Welcome to Chopping it Up. I'm your host, Mike Hallen, the senior Restaurant and food Service analyst at Bloomberg Intelligence. Our research and that of bi's five hundred analysts around the globe can be found exclusively on the Bloomberg terminal. Quick public service announcement. If you like our pod, we'd love it if you could leave us a review on Apple or Spotify. Today we're joined by Liz Williams, CEO of l Poyo Loco. Thanks for doing this.
Liz, Thanks for having me. Mike.
Tough loss for ut last night.
Oh man, I mean it wasn't even the official official bracket. We're looking for a new coach this morning though, if anyone knows anyone?
Oh okay, okay, interesting did you fill out a bracket?
My son did, and I gave him some input, but he took none of it.
So who do you have win in it?
Oh?
I can't divulge that.
Okay, all right, fair enough. I have Duke over Saint John's in the final.
I had to.
Give a little love to the Big East. Yeah, all right, good stuff. Please tell me a little bit about your background. I guess starting with your time at Taco Bell and what drew you to Elpoyo Loco. Yees.
So most of my career has been in the restaurant space. Before that, I was with Boston Consulting Group for many years, and then at Taco Bell, I was part of a fabulous team. We turned the brand around many years ago working for Brian Nicol and just had a lot of fun there. I ran the international business. I was CFO and then ran the international business. I got to work with some fabulous franchise partners the US and across the globe.
And then after I left Taco Bell, I wanted to do some smaller companies private equity, dabbled in the personal care space with dry Bar and just some up and coming cons and then I got a call from a headhunter actually, and she said, I have the perfect fit for you, And it truly was Elpoyo Loco back in
the restaurant space, a brand I'd always admired. I live in southern California, just great food, and I always thought, Gosh, why hasn't it grown more, Why hasn't it gotten out of the West Coast, And I just saw so much potential and then the fact that it literally was the headquarters was in my backyard out here.
I was thrilled to.
Come in and I have a great team that I got to join as I came in.
All right, So for our East Coasters, it's a QSR plus positioning, correct, that is right?
Yeah, So we sit just between QSR and Fast Casual although we have drive throughs, so most of our locations have drive throughs, and we're known as having a higher quality. So we sit above the traditional QSR players because of our quality.
All right, good stuff is there? You know in your part franchise. I think I saw your roughly two thirds or seventy percent franchise, is that correct?
Seventy percent? That's right? Franchise partners.
And you know we're in seven states, so California is where we were born in the US. We were actually born in Mexico, but then California and then some western states. We are in Texas. We have one restaurant in Louisiana. But really the other thing that drew me here was just the opportunity for growth. So I've gotten to take you know, a brand like Taco Bell and take it internationally.
This is similar, you know, taking a brand, driving brand awareness, positioning the brand so it can go across the United States.
Is there any uni economic data you can share?
And economics are great and only getting better. So historically this brand had, you know, had margins, you know, high teens in excess of twenty percent in the glory days, and we see no reason why we can't be back in those high teens. And that's what we've told the street. Our average unit volumes are two point two million, so
very healthy there. And you know, in terms of how we are looking at the middle of the P and L, we think there's still a lot of opportunity and on the top line as we drive growth again, I'm really excited what we can do just bringing innovation to drive growth there. The other piece of unit economics that everyone looks at is build costs. When I came in, I found our build costs had just gotten completely out of control.
And I'm pleased to say brought in a great new development leader and we've engineered the new development to be under two million dollars or targets actually one point eight and we're pretty close to that. So when you do all those economics, that's finally we're back to a spot where people want to grow again, and building that growth pipeline has been a lot of fun.
Great. Can you speak to the consumer demographics of the brand, including age, income, methness.
Yeah, we're pretty evenly split across you know, just what the ordinary population would be. We do have some areas where we skew, you know, higher Hispanic just being in southern California. We're in northern all over California. But you know, naturally as California has those demographics, we also you know, as the years have gone by and we haven't done as much to modernize our demographic has you know, gotten older, however, as we are focusing on getting back after that younger
consumer as well. And when I say younger, I mean you know, like twenty five, like in the mid twenties. So we're not looking to go after you know, the real young kids or you know, of course we love them, we want them to come enjoy a play a logo
as well. But you know, we're the brand that you know, you get out of college and you're realizing that you can't eat fried food and you know late night QSR every every night you want something that's cravable and delicious, but grilled is a really good option.
We're the brand for you, okay.
Cool. Twenty twenty five seems to be a big year for Elpoile Loco. Can you talk about the brand relaunch.
