Dive Brief:
- Biglari Capital has offered to buy El Pollo Loco, according to an 8-K filed by the chicken chain.
- Sardar Biglari, who owns Steak ‘n Shake, has entered a confidentiality agreement with El Pollo Loco over the proposed transaction, which includes a standstill provision on the purchase of more shares, another filing with the Securities and Exchange Commission shows.
- The move is the latest attempt by the activist investor to gain more control over a restaurant brand; Biglari has engaged in a long-running campaign to dislodge the leadership of Cracker Barrel, which has largely failed.
Dive Insight:
Biglari has already bought up about 15% of El Pollo Loco’s shares, according to the brand’s proxy statement, making him by far the largest shareholder of the chain.
In its most recent quarter, El Pollo Loco posted 0.5% comparable sales growth and ended the whole fiscal year with 2.8% growth, according to an earnings release. But that sales bump stems from pricing’s impact on check size.
“Company-operated comparable restaurant sales increase consisted of a 9.0% increase in average check size due to increases in menu prices, partially offset by a 6.8% decrease in transactions,” El Pollo Loco said in the earnings release. Such a sharp erosion of traffic is a problem for any brand in the long run.
But under CEO Liz Williams, the chain is implementing a five-part strategy to improve its market position, including significant investment in digital touchpoints and a new prototype designed to minimize buildout costs for franchisees. That new design will also be the blueprint for ongoing remodeling efforts.
The chicken chain’s unit count has increased slowly over the past few years, from 480 at the start of 2022 to 498 at the end of 2024, according to El Pollo Loco’s latest earnings release.
By comparison, Biglari’s Steak ‘n Shake has shed 80 units in the same time period, though it is still profitable, according to Biglari Holdings’ most recent earnings release. Biglari’s brand has turned to politicized marketing gimmicks in an effort to revive its fortunes, such as starting to cook its french fries in beef tallow in 2024.
U.S. Secretary of Health and Human Services Robert F. Kennedy Jr. paid the chain a visit earlier this year, leading to the bizarre spectacle of a public health official complimenting a fast food chain for its particular deep frying process. The beef tallow change, while potentially impacting flavor, also plays into a common conspiracy theory about the health effects of seed oils according to the BBC. Biglari is a minor individual donor to political committees aligned with President Donald Trump, Federal Elections Commission records show.
