Decision could cost El Pollo Loco $22M in payments to founder

LAREDO Texas A Laredo, Texas, jury last week awarded $22 million in damages to the founder of the El Pollo Loco chain in a lawsuit over who owns the rights to the flame-grilled chicken chain in Mexico.

 

However, the U.S. District Court in the Southern District of Texas gave the parties in the dispute until Aug. 9 to file post-trial motions that could change the outcome. Officials of El Pollo Loco Inc., the Irvine, Calif.-based operator or franchisor of about 370 restaurants across the United States, said they plan to appeal the ruling if the judge upholds the jury’s damage findings in his final judgment.

 

Plaintiff Juan Francisco Ochoa founded the El Pollo Loco chain in Mexico in 1975. The chain grew to about 85 units in 20 cities before Ochoa opened the first U.S. restaurant in Los Angeles in 1980. Three years later, Denny’s Inc. purchased rights to the brand in the United States, and the quick-service chain changed hands several times over the years as it grew. El Pollo Loco Inc. is now owned by New York-based private-equity firm Trimaran Capital Partners.

 

Ochoa retained rights to the brand for a certain territory of Mexico until 1996, when he signed over contractual rights to the U.S.-based El Pollo Loco Inc. to develop restaurants there. In March 2004, however, Ochoa sued, alleging the U.S.-based brand breached its agreement by failing to develop new restaurants in Mexico.

 

 

The verdict awarded damages to Ochoa based on theories under Mexican law, according to El Pollo Loco Inc. Officials of the U.S. chain assert that the plaintiff did not seek damages until 2004, after the statute of limitations had run out. They also contend that El Pollo Loco Inc. paid more than $1 million two years ago, representing the estimated value of Mexican development rights in 1996.