El Pollo Loco Franchise
Audited FinancialsRisk Score
Pending analysis
Investment Range
$793,750 - $2,685,500
Franchise Fee
$20,000
Min Cash Required
$25,000
Total US Locations
498
Business Summary
El Pollo Loco operates quick-service restaurants that serve fire-grilled food, with a focus on Mexican-style fire-grilled chicken. El Pollo Loco restaurants offer a range of related products and services and follow a comprehensive system that includes specific trademarks, building designs, equipment, recipes, and operational standards.
Corporate History
El Pollo Loco, Inc. was incorporated in Delaware in 1989. However, the El Pollo Loco brand has been offering franchises for quick-service restaurants specializing in Mexican-style fire-grilled chicken since 1980. El Pollo Loco is a subsidiary of El Pollo Loco Holdings, Inc., which began publicly trading on NASDAQ in July 2014.
Financial Overview
Investment Range
$793,750 - $2,685,500
Franchise Fee (Low)
$20,000
Franchise Fee (High)
$40,000
Minimum Cash Required
$25,000
Royalty %
5%
Marketing %
5%
Equipment Costs (Low)
$255,500
Equipment Costs (High)
$732,500
Working Capital
$62,500
Audited Financials
Yes
Offers Financing
No
Audit Opinion
Unqualified opinion
Financial Health Notes
El Pollo Loco maintains its liquidity primarily through cash flow from operations, $2.5 million in available cash as of December 25, 2024, and access to a $150 million revolving credit facility, with total debt at $71.0 million. The company believes these resources are sufficient for its liquidity needs for the next year. El Pollo Loco has recognized non-cash impairment charges in recent fiscal years, including $0.1 million in 2024 for two Nevada restaurants, $1.5 million in 2023 for one California and one Nevada restaurant, and $0.5 million in 2022 for one California restaurant. The company continuously monitors newer restaurant locations for potential future impairment. No impairment indicators were found for goodwill or trademarks in fiscal 2024. El Pollo Loco notes concentrations of risk with certain suppliers and franchisees, particularly in the greater Los Angeles area which generates a significant portion of its revenue, acknowledging that the loss of a major supplier or franchisee could negatively affect its financial health. The company's net income has shown growth, reporting $25.684 million in 2024, $25.554 million in 2023, and $20.801 million in 2022.
Financing Details
El Pollo Loco does not offer direct or indirect financing to its franchisees, nor does it guarantee franchisee notes, leases, or other obligations. While El Pollo Loco may occasionally identify third-party lenders willing to provide financing, and may offer a referral program for existing franchisees who refer new qualified franchisees, El Pollo Loco clarifies that providing such a list does not constitute approval or endorsement of any lenders or financing arrangements. El Pollo Loco also states that it does not receive revenue or other benefits from these third-party financing placements.
Performance Metrics
Total US Locations
498
Franchised Units
325
Corporate Units
173
Avg Square Footage
2,125
Franchising Since
1980
Legal & Compliance Analysis
Recent Litigation
Yes
Bankruptcy
Yes
Litigation Count
6
Litigation Summary
El Pollo Loco has no pending litigation. The document details six concluded lawsuits. Two derivative shareholder complaints, known as the Galustyan and Diep Actions, alleged that El Pollo Loco officers and directors breached fiduciary duties and were unjustly enriched by selling shares at inflated prices due to misrepresentations. The Diep Action settled for $625,000, and a related appeal was affirmed in June 2022. The Lancaster Lawsuit, filed in 2016 by a franchisee, claimed El Pollo Loco breached its implied covenant of good faith and fair dealing by opening company-owned restaurants too close to the franchisee's existing location. This resulted in an $8.8 million judgment against El Pollo Loco in 2018, which was later settled for $2.5 million in August 2020. As part of this settlement, El Pollo Loco agreed to include a 0.5-mile protected territory for certain new California franchised restaurants. A class action lawsuit, the Olvera Action, filed in 2014 by former employees alleging California labor law violations, was settled by El Pollo Loco for $16.3 million in January 2019, and the case was dismissed in April 2021. A securities class action from 2015, the Turocy/Huston lawsuits, alleged federal securities law violations and that El Pollo Loco Holdings, Inc. stock was traded at artificially inflated prices; this case settled for $20 million in June 2020. Finally, in October 2021, El Pollo Loco sued a former franchisee, MIK Food, Inc., for unauthorized use of its name and system after their agreement expired. El Pollo Loco obtained a temporary restraining order and a permanent injunction, and was awarded attorney fees in February 2022.
