Dive Brief:

• El Pollo Loco has partnered with drone operator Flytrex to offer door-to-backyard drone delivery and will launch the service starting June 24, according to a press release sent to Restaurant Dive. 
• The Air Loco service will be tested in 10 restaurants and the chain will look to scale the delivery option across different areas of its footprint, Andy Rebhun, vice president of digital at El Pollo Loco, said in an email. Future locations will be determined based on market demand and FAA regulatory approval, he said.
• While Flytrex has tested drone delivery with a Starbucks in Fayetteville, North Carolina, this is its first formal partnership with a QSR brand. McDonald's previously tested drone delivery with Uber in San Diego in 2019 and Pieology tested drones in Connecticut in 2018.

Dive Insight:

El Pollo Loco's digital sales grew from 5% of total sales to 10% during 2020, and the company plans to increase its digital sales to over 30% in the next three years, CEO Bernard Acoca said during the company's Q4 2020 earnings call. As of Q1 2021, that number was nearing 11%, Acoca said. But this growth comes with an increased cost, especially where delivery is concerned. 

Marketplace delivery fees were one of the contributors to higher operating expenses during Q1 2021, which the company said increased 140 basis points to 25.3%. To make up for the additional costs associated with delivery, the company has charged 15% to 20% more for delivery items, and tends to emphasize family meals, premium items and meal combos through this channel. 

The company believes it can reduce delivery costs by 25% to 30% using the Flytrex service, Rebhun said. It will also test different pricing models during its drone delivery pilot.

Flytrex orders take about 10 to 12 minutes to complete versus 36 to 40 minutes via third-party delivery partners, Rebhun said. The Air Loco drones cruise at 32 miles per hour and a wire release mechanism gently lowers food orders from 80 feet. Orders will be placed in the QSR's new Thermo-to-Go packaging and will be sent to a select number of its Loco Rewards members in Southern California, according to the press release.

"Flytrex drones will deliver individual orders to individual homes," Rebhun said. "We want to make the delivery option as convenient as possible for our customers. We are the first restaurant brand to provide door to backyard delivery."

Outside of drone delivery, the company has been shifting its focus to prioritize off-premise channels. In December, it unveiled two new designs, both of which are smaller than its traditional stores. One has a takeout window, dual drive-thru lanes, dedicated curbside parking, patio seating and no indoor dining room while the second one includes a dual drive-thru, dedicated curbside parking and a smaller dining room that opens up to a patio through garage-style doors. In September, the company added GPS-enabled curbside pickup and a revamped loyalty program that rewards customers for their number of visits and repeat purchases. 

Emma Liem Beckett contributed to this story.