Yes, I'm so excited to relaunch our brand. We've been working with a new agency and they're awesome. We are targeting mid May to kind of unveil. We've already started to unveil a little bit about our new prototype, our new look and feel. And what we've learned is this equity we have in quality and equity we have in chicken are two great places to start. And chickens are
growing category. Mexicans are growing category. And so when we weave in the chicken with Mexican flavors and really focus on the fact that we hand chop our food, we cook our food for real, We really cook our chicken in the restaurants, unlike some of our competitors. Once we showcase that in this new some of these new spots that we're filming, I think it's really going to come to life for Pule. And then the other piece is we want to show people that you know, it's we have Loco in our name.
You know, Loco means so much.
I know it means crazy, but we think it's crazy that you wouldn't cook food the real way, So we want to get that message out. We're not the crazy ones. It's crazy to not do all the things that we do to take care of our food.
How's the CASA test going?
Really well, it's delicious. Uh.
We've landed on an insight that people, you know, while they do want to, you know, eat things that at times are better for them. So we we do really well on salads. We mix about twenty percent on salads and bowls, which is pretty high for QSR. But we also serve great, craveable, cheesy, uey, gouey food as well, and that's where the Casadia fits a different occasion eating occasion. And the thing that also has been a huge win
is the port of ability. Of course, you know, everyone is just only getting busier and on the go, and the case da is one of those products that that is great for on the go. And it also features a new Chipotle sauce that's I think I'm addicted to.
I love a good Chipotle sauce. I can't think of Casey d as without thinking about Napoleon Dynamite any thought of having Napoleon Dynamite's mom promoted me. I don't know if twenty five year olds even know about her. And you know which is fix yourself a dang case, Adylla.
I'll pass that on to our marketing team. You know.
One of the things that we've we've unlocked as well is the Casadia is delicious when you dip it in the homemade guacamole, which that's another one of our strengths. We make our guacamole fresh in our restaurants every single day, whereas a lot of our competitors, you know, bring in, you know, guacamole that's was.
Made weeks ago.
So I, you know, get the Casadia and dip it in some awesome guacamole.
That's the way to do it. I make a mean gualk myself.
We'll have to share recipes.
Yeah, yeah, for sure, I'd be happy to why a summer launch. Our sales typically strong in the summer for you or there? Are you lapping a successful promotion from last year? Is there something else.
For the Casadia?
You know, we've just got a lot of innovation that we're trying to balance. We're actually we've been having a lot of conversations on when the Casadia should launch. It's doing well in test and you know, should we launch it sooner. We've also got our Fresco wraps and Fresca salad launching as we get into the later spring and summer. It's always a great time to launch a new salad and a wrap in the summertime, you know, swimsuit season,
especially out here, so I guess everywhere across America. And we're bringing new Citrus vinigarette, which is also delicious. So we're just trying to balance, you know, getting the attention of our consumer. Is it too many products and how do we pay some sequence?
Yeah, so, yeah, we're going to see a lot of food and innovation that's exciting. How many units have been remodeled and what kind of lift are they seeing.
We're in the process of kicking off a new or newer update for new builds that were then transferring over to our remodels. I'm excited because when you look over the next three years, about half of our restaurants are due for a remodel. And what that means is you're really going to see us show up with this new remodel, the lift that we're seeing. We haven't disclosed any data yet only because the few that we've done with this new prototype, we just don't have enough to put the
number out there. I'm hoping in the next couple of months we'll be able to. I know, we'll have enough that I can put that number out. But anecdotally, what I'm seeing is a nice lift and a nice return. So I'm pleased with what we're seeing. It's I'm getting great customer feedback and I'm getting great team member feedback. Just the light bright modern I know, I keep saying modern, but modern aesthetic is really resonating with people.
Great. Why the considerable gap between company owned same source sales and franchise same source sales in that fourth quarter.
You know, it was a a variance in mostly in pricing, so just different timing of pricing. Franchises took a little more pricing and got upfront with some of that that pricing at different times, So that was main the main difference there.
Okay, and we touched on the restaurant margin expansion that you see going forward one hundred and ninety basis points last year. You know, in the environment we were in, is very impressive. You're guiding for another increase in twenty twenty five. What do you expect to drive the gains this year.
Yes, we're really proud of being able to do that last year.
You know, for the listeners that might not have heard about the twenty dollars minimum wage in California, you know that was something people we're really fearful of the unit economics and you know, we we rallied together to think through taking labor productivity to the next level. And that's what we're going to do. Is you know, as we're in twenty five as well, we think there's more we can do.
To drive labor productivity.
So as an example, we put new equipment in the restaurants to make things easier for our team members. So we used to as we made our salsa by hand, we weren't as efficient in things like cutting its veto. We put some machinery and helps us cut a tomato faster. As an example, we put kiosks in the restaurants. So we're also in the midst right now of deploying a new labor deployment software that's going to get us even tighter, making sure we have you know, aces in their places
at the right time. We have great team members, so the more we can, you know, help them, they just get better service. So we'll see labor productivity and then also cost of goods. We've really a huge credit. I have a a supply chain leader who's just fantastic and he has gone through just about every single thing we buy and said, you know, how can we how can we just review that and you know, think think through things in different ways. So that's been really beneficial as well.
