Today, the cook time is down to 45 minutes, one flip and then another 15 minutes before it’s done.
“We blew up a nearly 40-year way of cooking our chicken,” said CEO and President Bernard Acoca, noting that the previous, more complex way of doing things had become rote.
“What I heard from a lot of long-term stakeholders was ‘That’s so sacrosanct. You better be careful if you’re thinking about doing that,’” Acoca said of the change he proposed after joining the grilled chicken chain.
“The less time you touch a chicken, the chicken stays a lot juicier and you wind up with a lot better product.
“We killed two birds with one stone.”
More like three, because creating efficiencies in the kitchen was part of a trio of transformation initiatives Acoca set into motion back in 2018, when he took the top spot at the Costa Mesa company (Nasdaq: LOCO), that he thought necessary before growth could happen.
Now, as Acoca’s initial transformation strategy comes to an end, the El Pollo Loco team is looking ahead at a new plan that involves more than 300 restaurants in line for remodels and as many as 140 new locations to be opened over the next five years.
El Pollo Loco currently totals more than 475 restaurants in Arizona, California, Nevada, Texas, Utah, and Louisiana.
Wall Street has bought into Acoca’s vision. Shares in OC’s fifth-largest restaurant chain by systemwide sales have nearly doubled since his arrival; El Pollo Loco counts an over $700 million market value.
Franchisees have also hailed the new plan. Roland Spongberg, CEO and president of Cypress-based WKS Restaurant Group, is a franchisee of about 70 El Pollo Locos mostly in California. He praised Acoca’s work on employee engagement, streamlining operations, the new restaurant design and the boost in digital marketing that he said has helped pull in more millennials.
New cooks used to take about six months to get up to speed on the process. Now, it takes just a few weeks under the simplified strategy for the kitchen, Spongberg said.
“He has a great vision. He’s a great marketer and a great person, which helps when you’re running a company,” Spongberg said. “I’ve been in the brand 33 years, so I’ve known most of the presidents. He’s a refreshing, engaged leader.
Franchising, New Designs
The company’s planned growth, which will come mostly through franchising, is designed to bring the chain in line with an annual growth rate of 5% by 2023. It reported $426.1 million in systemwide sales for the year ended Dec. 30.
That would mean continuing to invest in the company’s core markets.
Growth over the next three to five years will be focused on the West and Southwest. Starting in 2024, it will move to the Midwest as the company works its way eastward.
The expansion plans come as El Pollo Loco debuted two new restaurant designs that will freshen up locations and also keep it relevant with the surge in digital and the likely longevity of outdoor dining. The designs feature designated curbside pickup, where a bell chimes in the kitchen when a customer arrives, signaling a team member to meet the guest outside, as well as garage-style doors that open the dining area for an al fresco experience, and tablets that will be utilized in the drive-thru.
“It’s pretty fascinating because before the pandemic hit, we had a slightly different vision as to what these restaurant designs should look like,” Acoca said.
In fact, originally, the theatrics around the grill was to be played up by moving it to the middle of the dining room in a very Benihana-esque effort.
“Then the pandemic hit, and we started to ask ourselves, the world is moved so off-premise—it’s not to say dine-in won’t come back, but certainly I think the way people want to dine in has changed. We didn’t want to lose the fact that retail is theater,” Acoca said.
Now as drivers queue up in the drive-thru, they’ll have visibility on the grill where they can watch the chicken be cooked.
“Same concept, different execution,” the CEO said.
Preparing for Growth
Acoca came to El Pollo Loco in March 2018 fresh off his role as president of Starbucks’ tea business Teavana.
He said it was the El Pollo Loco brand that brought him to the chain, coupled with its healthy fare at competitive pricing.
If El Pollo Loco was so good, he wondered, why hadn’t the chain expanded heartily outside of its core region?
“What we focused on is why has this brand not managed to successfully sustain growth outside of the Southwest, and we came to three fundamental answers that lead us to where we are today,” Acoca said.
For starters, he looked at people and culture and what improvements could be made there.
“I come from brands where people and culture are the enabler for everything you do. Everything. While I felt there was a lot of great raw material to work with, the El Pollo Loco culture was not something I thought was clearly defined. There was no compelling company mission. No leadership competencies that were expressed. There was no real tangible, recognizable culture.”
The philosophy behind servant leadership where the workforce is an inverted pyramid with the restaurant employees at the top and Acoca at the bottom was a big focus in Year One on the job.
Differentiation Focus
Acoca was certainly no stranger to the intertwining relationship between brand and corporate culture. In addition to Teavana, he was previously a Starbucks senior vice president of marketing and category for the Americas, managing a $9 billion business. He was also L’Oreal Americas chief marketing officer and spent a decade at Yum Brands Inc., the parent to Taco Bell and Habit Burger of Irvine.
That led into focus point No. 2, which was brand differentiation.
“The brand had never been codified. It had a very loose architecture that really needed precision,” he said.
A brand book was created that has come to be the filter through which everything from product development to the new restaurant designs pass.
Rounding out the trifecta of improvements was simplifying operations, which goes back to the grill and the chicken among other things.
“The company used to rely on tenure to get the work done, but that doesn’t serve you well when you’re trying to open a new restaurant outside your market,” Acoca said.
