Biglari Capital Corp., the owner of a Midwestern burger chain and a well-known proxy battle instigator, is trying to scoop up Orange County’s El Pollo Loco.
The Costa Mesa-based restaurant chain said it “received an unsolicited, non-binding indication of interest” from San Antonio-based Biglari on April 6.
Biglari, founded and led by Chairman and Chief Executive Sardar Biglari, began purchasing shares in El Pollo Loco (Nasdaq: LOCO) in August 2023, accumulating then a more than 10% stake in the chain. The Steak ‘n Shake owner now owns nearly 4.5 million shares, or 15%, according to a March 1 Biglari shareholder letter.
The holding company is now looking to acquire the remaining amount of El Pollo Loco stock.
Shares of the El Pollo Loco, which has nearly 500 restaurants across seven U.S. states, jumped as high as $10.60 apiece during midday trading the next day. At press time, shares fell back down to $9.63 with a market cap of $287 million.
Board members said they were “in the process of carefully evaluating the proposal” in an April 7 filing with no set timetable for any decision related to Biglari’s inquiry.
El Pollo Loco, known for its citrus-marinated, fire-grilled chicken, and Biglari Capital entered into a confidential customary standstill agreement. As such, the chain said it would not provide any additional comment on the matter.
Back in 2023, El Pollo Loco took note of Biglari’s sudden interest in the company.
The company adopted a rights agreement that year “in response to a rapid and significant accumulation of company stock by Biglari Capital Corp.,” according to SEC filings.
“The Board noted that Biglari Capital has a track record of acquiring substantial and sometimes controlling interests in public restaurant companies,” a March filing said, also noting that a Biglari representative had “stated a desire to make substantial additional share accumulations in the public market” if the agreement was terminated or expired.
Biglari’s 15% El Pollo Loco stake tops the chain’s other major investors: BlackRock Inc., Dimensional Fund Advisors LP and CapitalSpring Finance Company LLC.
“There is no assurance that the indication of interest will result in a formal offer or any transaction,” the March filing said.
Besides Steak ‘n Shake, Biglari also owns steak buffet chain Western Sizzlin and holds 2.1 million in stock of Cracker Barrel Old Country Store Inc. (Nasdaq: CBRL), 9.3%, as of March.
Pursuing a Turnaround
Sales growth has slowed for El Pollo Loco in the past five years; last year, revenue inched about 1% to $473 million. The restaurant chain recently reported fourth-quarter revenue of $114 million, up 1.8% compared to a year ago.
Analysts aren’t expecting much sales growth, predicting 4.3% to $493 million this year followed by a 1.8% increase to $502 million in 2026.
El Pollo Loco’s newest leader, former Taco Bell executive Liz Williams, came onboard as chief executive in early 2024 with plans to get the business out of a growth rut by laying the foundation for national expansion.
“When I came in here, we weren’t growing in terms of new units. So, we’ve put a lot of things in place to get the pipeline built so that we can grow again,” Williams told the Business Journal back in December.
El Pollo Loco is forecasting the opening of up to 11 new restaurants in 2025, adding to its current count of 498 with a new and more affordable store model in place.
“El Pollo Loco’s basic problem is that they have been most successful in this corner of the country. They haven’t been able to breakthrough as a national brand yet,” restaurant analyst John Gordon of Pacific Management Consulting Group told the Business Journal, referring to the chain’s core California market.
The company went public at $15 a share in 2014 when it almost touched $40 each. For most of the past decade, shares have bounced between $10 and $20. In the five weeks prior to Biglari’s interest becoming known, the shares fell 25%.
“Biglari may be thinking (that) this is the time to buy into El Pollo Loco and then hoping for the bounce to occur later,” Gordon said.
El Pollo Loco is Orange County’s fifth-largest restaurant chain based in the region ranked by systemwide sales of $1 billion for 2023.
Steak ‘n Shake Owner Founded 17 Years Ago
Biglari, founded in 2008, publicly trades under Biglari Holdings Inc., which has a $681 million market cap (NYSE: BH). Its annual revenue has hovered around $365 million in each of the past three years.
The firm’s investment activities are conducted through its affiliate, the Lion Fund, which CEO Biglari started in 2000.
The company describes itself as “a collection of controlled and noncontrolled businesses — a group we seek to build upon with companies possessing excellent economics and exceptional management,” according to its 2024 shareholder letter released Feb 28.
Steak ‘n Shake was Biglari’s first acquisition, taking it over 17 years ago when the iconic burger chain had nearly 500 locations. The 91-year-old chain had 426 units at the end of 2024, according to Biglari’s 2024 annual report.
