results,” he said.
Menu and off-premises change await
In September, El Pollo Loco began menu simplification tests in Houston, Dallas, and Los Angeles to remove “a significant number of low-mixing, high-complexity menu items,” Acoca said. In some cases, it figured 12–15 SKUs off the menu.
“Not only does this initiative help to highlight what we do best, our fire-grilled chicken on the bone, but it also reduces operational complexity, allowing our restaurant teams to further focus on food quality and customer service,” Acoca said.
During Q3, El Pollo Loco reintroduced chips and handmade guacamole and ran a promotion on Overstuffed Quesadillas and $5 Craveable Combos—promotions that demonstrated the chain’s ability to drive sales without heavy discounting, Acoca said.
In an effort to continue pushing convenience, Acoca said El Pollo Loco added mobile pay in Q3 and made it possible to e-gift items to other users.
DoorDash is also serving El Pollo Loco systemwide on the delivery front. Acoca said he believes the chain will enjoy delivery success through its loyalty program, which currently has more than 1.1 members and accounts for about 7.5 percent of total sales.
“While we will continue to invest in bringing in new members, we have started to reduce the level of discounting required to acquire them,” Acoca said. “As with delivery, we are now focusing on optimizing our program, which in this case means determining how to translate the robust purchase history data into personalized communication and incremental sales.”
El Pollo loco is diverting resources to boost dinner as well, deploying extra labor in the drive thru to see if it can solve a transaction gap.
“Where we're going to really pivot in 2019 is put far more effort behind dinner. I think [CFO] Larry [Roberts] talked about the investment we're making in the quarter, the fourth quarter certainly, around additional labor at the drive-through, particularly at dinner,” Acoca said. “So that we improve our speed of service times during that daypart. But what that will also be coupled by is a real focus on family meals, advertising, targeting dinner as well as in 2019, a greater effort and messaging behind delivery.”