El Pollo Loco 2015 Annual Report Download - page 15

Table of Contents
208,000 members. My Loco Rewards is our e-club program. The program offers every member who joins a complimentary order of our
handmade guacamole and chips. We engage members via e-mails featuring news of promotional offers, member rewards, and product previews.
Members are offered complimentary two-piece meals or tostada salads during their birthday months. My Loco Rewards also allows members to
voice their opinions through surveys that provide us with information that helps us define future product concepts. In addition, we use our
database to survey and solicit new product ideas, which allows us to create a comprehensive product calendar that extends forward 18 months.
Through our public relations efforts, we engage notable food editors and bloggers on a range of topics to help promote our products. In addition,
we engage in one-on-one conversations using a portfolio of social media platforms, including Facebook, Twitter, and Instagram. We also use
social media as a research and customer service tool, and apply insights gained to future marketing efforts.
We created El Pollo Loco Charities, a non-profit charity, to support the communities surrounding our restaurants. El Pollo Loco Charities has
provided over 10,000 meals per year to underprivileged families, through organizations like South County Food Outreach, Habitat for Humanity,
Children’s Institute, and Court Appointed Special Advocates (“CASA”).
Purchasing and Distribution
Maintaining a high degree of quality in our restaurants depends in part on our ability to acquire fresh ingredients, and other necessary supplies
that meet our specifications, from reliable suppliers. We regularly inspect our vendors to ensure that products purchased conform to our
standards and that prices offered are competitive. We have a quality assurance team that performs comprehensive supplier audits on a frequency
schedule based on the potential food safety risk for each product. We contract with MBM Corporation (our “primary distributor”), a major
foodservice distributor, for substantially all of our food and supplies, including the poultry that our restaurants receive from suppliers. Our
primary distributor delivers supplies to most of our restaurants three times per week. Our distributor relationship with our primary distributor has
been in place since 1997. Our restaurants in Texas and Utah utilize regional distributors. Our franchisees are required to use our primary
distributor or an approved regional distributor, and franchisees must purchase food and supplies from approved suppliers. In our normal course
of business, we evaluate bids from multiple suppliers for various products. Poultry is our largest product cost item and represented
approximately 40% of our total food and paper costs for fiscal 2014. Fluctuations in supply and in price can significantly impact our restaurant
service and profit performance. We actively manage cost volatility for poultry by negotiating with multiple suppliers and entering into what we
believe are the most favorable contract terms given existing market conditions. In the past, we have entered into contracts ranging from two
months to three years, depending on current and expected market conditions. We currently source poultry from four suppliers, with two
accounting for approximately 86% of our planned purchases for fiscal 2015. We have entered into fixed-price contracts with our poultry
suppliers through the end of 2015.
Intellectual Property
We have registered El Pollo Loco
®
, Pollo Bowl
®
, The Crazy Chicken
®
, and certain other names used by our restaurants as trademarks or
service marks with the U.S. Patent and Trademark Office (the “PTO”), and El Pollo Loco
®
in approximately 42 foreign countries. Our current
brand campaign, Crazy You Can Taste™, has also been approved for registration with the PTO. In addition, the El Pollo Loco logo, website
name and address, and Facebook and Twitter accounts are our intellectual property. Our policy is to pursue and maintain registration of service
marks and trademarks in those countries where business strategy requires us to do so, and to oppose vigorously any infringement or dilution of
the service marks or trademarks in those countries. We maintain the recipe for our chicken marinade, as well as certain proprietary standards,
specifications, and operating procedures, as trade secrets or as confidential proprietary information.
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