El Pollo Loco, with flame-grilled chicken at the top of its menu, urges its customers to "taste the fire." Now the chain itself is feeling the heat.
Despite its efforts to spice up its menu offerings and boost business, the Orange County company is struggling with red ink and greater competition.
The chain said last week that it had lost $4.7 million in the first quarter of 2011 partly because of a drop in sales of 2.5%. That was on top of significant losses in each of the last three years: $40 million in 2010, $52 million in 2009 and $40 million in 2008.
The 400-store chain, whose majority owner is New York private equity firm Trimaran Capital Partners, has hired a new advertising agency to bolster its image and an architectural firm to improve the look of its restaurants.
It has dropped slow-selling items like steak tacos and tried to create buzz with a limited-time offering of fish tacos. New side dishes meant to appeal to more upscale consumers include sweet-potato fries, sweet corn cakes and grilled cut corn.
"This is about facing the brutal facts," said Mark Hardison, vice president of marketing for the chain. The company is banking on its ability to attract new customers like the ones that fill many locations with lines out the door at lunchtime, seeking chicken just off the grill.
"They're kind of on the bubble," said Bonnie Riggs, restaurant analyst for NPD Group. "They're just wondering if there's a way if they reinvent themselves that they will survive."
If you want to see intense competition among the region's many Mexican-style chicken restaurants, check out the intersection of Ball Road and Beach Boulevard in Anaheim.
El Pollo Loco sits on the southwest corner, near a bus stop. Across Beach Boulevard is Juan Pollo, a small local chain with a cleaner store, bigger portions and lower prices. And across Ball Road is El Pollo Norteño, whose fans say they drive for hours to get charbroiled chicken, tacos and other dishes.
Teresa Sestito, 34, a physical education teacher at nearby Cypress College, knows the corner offerings. Once a fan of El Pollo Loco, she now says, "I used to eat there a lot more, but their prices have gone up and their quality has gone down."
Among other things, she said, restrooms need to be cleaner. "So I honestly am not there a whole lot anymore," she said, "And I rarely, if ever, go inside."