Bankruptcy History
El Pollo Loco discloses that Roadhouse Holding, Inc., a company where Samuel Borgese, a current member of El Pollo Loco's Board of Directors, served as CEO from October 2014 to August 2016, filed for Chapter 11 bankruptcy in August 2016. Roadhouse Holding, Inc. emerged from bankruptcy in December 2016. This is the only bankruptcy required to be disclosed by El Pollo Loco.
Agreement Terms
Initial Term
20 years
Renewal Term
10 years
Renewal Conditions
To renew their franchise agreement, El Pollo Loco franchisees must meet several conditions. They need to be in full compliance with their current Franchise Agreement, including all financial and operational obligations. They must also secure the right to possess their restaurant premises for the entire duration of the new successor franchise term. Franchisees are required to provide El Pollo Loco with 360 days' advance written notice of their intent to renew. Additionally, they must complete a remodel of their restaurant to current El Pollo Loco standards before the new successor franchise agreement becomes effective, pay a renewal fee, and sign a general release of claims against El Pollo Loco.
Training & Support Program
Franchisor Assistance
El Pollo Loco provides its franchisees with comprehensive assistance throughout the franchise lifecycle. Before opening, El Pollo Loco helps by providing minimum standards and specifications for new restaurant locations and computer systems, coordinates supplier meetings, and oversees system installation. Within 60 days, El Pollo Loco approves or rejects proposed sites based on various market and demographic factors. Franchisees receive standard restaurant plans, layouts, and construction specifications. For a franchisee's first three restaurants, El Pollo Loco offers initial training at no cost for the franchisee, a Designated Operator, and up to four managers. Franchisees also receive an electronic copy of the Operations Manual. On an ongoing basis, El Pollo Loco manages marketing and advertising funds, defends trademark usage, conducts periodic restaurant inspections with written reports, and updates its Operations Manual. It also offers periodic and ongoing training programs for franchisees and their staff, with a list of approved products and distributors available through the Operations Manual.
Initial Training Hours
400
Training Location
Near Costa Mesa, CA (Support Center)
Ongoing Support
El Pollo Loco provides its franchisees with ongoing support by administering and managing marketing and advertising funds, and by protecting and defending the authorized use of its trademarks. El Pollo Loco periodically inspects restaurants, providing written evaluation reports, and updates the Operations Manual with changes to standards and procedures. It also offers periodic and ongoing training programs for franchisees and their staff, with certain fees applicable for additional attendees. Franchisees have access to an "Approved Products and Distribution Guide." El Pollo Loco furnishes promotional programs and point-of-purchase materials at cost. The franchisor seeks franchisee input through Brand Update web conferences, which serve in an advisory capacity for marketing decisions. Additionally, franchisees are required to participate in several key programs including the Gift Cards Program, Remote Ordering System, Loyalty Program, Third-Party Delivery Program, Digital Menu Boards Program, and the PCI Data Security Standard Program.
Franchise Requirements
Ideal Candidate Profile
El Pollo Loco seeks franchisees who are either personally involved in the direct operation of their restaurant or appoint a full-time Designated Operator to supervise all franchise activities. Ideal candidates should possess appropriate business qualifications, experience in restaurant operations, a strong reputation, and the aptitude to operate and maintain the restaurant effectively. Franchisees must be financially responsible, have a favorable credit rating, sufficient net worth, and be able to devote full-time effort to operating and maintaining the business. Additionally, El Pollo Loco prefers candidates who do not have a history of criminal misconduct and are not involved in any competitive businesses.
Industry Experience Required
Yes
Management Experience Required
Yes
Sales Experience Required
No
Technical Skills Required
No
Operational Details
Location Type
Retail
Owner Participation
Hands-On
Territory Type
Protected
Territory Size Requirements
El Pollo Loco franchisees receive a protected area that extends one-half (0.5) mile radiating from their restaurant. Within this Protected Area, El Pollo Loco will not establish or franchise another standalone or traditional inline El Pollo Loco restaurant, unless the franchisee provides prior written consent. This protection does not apply to "Ghost Kitchens" or "Non-Traditional Venues" as defined by El Pollo Loco.
Staffing Notes
El Pollo Loco requires each restaurant to be managed by at least four Managers, including General Managers, Assistant Managers, or Shift Leaders, all of whom must have successfully completed the Management Training Program and be certified in the Food Protection Management Training Program. These Managers are responsible for the restaurant's daily operations, food preparation, accounting, and staff supervision and training. A Manager must be present and in charge during every shift. Franchisees must also ensure that all employees are adequately trained using the Pollo Zone learning management system, with certifications required for all positions before employees can work alone in a given area. A Designated Operator, who can be the franchisee, is also required to oversee all franchise activities and devote their full time to the restaurant's supervision and operations, completing specialized training and certification. If a Designated Operator or General Manager position becomes vacant, El Pollo Loco requires a new, qualified individual to be appointed and trained within specific timeframes.