Could El Pollo Loco be the next Chipotle? Investors think so

Could El Pollo Loco be the next Chipotle? Investors think so

El Pollo Loco, the fast-food chain known for Mexican-style grilled chicken, found a sizzling reception on Wall Street for its initial public offering. Shares of the Costa Mesa company closed up $9.03, or 60%, at $24.03, up from the IPO price of $15. The offering raised $107 million by selling 7.1 million shares of common stock.

The company’s shares surged an eye-popping 55% from its IPO price of $15 on the first day of trading. So what’s so great about this chain that’s been around for more than two decades? For many investors, it resembles the massively successful Chipotle.

Like Chipotle, it’s a fast casual chain that serves Mexican-style food in large portions. Its same-store sales growth rate is comparable to Chipotle’s, and actually surpassed Chipotle’s in 2012 and 2013, according to The Motley Fool’s Nickey Friedman.

Based in California, El Pollo Loco has 401 company-owned and franchise locations in five U.S. states, including Texas and Arizona. But the vast majority of its restaurants are in the Golden State. The first El Pollo Loco was opened in 1980 on Alvarado Street in Los Angeles, and the chain still has a huge presence in the city. Last year, it generated 80% of its revenue from the greater L.A. area.

The chain is known for its citrus flavored fire-grilled chicken, which is served in family-sized portions or as part of individual dishes such as burritos, bowls, salads, and tortas. Appetizers include chicken nachos and chicken tortilla soup and there are more than a half dozen sides, such as refried beans, corn, broccoli, macaroni and cheese, mashed potatoes, french fries, and rice.

Chief Executive Steve Sather said El Pollo Loco differentiates itself from competitors by offering quality, healthful food at affordable prices. “Our chicken is healthy. It’s not deep-fried like some of our competitors’,” he told the Los Angeles Times. “I think consumers are demanding not only products that taste great and are great quality, but also ones that are healthy for them. We are starting to hit that sweet spot.”

El Pollo Loco says it’s well positioned to benefit from increasing demand for healthier food and the growing Hispanic population in the United States. The company believes it has the potential to operate 2,300 locations in the United States, but it has had limited success expanding beyond its home markets. Read more about the story here.

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