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El Pollo Loco (LOCO) Opens New Restaurant in California

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The leading fire-grilled chicken chain of the U.S., El Pollo Loco Holdings, Inc. (LOCO - Free Report) , opened its newest outlet in Bishop, CA on Nov 11, 2016. The 3,200 square feet restaurant is located at 785 N. Main Street and can accommodate 75 guests.

The outlet features the brand’s hacienda design and has an open kitchen layout to display the preparation of its signature dish. Owned and operated by franchise partner Sierra Pollo, Inc., it marks the first outlet for El Pollo Loco in Bishop and the sixth for the franchisee.

The company currently has more than 450 company-owned and franchised restaurants in Arizona, California, Nevada, Texas and Utah, and is looking to expand its presence in key markets like Houston and Dallas.

El Pollo Loco has opened over 22 restaurants year to date with the expectation of opening an additional 17–18 company-operated restaurants and 11–12 franchised restaurants in 2016.

However, the company loses out in terms of international presence. Whereas other restaurateurs like Yum! Brands, Inc. (YUM - Free Report) , McDonalds Corporation (MCD - Free Report) and Papa John’s International, Inc. (PZZA - Free Report) are following aggressive global expansion policies, El Pollo Loco seems to be weak on this front.


Nonetheless, the company has joined the S&P 600 Small Cap Index after the close of trading on Sep 12. We believe El Pollo Loco's addition to one of the most widely followed small-cap benchmarks is a key positive for the company.

Notably, the company reported weak third-quarter 2016 results with both earnings and sales missing the Zacks Consensus Estimate. The company also slashed its 2016 earnings outlook.

However, the third quarter marked the 21st consecutive quarter of positive comps, courtesy of various sales and digital initiatives. Interestingly, menu innovation and limited time offers have been contributing to traffic. Going forward, the company’s increased focus on catering to health-conscious customers by offering customized meals without compromising on flavors should boost traffic.

Yet, a challenging sales environment and lower consumer spending in the U.S. restaurant space remain headwinds for the company’s top line.

El Pollo Loco currently has a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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