El Pollo Loco 2016 Annual Report Download - page 8

benchmarksderivedfromabroadselectionoffastcasualandQSRbrands.Attherestaurantlevel,weusesophisticatedtechnologytoconstantlymonitorkeyo
perationaldataregardingsalesperformance,speed-of-servicemetrics,andfoodandlaborcostcontrols.Theintelligenceprovidedbyouroperationsinfrastructure
allowsbothourcompany-operatedandourfranchisedrestaurantmanagerstomakerapidandobjectivedecisionstomaintainourstandardsforfoodandservice.
Developing High Average Unit Volumes (“AUVs”) and Strong Unit Economics One Chicken at a Time. WebelievethatourdifferentiatedQSR+positioningdrives
restaurantoperatingresultsthatarecompetitivewithotherleadingrestaurantconceptsinboththefastcasualandQSRindustrysegments.Webelievethatour
restaurantmodelisdesignedtogeneratestrongcashflow,consistentrestaurant-levelfinancialresults,andhighreturnsoninvestedcapital.Infiscal2015,our
company-operatedrestaurantsgeneratedaverageannualsalesperrestaurantofapproximately$1.9millionandrestaurant-levelcontributionmarginsof21.7%.
Experienced Leadership .Ourseniormanagementteamhasextensiveoperatingexperience,withanaverageofover20yearsofexperienceeachintherestaurant
industry.WeareledbyourChiefExecutiveOfficer,SteveSather,whojoinedusin2006andwasnamedCEOinJanuary2011.Othermembersofthesenior
leadershipteamincludeLarryRobertsasourChiefFinancialOfficer,EdValleasourChiefMarketingOfficer,andKayBogeajisasourChiefOperatingOfficer.
Our Growth Strategy
Webelievethatwearewell-positionedtotakeadvantageofsignificantgrowthopportunitiesbecauseofourdifferentiatedQSR+positioning,signaturefire-grilled
chicken,disciplinedbusinessmodel,andstronguniteconomics.Weplantocontinuetoexpandourbusiness,driverestaurantsalesgrowth,improvemargins,and
enhanceourcompetitivepositioningbyexecutingonthefollowingstrategies:
Expand Our Restaurant Base .AsofDecember30,2015,wehad433locationsinfivestates.Infiscal2015,weopened14newcompany-operatedandfivenew
franchisedrestaurants,andin2016weintendtoopen18-22newcompany-operatedand10-15newfranchisedrestaurants.Overthelongterm,weplantogrowthe
numberofElPolloLocorestaurantsby8%to10%annually.Thereisnoguaranteethatwewillbeabletoincreasethenumberofourrestaurants.Wemaybe
unsuccessfulinexpandingwithinourexistingorintonewmarketsforavarietyofreasons,asdetailedinItem1A,“RiskFactors,”includingcompetitionfor
customers,sites,franchisees,employees,licenses,andfinancing.
Webelievethatourrestaurantmodelisdesignedtogeneratestrongcashflow,attractiverestaurant-levelfinancialresults,andhighreturnsoninvestedcapital.Our
currentinvestmentmodeltargetsanaveragenewunitcashinvestmentof$1.4-$1.5million,netoftenantallowances,anAUVofapproximately$1.9million,anda
cash-on-cashreturninexcessof25%inarestaurant’sthirdfullyearofoperations,althoughthereisnoguaranteethatthesetargetswillbemet.
Whilemostofourgrowthin2015wasderivedfromtheexpansionofourcompany-operatedrestaurantbase,wewillcontinuetostrategicallydevelopour
franchiseerelationshipsandgrowourfranchisedportfoliowithinexistingandnewmarkets.Forexample,inMayof2015,weenteredintoexclusivefranchise
developmentagreementswithChickenTimeHoldings,LP,anaffiliateofHenryInvestmentGroup,aDallasbasedFamilyOffice(together,“HIG”),forseven
restaurantsinthegreaterDallasarea.Weviewourfranchiseprogramasanimportanttoolforexpandingourbrand,allowingustoincreaseourrestaurant
penetration.HIGshouldopentheirfirstElPolloLocorestaurantin2016.
Increase Our Comparable Restaurant Sales .Oursystemhasexperienced18straightquartersofcomparablerestaurantsalesgrowththroughourfiscalquarter
endedDecember30,2015.Weaimtobuildonthismomentumbyincreasingcustomerfrequency,attractingnewcustomers,andimprovingper-personspend.
Furthermore,wearewellpositionedtobenefitfromshiftingculinaryanddemographictrendsintheUnitedStates.
Menu Strategy and Evolution .Wewillcontinuetoadaptourmenutocreateentreesthatcomplementoursignaturefire-grilledchickenandthatreinforceour
differentiatedQSR+positioning.Webelievethatwehaveopportunitiesformenuinnovationaswelooktoprovidecustomersmorechoicesthroughcustomization
andlimitedtimealternativeproteins,suchasBajaShrimp.Inaddition,wewillcontinuetotapintotheneedforhealthierofferingsbybuildingonthesuccessof
ourpopular“Under500Calorie”menuandother“betterforyou”products.Ourmarketingandoperationsteamscollaboratetoensurethattheitemsdevelopedin
ourtestkitchencanbeexecutedtoourhighstandardsinourrestaurantswiththespeedandvaluethatourcustomershavecometoexpect.
Increase Brand Awareness and Consumer Engagement .Weengageconsumersthroughour9-moduleproductcalendarwhichfeaturesseasonalfavoritesfromour
“Under500Calorie”lowcaloriemenuforNewYear’sresolutionstoDoubleChickenSaladsinSpring,andStuffedQuesadillasforthewinterholidayseason.Our
keypointsofdifferentiationarecommunicatedthroughouradvertisingcampaignwhichhighlightsthelengthswegothroughtodeliverrealfoodcookedonreal
grills,withrealfire.Wetailorourmessagefromtelevisionanddirectmail,whichgarnersbroadexposure,toourcosteffectivee-mailmarketingprogramMyLoco
Rewardsandsocialmedia
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