Despite a soft start to the year, El Pollo Loco remains committed to its brand transformation efforts—spanning the menu, operations, design, and development.
“A brand turnaround is never easy, even in the best of environments, and the dynamic and challenging consumer environment we are facing to start the year is only adding another layer of complexity,” CEO Liz Williams said during the company’s earnings call on Thursday. “Progress takes time, and to ensure we achieve our ambitions of long-term, sustainable growth, we are committed to taking no shortcuts.”
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. 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.
“The consumer pullback is real,” she said. “And at this point, we see these headwinds continuing as we go through Q2.”
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Still, the brand is encouraged by early signs from its menu strategy. The late-January debut of Mango Habanero Fire-Grilled Chicken helped drive traffic and trial, and leadership expects continued momentum as more new items hit the menu throughout the year.
The chain will have five marketing windows in 2025, each with a new product launch, as part of its renewed focus on menu innovation. January’s introduction—its first chicken innovation in many years—was a hit with guests. Williams said the product delivered on taste and drove new trial for guests, “giving us a proof point on the opportunity we have with flavor innovation and menu innovation more broadly.”
That’s drumming up excitement around the next products in the pipeline. In a few weeks, El Pollo Loco will launch new Fresco wraps and salads, followed by Quesadillas at the end of June. The new quesadilla combo features all-white meat chicken and shredded jack cheese with a choice of avocado salsa or chipotle sauce, plus guacamole for dipping paired with chips and a drink, for a combo price point of $9.99.
“Combined with an a la carte pricing in the mid-$7 range, these price points offer a solution to the number one consumer opportunity that we see: price and affordability,” Williams said.
The quesadilla is also a product that fits very well with a younger guest due to its portability and convenience factors, she added. Feedback from the test exceeded expectations—not just from consumers, but also from team members due to operational simplicity.
“We believe so much in this new quesadilla that we proactively accelerated the rollout to early summer to get this amazing product in the hands of our consumers even faster,” Williams said.
She told analysts that while the culinary team has been rebuilding the innovation pipeline, the company also has been laying the groundwork for a brand transformation. Over the last few months, it has conducted third-party research that confirmed the equity it has with consumers. That work also reemphasized an opportunity to offer even more affordable, on-the-go chicken options like quesadillas, wraps, strips, and sandwiches.
“Fortunately, our product pipeline is geared to meet these consumer needs,” Williams said. “We see an opportunity that few QSRs can address with quality. We are well positioned in this growing chicken category with our unique twist of Mexican flavors, and we are looking forward to unveiling the first part of our new brand campaign later this month as we evolve our brand to be more modern with an updated brand aesthetic as well as a new approach to marketing and brand positioning. Ultimately, this effort will allow us to show our passion for chicken, our fresh ingredients, and our quality food.”
It will take some time for all of the brand touchpoints to ripple throughout the system, she added, noting that leadership expects the first step will have a “positive and elevating impact.”
Operational improvements remain a top priority in the company’s turnaround plan. Williams said the brand is focused on raising service standards and consistency across both company and franchised stores, supported by a new customer feedback system that helps benchmark performance and identify areas for improvement—especially around order accuracy and hospitality. She emphasized that consistent staffing is a key enabler of better guest experiences.
“We truly believe that customer service drives transactions, and customer loyalty only grows with better service,” Williams said. “We are optimistic that improvement will positively impact sales and transactions as we move forward.”
On the cost side, El Pollo Loco is taking a measured approach to improving unit economics. Despite first-quarter pressures, the company still expects to achieve full-year restaurant-level contribution margins in the range of 17.25 percent to 17.75 percent. One recent change helping drive that goal is a transition to a new distribution partner, which Williams said went smoothly and supports growth ambitions beyond the chain’s current seven-state footprint.
The company is also making headway on a new restaurant design, with a goal of keeping build costs below $2 million. Construction on the prototype, which the company named “Iconic,” will begin this summer.
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. Two stores have already opened this year. Most of the growth will come from emerging markets like Arizona, Colorado, Idaho, New Mexico, Texas, and Washington. Notably, the 500th store is expected to open soon outside of California, either in Arizona or Colorado.
“There have been a lot of conversations recently about the impact of tariffs on build costs and how it will impact our industry as a whole,” Williams said. “We continue to monitor the situation. More broadly speaking, we are fortunate to have a flexible restaurant format which allows our company development and our franchise partners the ability to take advantage of restaurant closures that are out there in the industry and convert them to El Pollo Locos. This helps us achieve a reduced build cost and deliver outsized returns relative to a new ground-up build. And it does help to mitigate some of that potential cost inflation.”
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.
