The new owner wants to upgrade and expand the popular regional fast-food chicken chain.

In the southwestern United States, El Pollo Loco Inc. – Spanish for “The Crazy Chicken” – is a fast-food icon. The fast-casual restaurant chain offers high-quality food – mainly Mesquite-cooked chicken – and a unique Mexican decor that distinguishes it from its competitors. Now, El Pollo Loco is poised to enter a new phase in its corporate history.

Trimaran Capital Partners, a group of New York investors, plans to upgrade and expand the Irvine, California-headquartered chain nationwide. Trimaran reached a tentative agreement to buy the chain for approximately $400 million from American Securities Capital Partners, a private investment firm.

The sale and new direction for the company come amid heightened growth in the restaurant industry as Americans continue to spend more on meals away from home and competitors jockey to capture diners who want inexpensive-but-healthy food. Trimaran is betting that El Pollo Loco has the right mix of healthy but tasty fare. Trimaran has targeted New York, New Jersey, New England, Chicago, Denver, and Texas for expansion and has signed franchise agreements for new stores in those markets, Trimaran managing partner Andrew Heyer said.p> The company hopes to open 150 locations in the next five years, adding to its current 328 sites, which are mostly in southern California, with a few in Arizona, Nevada, and Texas. Members of El Pollo Loco’s management, led by CEO Stephen Carley, will invest in the company and retain their current positions, Heyer said. The purchase is expected to close by the end of the year.

The chain has turned around since American Securities bought it from now-defunct Advantica Restaurant Group in December 1999. The previous owner had neglected El Pollo Loco to concentrate on reviving another one of its companies, the Denny’s restaurant chain, Glenn Kaufman, managing director of American Securities, said.

El Pollo Loco “was overleveraged and operating as an orphan brand,” Kaufman added. “There was clearly deferred maintenance and it was not up to competitive standards in the industry. People supported the brand because, despite the fact that there was such significant underinvestment, they just loved the chicken.”

El Pollo Loco reported a $2.3-million profit in the second quarter, an improvement over a $270,000 loss a year earlier, thanks to sales growth and labor cost controls, according to documents filed with the Securities and Exchange Commission. Sales at stores open at least a year, including both company-operated and franchised restaurants, increased 9.4 percent.

Web posted: September 30, 2005
Category: Marketing