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El Pollo Loco same-store sales rise on value focus

Chain to launch mobile ordering and payment this year

El Pollo Loco Holdings Inc. credited a focus on value for a 2.2-percent increase in systemwide same-store sales during fiscal 2015, the company said Thursday.

For the Dec. 31-ended fiscal year, same-store sales grew 1 percent for company units and increased 3.1 percent at franchised restaurants.

During the fourth quarter, same-store sales rose 1.8 percent, including a 1-percent increase at company locations and a 2.4-percent increase at franchised units. The increase at company locations included a 2.7-percent increase in average check that was offset by a 1.6-percent decline in traffic.

Steve Sather, El Pollo Loco president and CEO, said the full impact of efforts to focus on the brand’s value proposition will take time.

“We are confident we are taking the necessary steps to re-engage our value customer, while continuing to improve the guest experience in our restaurants, thus enhancing our ‘QSR-plus’ positioning,” Sather said. 

In 2015, the chain focused on value, restoring a $5 combination meal platform and slowing price increases somewhat. In November, the chain raised menu prices 0.8 percent, which was lower than the typical 1.5-percent to 2-percent increase.

“Our research found that while our guests love our food and put us on par with fast-casual competitors in terms of taste and quality, our value proposition had gotten somewhat distorted,” Sather said.

He noted that it’s too early to tell whether heavy discounting by competitors in the quick-service space has had an impact on El Pollo Loco. 

“Probably a little bit,” he said. “But we have been focused on that value equation, and we really think long term the burger guys will have trouble keeping that up forever.”

Within a few weeks, El Pollo Loco plans to test a new mobile app that allows users to order and pay ahead, a sales-driving initiative the chain plans to roll out systemwide in the second or third quarter.

The chain is also testing a new prototype “Vision” design at a remodeled unit in Fullerton, Calif. The company plans to bring the new design to the Dallas market.

For the fourth quarter, revenue declined to $86.3 million, compared with $90 million a year ago, although the fourth quarter 2014 included an extra operating week that contributed about $4.6 million.

Net income for the quarter was $5.4 million, or 14 cents per share, compared with $4.6 million, or 12 cents per share, a year ago. Excluding the extra week, pro forma net income rose 8.7 percent, to $6 million, or 15 cents per share, compared with $5.5 million, or 14 cents per share.

For the year, revenue was $355.1 million, compared with $344.9 million a year ago, including the extra operating week.

Net income for the year was $24.1 million, or 62 cents per share, compared with $42.5 million, or $1.24 per share, a year ago. Pro forma net income rose 28 percent, to $27.5 million, or 71 cents per share, compared with $21.5 million, or 55 cents per share, excluding the extra week.

In 2015, the chain added 11 company-operated units and three franchised restaurants. In 2016, the company expects 18 to 22 company-owned restaurants to open, along with 10 to 15 franchised locations.

El Pollo Loco projected same-store sales growth in the low single digits systemwide.

Contact Lisa Jennings at [email protected].
Follow her on Twitter: @livetodineout

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