Faced with staffing challenges, inflation, the need to speed drive-thru times and a goal of driving 5% unit growth by 2023, El Pollo Loco’s interim CEO Larry Roberts has a plan:
It’s a theme that runs through many of the go-forward initiatives for the Costa Mesa, Calif.-based grilled chicken chain. Roberts is also chief financial officer and stepped in after the resignation of Bernard Acoca in October while the board conducts a search. Acoca was named CEO of Zaxby's.
There’s no update on the permanent replacement at El Pollo Loco. But in an interview with Nation’s Restaurant News, Roberts offered more detail on how El Pollo Loco is addressing recent challenges.
Preliminary fourth-quarter results indicated that staffing challenges took a 5-6 percentage point bite out of same-store sales for the grilled-chicken chain, though results were positive. The Dec. 29-ended quarter showed systemwide same-store sales up 11.1%, including a 6.2% increase at company-owned units and a 14.4% increase at franchised locations. On a two-year basis, comp sales were up 10.3% systemwide.
Roberts said it’s difficult to say how many restaurants are feeling the impact of staffing issues, as it varies day to day. But he said the number of omicron cases have started to drop and the number of restaurants dealing with sick or quarantining workers has also started to decline.
“I’m optimistic that we’re through the worst of it and we’re coming out of it,” he said. “And so, in February, we’ll get a lot better in our restaurants and be able to open all the operating hours and service channels.”
Still, the lingering effects of The Great Resignation remain, and Roberts said El Pollo Loco now sees recruitment and retention as the No. 1 priority.
Like others throughout the industry, El Pollo Loco has taken various steps to improve the labor situation. The chain has raised wages to compete in markets where that is needed, he said, and restaurants are encouraged to show workers more appreciation. General manager pay has been increased in high-volume restaurants as a retention tool. New technology has been brought in to speed the application process, and area restaurant leaders have been trained to go out in their trade areas to do on-the-ground recruiting, he said.
But perhaps the biggest initiative is one that will impact El Pollo Loco’s performance on a number of fronts: operation simplification.
Though it describes itself as “QSR plus,” El Pollo Loco is not like typical quick-service restaurants in that food is prepared from scratch, including salsas and guacamole. Roberts is looking to make the production process a bit easier for workers to execute.
The chain is approaching simplification in three ways:
Menu: The first step is combing through the menu to reduce SKUs. Robert said some work on that was done in January, but more menu reduction will be done in March. Some low-volume items might come off the menu, he said, but in many cases it could be tweaks to existing items to eliminate some ingredients.
Process: The chain is looking for ways to reduce some work in restaurant kitchens. Traditionally, El Pollo Loco purchased serrano peppers with stems on, because they’re cheaper, for example. Now the chain is buying de-stemmed chiles, which cost more but save workers from the stemming process. “That’s a job that people hate to do,” he said.
Equipment: New equipment will be rolled out in the next several months to help streamline production. A new processor for tomatoes, for example, will make better-tasting salsa with the added win of being easier to clean. Current tomato-processing equipment can take up to 45 minutes per blade to clean, he said.
Streamlining back-of-the-house processes will also help speed drive-thru times, which is another goal, said Roberts. Roughly half of El Pollo Loco sales come through the drive-thru, but Roberts sees an opportunity to grow that business with additional technology.
Before the pandemic, El Pollo Loco was testing the use of workers using tablets to help move the drive-thru line faster. That test was put on hold when COVID hit, but Roberts said it will resume once the omicron wave is more fully resolved.
With average unit volumes north of $2 million and a lane largely to itself as a grilled-chicken concept in a world of fried chicken and burgers, El Pollo Loco is still on track to hit 5% unit growth in 2023, Roberts said.
“It’ll be challenging in the current environment, where you have the challenge of getting things built, but you also have people wanting to see how things play out before they jump in,” he added.
With 480 units, about 60% of which are franchised, the plan currently is to open about five company-owned restaurants a year in Southern California and Las Vegas. The chain will work with existing franchise operators in existing markets to open another seven to 10 per year, and then the balance will come from either existing or new franchisees in new markets.
About 14 restaurants have been remodeled, and one converted, with the new more-flexible restaurant design rolled out in 2020. The company has been value engineering the design to bring down costs, he said.
This year the first ground-up restaurant with the new-prototype design is scheduled to open in Las Vegas — and that unit will also include some of the more-efficient back-of-the-house elements.
In 2022, about 20 company locations and 30-40 franchised units will remodel with the new design, he said.
“We’re excited about it. Franchisees love it, they’re very excited about it. One reason is they were engaged in the process,” he said.
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