Gordon noted that Biglari discovered Steak ‘n Shake when management was poor, so when he conducted a proxy contest, “shareholders just, kind of surrendered.”
Besides restaurants, the company’s portfolio also includes two insurance companies, two oil and gas operations and a publishing business. Abraxas Petroleum was its last purchase in 2022.
Biglari said that since its founding, its cash and investments have grown from $1.6 million to $790 million in 2024. The firm reported pre-tax operating earnings of $32.6 million in 2024 from all seven companies.
“Every subsidiary must be a long-term supplier of cash to (the) parent company,” according to Biglari, which he uses to fund acquisitions.
‘Lone Wolf’ Strategy Based on Opportunity
“Our path to prosperity — the purchase of businesses in their entirety but also, secondarily, the purchase of partial business ownership via the stock market — is based on opportunity,” Biglari said.
Biglari’s partner is his former college professor Phil Cooley, who is vice chairman at the company. The executive doesn’t hold earnings calls and rarely appears before investors, opting instead to pen lengthy shareholder letters each year.
“Biglari is known in the restaurant world, and in the investment community, as somewhat of a lone wolf,” Gordon said.
Along with El Pollo Loco and Cracker Barrel, Biglari’s current stock investments include Ferrari N.V.
According to the shareholder letter, it holds 440,000 shares in Ferrari valued at $187.5 million at year-end 2024, making the luxury automaker the company’s most valuable common stock holding.
A year ago, Biglari said that one of those investments included a 5.5% stake in San Diego’s Jack in the Box Inc., owner of Irvine-based Del Taco. According to a Jack in the Box proxy statement from January 2025, the company still holds 5.7% of common stock with 1.1 million shares.
“It’s that he’s dipping his toe in the water and waiting to see whether this is an appropriate company to go to battle for, or go to battle with,” Gordon said.
“We would rather own a fraction of an outstanding business than 100% of a mediocre one,” Biglari said. “Phil and I continue to search for sensible acquisitions that will advance operating earnings over time.”
Gordon noted: “The problem is that the restaurant world has changed so much since 2008. We’re in a terrible hole in the restaurant space right now because of plunging consumer confidence, because of fear of tariffs. Then the quick service restaurants have all been in this price war, and consumers at either the top end of the income scale or the bottom end have cut back on visits.
“This isn’t absolutely the best time to invest a lot of money into a brand,” he added.
Investor’s Feistiness Shows in Cracker Barrel Battle
If Biglari Holding Inc.’s prior clashes with publicly traded restaurant chains are any indicators, El Pollo Loco executives and shareholders should prepare for a long battle.
The San Antonio-based Biglari last summer went into a proxy fight again with Cracker Barrel Old Country Store Inc.—the seventh such contest in nearly 14 years.
Biglari (NYSE: BH) first purchased more than 4.7 million shares in Cracker Barrel in 2011. It has since downsized to 2.1 million shares with control of 9.3% of the restaurant operator’s stock (Nasdaq: CBRL).
Last August, Cracker Barrel released a statement in response to Chief Executive Sardar Biglari’s intent to nominate five candidates for the board last year.
“This marks the sixth time Biglari has nominated candidates for board seats, the fourth time nominating himself, and the seventh proxy contest overall,” according to the statement. “Each time, our shareholders have rejected Biglari’s nominees and positions by significant and increasing margins.”
Cracker Barrel added that it was “disappointed that Biglari has chosen to launch another distracting and costly proxy contest.”
Biglari wrote a letter to Cracker Barrel shareholders in October noting that they had “collectively lost over $2.9 billion in market value,” citing that the new CEO appointment and transformation plan had not “restored shareholder confidence” among other “management failures.”
“He’s been a pest at trying to take over Cracker Barrel, and other restaurant companies, (wasting) a lot of money for himself and for the companies that are fighting him,” restaurant analyst John Gordon of Pacific Management Consulting Group said.
In November, only one of Biglari’s recommended nominees made it to the board, PetSmart’s Michael Goodwin.
“We pay heed to the counsel of Bette Davis in the 1950 classic All About Eve: ‘Fasten your seatbelts. It’s going to be a bumpy night,’” Biglari wrote in a letter to his shareholders in March.
“The cash generation of our operating businesses, along with a rock-solid balance sheet, permits us not only to make it through the troughs but also to take advantage of the transfers of wealth they precipitate,” he said. “We welcome a bumpy ride if it leads to a better destination.”
