Steak ‘n Shake owner Sardar Biglari wants to buy El Pollo Loco.
The activist investor, who already owns 15.1 percent of El Pollo Loco through his investment firm Biglari Capital Corp., sent an unsolicited, non-binding indication of interest to buy the rest of the shares it doesn’t already own. If successful, the deal would give Biglari full control of El Pollo Loco and likely result in the company going private.
El Pollo Loco’s board of directors is reviewing the offer in consultation with independent financial and legal advisors to determine the best course of action, according to an SEC filing. As part of the process, the two parties entered into a confidentiality agreement on April 6.
“The Board has not set a timetable for, nor has it made any decisions related to, any further actions with respect to Biglari Capital’s indication of interest at this time,” El Pollo Loco states in the filing. “The Company does not intend to provide further comment on Biglari Capital’s indication of interest or on a potential transaction with Biglari Capital or any other party unless and until it determines that additional disclosure is appropriate or necessary. There is no assurance that the indication of interest will result in a formal offer or any transaction.”
This isn’t the first time El Pollo Loco has dealt with Biglari.
In 2023, El Pollo Loco’s board unanimously adopted a limited-duration shareholder rights plan—commonly referred to as a poison pill—in direct response to Biglari’s growing stake in the company. At the time, Biglari Capital had acquired more than 12 percent of El Pollo Loco’s outstanding shares. The board viewed the investment as potentially disruptive, citing Biglari’s history of aggressive involvement in other public restaurant companies, including a years-long proxy battle with Cracker Barrel.
The poison pill defense was structured to dilute the holdings of any investor—including Biglari—who acquired 12.5 percent or more of the company’s shares without board approval. Under the plan, all other shareholders would be able to purchase shares at a 50 percent discount, effectively making it more expensive and complicated for a hostile takeover to occur.
Biglari has most notably fought for more influence with Cracker Barrel. He lost another attempt to gain a seat on the board last year. It was his seventh proxy contest in 13 years.
Meanwhile, Steak ‘n Shake has shed 200 units since its peak of 626 restaurants in 2018. Additionally, the brand reported pre-tax operating earnings a touch shy of $20.1 million last year. That pre-tax cash return on capital missed Biglari Holdings’ targets by 20 percent.
El Pollo Loco just finished the first year of a three-year turnaround plan. The chain relaunched brand standards, implemented a new labor deployment system in company restaurants, and invested in cooking equipment and kiosks. Cost-saving initiatives resulted in contribution margins of 17.4 percent in 2024, a 190-basis-point improvement year-over-year. The chain also launched a remodel program that touched 52 outlets in 2024. It will cover 60 to 80 restaurants this year.
Systemwide comps increased 0.5 percent in Q4, consisting of a 1.6 percent rise at company-operated restaurants and 0.1 percent decrease at franchise stores. The corporate comps were fueled by a 9 percent rise in average check, offset by a 6.8 percent decrease in transactions. First quarter-to-date through February 26, systemwide same-store sales increased 0.6 percent, consisting of a 2.3 percent lift for company units and a 0.4 percent decrease for franchise locations.
El Pollo Loco finished 2024 with 498 restaurants—173 company units and 325 franchise units.
