El Pollo Loco has been in a growth rut for the past few years.
Chief Executive Liz Williams, who joined the Costa Mesa-based restaurant chain in March, plans to dig the company out and jumpstart nationwide expansion.
The restaurant firm, founded in 1980 with a fire-grilled chicken recipe from Sinaloa, Mexico, has locations in seven states and will have 500 stores by the end of December.
Williams wants to reach the other 43 states.
“I’ve had that track record in my career of going into a situation and getting growth going again,” Williams told the Business Journal. “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.”
She’s joined a company where sales growth has slowed in the past four years; last year, it declined about 0.2% to $468.7 million. In contrast, Chipotle Mexican Grill Inc., based in Newport Beach, has had far greater success as annual sales grew 14% last year to $9.8 billion and its market cap tops $88 billion.
Williams replaced Larry Roberts, who took on the top position in 2022 with the goal of focusing more on the food and less on marketing. Roberts, who had previously served as chief financial officer including taking the company public in 2014, resigned in late 2023.
Roberts was replaced on a temporary basis by Chief Operating Officer Maria Hollandsworth, who in October won a Business Journal Women in Business Award.
After El Pollo Loco’s stock topped $40 in 2015, it fell to around $10 in 2016 and has stayed about the same price for most of the decade. Since Williams’ appointment was announced on Feb. 13, the stock has risen 29% to $11.57 and a $351.5 million market cap (Nasdaq: LOCO).
Growing Across Countries
Williams started her career in Austin, Texas, as an intern working at tech leader Dell back when it was still a startup in 1996, she said. Williams spent the next seven years at the firm before joining The Boston Consulting Group as a principal in the consumer practice.
“I spent just over six years working with a lot of brand names on all kinds of consumer projects,” she said. “It really heightened my love for building brands, for helping drive growth, and for solving complex problems.
“I’ve always been a consumer junkie, or shall we say, passionate about consumer brands.”
In 2010, Williams turned to the restaurant industry, starting as senior director of corporate strategy at Yum Brands Inc. (NYSE: YUM).
“I had an opportunity to take all of what I had learned and also the technology piece, (which) was always the future in terms of the new part of consumerism and go internal with Yum Brands,” CEO Williams said.
After one year, she transitioned to Irvine-based Taco Bell and spent the next decade moving into the roles of chief financial officer then president of international. Williams earned a CFO of the Year Award from the Journal back in 2016.
As head of international, Williams said she built her skills in educating new markets on a brand.
Williams learned “the importance around building a brand, building great teams and having fabulous products at the heart of it,” she added.
Since her time at Taco Bell International from 2018 to 2020, the division has reached over 1,100 restaurant locations.
“The other piece that has been very rewarding throughout my career is to see those seeds that you plant grow,” Williams said. “There are many parallels to what I’m doing now. That’s what I’m excited about with El Pollo Loco, is getting growth going again.”
After her time at Taco Bell, Williams jumped to a few private equity-based concepts such as hair salon owner Drybar and vegan restaurant chain Hart House. She was serving as CEO of Outfox Hospitality, the parent company of neighborhood retailer Foxtrot, when she got the call from El Pollo Loco.
“I just saw so much potential,” she added. “I kept asking myself, ‘This brand is only in seven states. Why isn’t it across the country?’”
Creating Flexible and Affordable Restaurant Models
“The best part, I think, about leading a turnaround is when you realize that the core of the brand, which is the food, does not need to be turned around,” Williams said.
Before starting the growth engine, Williams discovered that over 50% of El Pollo Loco restaurants had not been remodeled in “way too many years.”
It has now introduced a new store model with reduced building costs that will help drive unit growth again “by becoming flexible and affordable,” according to Williams.
Spearheaded by the company’s newest Chief Development Officer Tim Welsh, the restaurant prototype will be “a clean and simple design embracing a less is more philosophy, an evolutionary rather than revolutionary design,” executives said in an October earnings call.
“Through a two-tiered approach, including a low-cost five-year refresh investment and a more extensive 10-year remodel investment, we anticipate being able to touch roughly half of our total system over the next four years in partnership with our franchise partners,” Williams told analysts.
“We are excited to roll this modernized image across the system and also optimistic with the sales and economic returns that come with remodels.”
The prototype aims to lower the new unit build cost to around $1.8 million by reducing the restaurant’s total footprint and “rethinking equipment packages, decor, signage design.”
“We have company and franchise units in the planning process using these new lower cost beautiful designs that will be open in the next 12 months to 18 months,” Williams added.
The new design’s flexibility can also help in converting closed locations of other quick-service restaurant chains, making it just as efficient and lucrative as new ground-up locations, according to Williams. It also encourages franchise partners to build, she added.
The company completed its first company remodel with the prototype design during this year’s fourth quarter, according to Chief Financial Officer Ira Fils.
El Pollo Loco plans to open 10 new restaurants in 2025, eyeing untapped markets such as Boise, El Paso, Kansas City and Seattle-Tacoma.
It recently secured a location with a franchise partner in Kent, Washington for its first outpost in the Pacific Northwest, according to Welsh.
Although there are currently 10 El Pollo Loco franchised restaurants in the Philippines, the company will focus on U.S. expansion before looking to international growth for now.
“I’d be remiss if I went international before I took it to the states. However, we have had inquiries from international, and we’re just starting to entertain some of those,” Williams said.
Sky’s the Limit
While El Pollo Loco shares are up since her appointment, analyst estimates portray a continued slowdown in the company’s incoming financials.
Analysts are forecasting revenue of $471.9 million for 2024, which is less than 1% growth compared to the previous year. Analysts aren’t expecting much acceleration in 2025 sales either, forecasting 3.8% growth to $489.6 million next year.
As for the third quarter ended Sept. 25, the chain reported systemwide comparable restaurant sales increased by 2.7% compared to a year ago. Total revenue was $120.4 million, flat from the previous third quarter.
“If we focus on the consumers, we focus on our team members, we focus on our franchise partners and thoughtful growth, I think sky’s the limit on what we can do as a brand, and we’ll get rewarded from shareholders,” Williams 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.
One of the chain’s main improvement strategies has been its storewide kiosk rollout, which is on track for completion by the first quarter of 2025.
“In the next couple years, we’re going to show up in a much more elevated and modern way,” Williams said.
