El Pollo Loco looks to grow, mostly outside of California

El Pollo Loco expects to open 10 new restaurants this year. | Photo: Shutterstock.

The next restaurant that El Pollo Loco opens this year will be the brand’s 500th restaurant. CEO Liz Williams does not know where, exactly, that opening will be. But she knows one thing: It will not be in California.

“It will either be in Arizona or Colorado Springs,” she told analysts this week. “We’ll know in just a couple of weeks.”

The brand expects to open 10 new units this year, which would be the most since 2022. The chain has never grown all that fast, having opened an average of just eight locations a year over the past decade. 

Most of those openings, Williams said, will be outside of California. The company plans to open locations in Arizona, Colorado, Idaho, New Mexico, Texas and Washington.

That’s important, because the bulk of El Pollo Loco’s locations are in the state, which has cost the company profitability as costs have increased.

For instance, restaurant margins in the first quarter were 16%, down from 17.6% a year ago. The decrease was due entirely to the increase in California’s fast-food wage a year ago, to $20 an hour, CFO Ira Fils said. 

The higher pace of development is one of the brand’s “green shoots” that Williams says are a sign of the chain’s comeback. The brand added just three locations last year, for instance, and just six per year since 2021.

Most of the brand’s 500 restaurants are franchisee-owned, so the brand depends on those operators’ willingness to expand if the chain is to grow. “The pipeline is coming together nicely for next year,” Williams said. She won’t put a number on how many locations the chain expects to add in 2026, but added, “You’ll see some nice growth off of the 10.”

El Pollo Loco does plan to find strategies to reduce development costs and encourage franchisees to grow new locations, in part by focusing on second-generation real estate.

Such real estate—typically closed restaurants that are remodeled and converted into other brands—can often be had more cheaply than ground-up builds, particularly in larger markets. 

It’s expected to be more plentiful as restaurants close due to bankruptcy filings or other issues. The Yum Brands-owned Habit Burger, like El Pollo Loco, also plans to concentrate on such sites as it works to expand. The risk with such development, however, is that sometimes those restaurants closed because of the location, and not the brand.

“We are fortunate to have a flexible restaurant format which allows our company development and our franchise partners the ability to take advantage of restaurant closures that are out there and convert them into El Pollo Locos,” Williams said. “This helps us achieve a reduced build cost and deliver outsized returns relative to new ground-up builds.”

It could also mitigate higher construction costs due to tariffs or other issues, she said. 

To be sure, the best way to build better unit economics is to generate higher sales. That’s been a challenge recently for many fast-food brands, including El Pollo Loco, whose same-store sales declined 0.6% in the first quarter. 

Yet the chain did find some success early in the year with the introduction of Mango Habanero Fire-Grilled Chicken. Customers tried the product, which helped drive sales early in the quarter. It also proved to Williams that the company can generate sales with new menu news.

That’s important, because El Pollo Loco plans more of this in 2025. The company plans to sell new Fresca wraps and salads in the coming weeks. And by the end of June the chain plans to start selling quesadillas, including a combo with chips and a drink priced at $9.99 that could pull in value customers. 

“The consumer wants innovation,” Williams said. “They want a reason to come in whether they’re a new or lapsed user.” 

Members help make our journalism possible. Become a Restaurant Business member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.