And you touched on a little bit. You're making a lot of investments in restaurant tech and kitchen equipment, so if you could expand on a little bit, maybe talk about how you've prioritized those investments and the pacing and the sequencing of the different initiatives.
Yes, it does take pacing and sequencing. I think we all in the restaurant industry want to do things fast, but the reality is you can only digest so much. So you know, anything that is productivity related or makes the team members life easier or the customer's life, you know, gets to the front of the line. So as an example, our point of sale, we've been in the midst of
doing a cloud point of sale transition. I have a great technology leader who you know has been with us for many years and he is already looking at all the things then we can plug into this new point of sale system again to make team members' lives easier. So we've been prioritizing that Kiosks would be the other piece, you know, and there it's really the consumer's life easier. You know, how do you make it a seamless transaction with the consumer. So we've been you know, looking at
that really carefully. And then a lot of I know it's not quite tech, but a lot of cooking equipment. So you know, we also are quality is great, but how can it get even better? And so we've you know, invested in warming cabinets, you know, one of the things I am proud of. You know, as I look at us as a brand, we're not shy to make the investments that are going to drive drive the future.
Yeah, So a couple of follow ups on that. I think I saw that the warming ovens are going to let you shut down the kitchen a half hour earlier. That should help you save money on labor or guess on the electric exactly.
Yes, yes, and they actually and the you know, best part about them is they help the chicken stay more moist and juicy. You know, you can just imagine being in a kind of like a warming drawer versus you know, out on the grill. It's just a better flavor. So that's a benefit. But yes, it really helps the team member. You know, at the end of their shift, all they want to do is you know, clean up and go home, and it helps them as well.
Okay, great, And I would assume that you know you're expecting some improvements in turnover and employee turnover.
I yes, I think all the things we're doing around the other piece of you know that I've prioritized is our focus on standards, our focus on training, just like I keep saying, making things easier. All of that does help team member turnover. We're very lucky in that we have some of the lowest turnover numbers that I've seen in the industry. I think that's a testament to our culture. It's a testament to the brand. We're a brand that team members.
Love to be part of.
You know, we have a I would say a familial tradition in terms of, you know, how we work together. Team members really appreciate that, but I think we can always get better on turnover, and so those enhancements will certainly help.
Yeah, but I love hearing that you're better than peers. That's great. Yeah, Elpoil Local owns and operates, you know, thirty percent of the stores. That's a sizable amount. And why not refranchise and buy back shares at this multiple.
We love running our restaurants, you know, we always look at every different option.
I think.
I know we make a lot of money out of our restaurants, and I also appreciate the fact that we have skin in the game when it comes to working
with our franchise partners. You know, we're right there alongside them in terms of trying to grow sales, but also really caring about the middle of the P and L. And as we invest in all of these initiatives to drive better operations, I think it would be really hard to do that without owning our own restaurants right now, because we can go test things, we can see things, you know, can get things better. We have great franchise
partners and they test alongside us. We're very fortunate in that we're able to do it faster because we can do it in both ways, but never say never, you know, I think in this industry you've got to always be be staying ahead and looking at all your options.
Okay, so I haven't been to a l Poyo Loco yet. I'll be in SoCal again in a few months. What should I order?
Oh, that's a hard one. There's so many things. So our burritos are awesome. We've got homemade guacamole in all of them, so I would start there. I also love our toast autu salad. That's an original favorite. I mean, who doesn't love a freshly fried shell. And then if you're feeling like you want something a little bit better for you, if you just you know, are trying to it's the middle of the week, you're trying to be good. Our Poyo fitball is a salad. It has leafy green lettuce.
You've got the grilled chicken on top. That's a really good option. And then you know, if you're an old standby, go for the chicken on the bone.
Okay, all right, you have me at burrito and I'm gonna have to get a side of chicken on the bone. I have a I have quite the appetite, So all right, good stuff. Where can listeners go to find their closest lpoil loco and what social media channels should we follow you on?
Yeah, so you can always go to our website. It's pretty intuitive www dot lfoyoloco dot com. And we are, you know, everywhere you'd expect on the social waves. So whether it's TikTok or Snapchat and some of the ones that people my age are are still using, which would be Instagram, Facebook, my kids are you know, prolific on TikTok. So I've been trying to get myself, you know a little more in the spirit.
Right, Yeah, my son as well. I buckled. I buckled, and I now have a TikTok account. I have stained for quite some time, but I'm here now.
Me too, Me too.
Well, this is fun. Thanks again, Liz, and please tell Ayra I said Hi. I love that guy.
He's awesome. So lucky to have Ira on the team. I will for sure.
And I want to thank the audience for tuning in. If you liked our discussion, please subscribe and leave us a review. Check back next week for an interview with Brinker CEO Kevin Hawkman.