CapitalSpring, a private equity firm with a rich history in the restaurant segment, has bought into El Pollo Loco and is considering “extraordinary transactions” involving the chain.
The company purchased a 5.2 percent stake, amounting to a $14.7 million investment. CapitalSpring now holds a position that could signal a bigger interest in the fast casual’s future direction.
The private equity firm plans to engage with El Pollo Loco’s management, board, and other stakeholders to discuss the company’s performance, strategy, and potential transactions aimed at maximizing shareholder value. This includes moves by third parties in which CapitalSpring may participate as “investor, financing source, or otherwise.”
“There is no assurance that any such transaction will develop or materialize, or if it does, as to its timing or whether [CapitalSpring] will participate,” according to an SEC filing.
In recent years, CapitalSpring has invested in restaurant brands like Buddy’s Pizza, Luna Grill, Bushfire Kitchen, Newk’s Eatery, and Beef ‘O’ Brady’s.
The announcement is completely independent of Biglari Capital Corp.’s interest in buying the brand. The company, led by serial investor Sardar Biglari, owns about 15 percent of El Pollo Loco. In April, the fast casual announced it received an unsolicited non-binding indication of interest to buy the rest of the shares it doesn’t already own. At the time, El Pollo Loco said its leadership team was reviewing the offer.
El Pollo Loco’s systemwide same-store sales declined 0.6 percent in Q1, driven by a 1.3 percent dip in comps at franchised locations. With rising wage pressures, the weaker topline dragged restaurant-level margins down 160 basis points to 16 percent. CEO Liz Williams acknowledged the results were “underwhelming,” but noted the entire category is contending with similar headwinds as consumer spending softens and weather events impacted traffic early in the quarter.
In terms of expansion, El Pollo Loco plans to open at least 10 new locations in 2025—its highest number of new units since 2022. Most of the growth will come from emerging markets like Arizona, Colorado, Idaho, New Mexico, Texas, and Washington. Remodeling remains a key part of the chain’s development strategy, too. The company is using a two-tiered approach: a lighter five-year refresh and a more extensive 10-year investment. The goal is to update around half of the system within four years. For 2025, El Pollo Loco expects to remodel between 60 and 70 restaurants. Eight have been completed so far.
El Pollo Loco finished 2024 with 498 restaurants—173 company units and 325 franchise units.
