El Pollo Loco 2016 Annual Report Download - page 6

PAR T I
Unlessotherwisespecified,orthecontextotherwiserequires,terms“ElPolloLoco,”“theCompany,”“ourcompany,”“we,”“us,”and“our”meanElPolloLoco
Holdings,Inc.(“Holdings”),togetherwithitssubsidiaries.
ITEM 1. BUSINESS
Our Company
ElPolloLocoisadifferentiatedandgrowingrestaurantconceptthatspecializesinfire-grillingcitrus-marinatedchickenandoperatesinthelimitedservice
restaurant(“LSR”)segment.Webelievethatweofferthequalityoffoodanddiningexperiencetypicaloffastcasualrestaurantswhileprovidingthespeed,
convenience,andvaluetypicaloftraditionalquick-servicerestaurants(“QSRs”),acombinationthatwecall“QSR+”andthatprovidesavalue-orientedfastcasual
diningexperience.Ourdistinctivemenufeaturesoursignatureproduct—citrus-marinatedfire-grilledchicken—andavarietyofMexican-inspiredentreesthatwe
createfromourchicken.Everydayineveryrestaurant,wemarinateandfire-grillourchickenoveropenflames,andhand-slicewholetomatoes,avocados,serrano
peppers,andcilantrotomakeoursalsas,guacamole,andcilantrodressingsfromscratch.ThedesignofourkitchensrevealsourMexican-inspiredcookingprocess
andallowsourcustomerstowatchourgrillmastersandteammembersfire-grillandhand-cutoursignaturechicken,aswellasmakeburritos,salads,tostadas,
bowls,stuffedquesadillas,andchickenentrees.
Weofferourcustomershealthieralternativestotraditionalfoodonthego,servedbyourteammembersinacolorful,bright,andcontemporaryrestaurant
environment.Weserveindividualandfamily-sizedchickenmeals,avarietyofMexican-inspiredentrees,andsides,and,throughouttheyear,onalimited-time
basis,additionalproteinslikeshrimp,carnitas,andbeef.OurentreesincludefavoritessuchasourChickenAvocadoBurrito,Under500Calorieentrees,Ultimate
PolloBowl,BajaShrimpTacos,andStuffedChickenAvocadoQuesadilla.Oursalsasanddressingsarepreparedfreshdaily,allowingourcustomerstocreatetheir
favoriteflavorprofilestoenhancetheirculinaryexperience.Ourdistinctivemenuwithhealthieralternativesappealstoconsumersacrossawidevarietyofsocio-
economicbackgroundsanddrivesourbalancedcompositionofsalesthroughouttheday(our“day-partmix”),includingatlunchanddinner.
ElPolloLocoisSpanishfor“TheCrazyChicken.”WeopenedourfirstlocationonAlvaradoStreetinLosAngeles,California,in1980,andhavegrownour
restaurantsystemto433restaurants,comprisedof186company-operatedand247franchisedrestaurantsasofDecember30,2015.Ourrestaurantsarelocatedin
California,Arizona,Nevada,Texas,andUtah.Ourtypicalrestaurantisafree-standingbuildingwithdrive-thruservicethatrangesinsizefrom2,200to3,000
squarefeetwithseatingforapproximately70people.
Our Industry
Therestaurantindustryisdividedintotwosegments:fullserviceandlimitedservice.Fullserviceiscomprisedofthecasualdining,mid-scale,andfinediningsub-
segments.LimitedserviceiscomprisedoftheQSRandfastcasualsub-segments.QSRsaretraditionalfastfoodrestaurantswithaveragechecksizesof$3.00to
$8.00.Fastcasualisalimitedorself-serviceformatwithaveragechecksizesof$8.00to$12.00thatoffersfoodpreparedtoorderwithinagenerallymoreupscale
anddevelopedestablishment.
WeoperatewithinthebroaderLSRsegment,andwebelievethatweofferthefoodanddiningexperienceofafastcasualrestaurantandthespeed,value,and
convenienceofaQSR.Webelievethatourvalue-orientedfastcasualpositioningbestalignswithfastcasualrestaurantsbecausewebelievethatweofferthe
methodofpreparation,qualityoffood,anddiningexperiencetypicaloffastcasualrestaurants.Webelievethatourdifferentiatedmenu,colorful,bright,and
contemporaryrestaurantenvironments,andconvenientlocationspositionustocompetesuccessfullyagainstotherfastcasualandQSRconcepts,providinguswith
alargeaddressablemarket.
Webelievethatwearealsowell-positionedtobenefitfromanumberofculinaryanddemographictrendsintheUnitedStates.Weexpectthatthetrendtowards
healthiereatingwillattractandincreaseconsumerdemandforfreshandhand-prepareddishes,leadingtoapositiveimpactonoursales.Furthermore,asindicated
byrecenthighgrowthintheMexicanrestaurantsegment,weexpecttobenefitfromincreasedacceptanceofMexicanfoodintheUnitedStatesinthegeneral
market.Finally,wealsoanticipatebenefitsfromthecontinuedgrowthoftheHispanicpopulationintheUnitedStates,which,accordingtotheU.S.CensusBureau,
hasgrownfrom50.5millionpeoplein2009toanestimated56.8millionpeoplein2015,andisprojectedtoreach77.5millionin2030.ThegrowthoftheHispanic
populationisexpectedtooutpaceoverallpopulationgrowth,andtheHispanicpopulationasapercentageofthetotalU.S.populationisexpectedtoincreasefrom
17.7%in2015to21.6%by2030.
3