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O.C. BUSINESS PLUS

Carley Takes Over at El Pollo Loco as Chain Expands

Fast food: Executive arrives just as 282-store company plans 100-outlet growth into other states.

April 11, 2001|E. SCOTT RECKARD | TIMES STAFF WRITER

Turning up the heat as it expands into new markets in the Southwest, grilled chicken specialist El Pollo Loco on Tuesday appointed veteran fast-food marketer Stephen E. Carley as its president and chief executive.

Carley, 48, spent 12 years during the 1980s and early '90s at Taco Bell Corp. and its then-parent company, PepsiCo Inc., before moving on to stints as president of Universal Studios Hollywood and, most recently, the online digital photography business PhotoPoint Corp.

He succeeds Nelson J. Marchioli, who left El Pollo Loco in January to head Advantica Restaurant Group Inc. of South Carolina, which owns the nationwide Denny's chain and sold the regional El Pollo Loco operation to a New York investment firm in December 1999.

Carley joins El Pollo Loco as the Irvine chain begins to add 100 locations over the next five years, pushing deeper into out-of-state markets like San Antonio, Texas.

It now has 282 locations, consisting of 129 company-owned stores and 153 franchises, in California, Arizona, Nevada and Texas. About 90% of its operation, however, is in California.

In a business where national chains have the marketing muscle, El Pollo Loco plans to spend more on highly visible locations, Carley said, and conducting "guerrilla marketing" campaigns: putting fliers on cars, sponsoring high school car washes, hanging ads on doorknobs.

"It's really an entrepreneurial approach, trying everything that a feisty little single-unit operator would do," he said. "The competition will always be extreme in this segment. And for sure, you won't be able to outspend them."

Restaurant consultant Robert Sandelman in Brea said El Pollo Loco has become "a very strong chain" in its core markets around Los Angeles, winning loyalty from Spanish-speaking diners and health-conscious patrons with its signature grilled chicken, made-from-scratch salsa and other "fresh Mex" cuisine.

Those offerings make it something of a cross between fast-food and the more upscale and expensive restaurants known in the trade as "casual dining," Sandelman said. Still, it will be tough to expand outside California.

"They are very well-managed and they test high [for customer satisfaction] in L.A.," Sandelman said. "But it's a very competitive market. . . . It's not easy to expand in markets where they are an unknown."

Carley is building on a strong base: El Pollo Loco's revenue rose 11% to $305 million last year from $275 million the previous year, and the chain registered strong gains at established stores. Sales at restaurants open more than a year jumped 7.5% two years ago, 7.3% last year, and are running at 7.7% so far this year. Spokeswoman Julie Weeks said much of the credit goes to menu additions like chicken burritos and tostada salads that have increased lunch business.

The chain, purchased for $114 million by American Securities Capital Partners LP, "was kind of an orphan brand of Advantica," eclipsed by Denny's and with little capital to expand, said David Horing, managing director at American Securities and chairman of El Pollo Loco.

"The business has a great product, a great niche and broad consumer appeal," Horing said. "We thought it was a brand with significant potential that was not really being managed for growth."

So far, the new owners have been more than pleased. American Securities aims for a 30% rate of return on equity, Horing said, "and we are more than achieving our objectives."

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