Aspects—such as cooking the chicken—had been passed down from longtime chefs at El Pollo Loco restaurants. That doesn’t help when you’ve got a 19-year-old kid at a brand-new restaurant in, for example, Louisiana—a market, by the way, where El Pollo Loco recently inked a franchise deal in.
The previously 477-page operations manual has been cut down to 77 pages. All recipes can now be made in six steps or less. Inventory management, a process previously done manually, has now been automated through tablets.
“Both through technology and overhauling our processes and making them easier to execute, we simplified the back of the house,” Acoca said. “We first had to get the culture and our people right. We had to really make sure we understood what the brand stood for and ensure it was being consistently and clearly communicated regardless of the customer touchpoint, and we had to simplify operations. When we do all three of those things well, in that order, that gives us license and permission to do what we’re set to embark on over the next three to five years, which is grow the brand profitably.”
The Future
Digital will play a big role in that future brand growth. It was also something Acoca focused on when he joined the company.
“For many, many years, the brand had only known sales growth,” he said. “From 2015 and onward, that growth was getting a lot more inconsistent and it hadn’t been as significant as it once had been. Now, a little bit of that was a dynamic of the restaurant industry, but the other part was the company had relied on a playbook for a long time, and wasn’t trying to write a playbook for the future.
“What I said was ‘We’re no longer going to be reactionary. We’re going to really embrace technology in a way that can drive growth.’”
He revamped the media spend to focus more on digital.
“When I got to the company, the way the brand was going to market felt like 1985. The entire media spend was on television and print. Less than 2% of media dollars was on digital,” Acoca said.
Fast forward to today. El Pollo Loco is spending between 30% and 40% of its media budget on digital for any given promotion.
A revamped website in July 2019 was welcome; the site hadn’t been touched since 2012.
The company also rebuilt its mobile app, which was developed three years prior, and hadn’t been updated since then.
Third-party partnerships with GrubHub, Postmates and other delivery services were struck.
With all that done, a new and simpler loyalty program was unveiled last year that allowed for one point to be accrued for every $1 spent, and $5 rewards earned for every $50 spent. Acoca pointed out with family meals in the range of $20 to $25, a reward can be received within roughly two purchases, providing an incentive to continue coming back. That compares with the average six months time it typically took to earn a reward under the former system, which required $100 spent to receive a $10 reward.
About 10% of sales are now driven through the loyalty program, and membership has increased. The company began 2020 with 1.7 million loyalty members and ended the year with more than 2.3 million. Average check sizes among those enrolled in the loyalty program has grown about 7%.
Consumers like the new loyalty program so much, it ranked in the top 10 of Newsweek’s 2021 America’s Best Loyalty Programs.
The company is continuing to get smarter on the back-end, dividing the customer base into 23 different segments based on purchasing behavior that allow for more precise target marketing.
This year will see more incorporation of artificial intelligence for predictive analytics.
As the traffic increases to restaurants, the operations team has a goal of getting order times down to 45 seconds and window times down to 45 seconds. The average wait time at the drive-thru currently ranges from 1:15 to 1:20.
Middle Swim Lane
The levers the company is pulling is ultimately in a bid to avoid what Acoca said is being “a one-dimensional, functional brand just known for our food.”
Instead, the company is striving for something more.
Working with local artists to commission murals on the sides of restaurants, in an effort to bring back art lost to gentrification in the city of Los Angeles, is one aspect of that, in addition to donating to local charities.
Whether being multidimensional will be born out in more product beyond food, akin to some of El Pollo Loco’s peers in the OC restaurant landscape with their lifestyle-branded product lines, remains to be seen (see story, this page). Acoca said their approach will be different.
It will mean donating to local entrepreneurs through grants or mentoring. El Pollo Loco is also looking at how to take products from local food businesses and integrate it into its supply chain.
At the end of the day, Acoca sees opportunity for El Pollo Loco, saying it occupies a unique position in the middle of the market, where it’s above the likes of quick-serve operators such as McDonald’s and Burger King, but below that of Chipotle or Qdoba.
Acoca’s just fine with the positioning.
“We want to continue occupying that middle swim lane, which a lot of brands don’t want to be in the precarious middle,” he said. “We think that’s a source of strength for us.”
El Pollo Loco Inc. (Nasdaq: LOCO) CEO and President Bernard Acoca isn’t ruling the idea out, but he stressed the need for collaborations to make sense.
“I really believe if you’re going to go and do these stunts that a lot of these brands do in the name of becoming a lifestyle brand, if it doesn’t naturally flow from your brand’s DNA and it’s not an extension of your values, I think the customer sees through that,” he said.
That hasn’t stopped OC’s two largest chains from trying their hand at the merchandise game, with some interesting results:
Chipotle Mexican Grill Inc. (NYSE: CMG) is testing the concept of limited-edition drops, such as a recent one with a kid whose viral proclamation of love for Chipotle is now on T-shirts. The items are sold in the Newport Beach-based restaurant operator’s Chipotle Goods online shop, which launched last summer with a collection of tops, bottoms, jackets, and accessories touting sustainable materials and profits funneled to various charities.
Taco Bell Corp.’s online store, dubbed the Taco Shop, sells everything from sauce packet tracksuits and vintage-inspired pullovers to branded puzzles and pillows for the home. The Irvine-based fast-food chain turned heads in 2017 when it collaborated with Los Angeles fast-fashion retailer Forever 21 on a collection garnering plenty of buzz and, of course, a runway debut.
