Recipe for Success

Mexican-style chicken restaurants, which burst on the fast food scene three years ago, seem here to stay--although some are clearly doing better than others.

The largest chain is El Pollo Loco, which is owned by Denny’s. El Pollo Loco--the name means Crazy Chicken--has 49 restaurants in Southern California, nearly three times its 1983 size. The chain has recently signed franchise agreements for expansion in Florida and Hawaii.

Chicken on Fire, another restaurant chain which offers spicy half and quarter chickens, has recently filed for protection from its creditors under Chapter 11 of the U.S. Bankruptcy Code. The company, which operates three restaurants in upscale Los Angeles neighborhoods, said in its bankruptcy filing that it had $465,000 in assets and $278,150 in liabilities.

The bankruptcy notwithstanding, Ali G. Ardalan, Chicken on Fire owner, maintains the market for spicy chicken is good.

Most Mexican-style chicken restaurant chains are privately owned and have remained small, most of them with fewer than a dozen restaurants. Don Pierce, president of El Pollo Loco, says Denny’s willingness to pour “tremendous amounts of money” into the chain is the real secret behind El Pollo Loco’s development. “This kind of growth is just too expensive for a small company.”

Pierce said sales now average $750,000 per restaurant, compared to $500,000 for the average fast food chicken restaurant. He says the chicken, which is cooked on skewers in plain view of diners, appeals to chicken lovers regardless of ethnic background. A number of El Pollo Loco restaurants are located in heavily trafficked middle-class neighborhoods in Orange and San Bernardino counties, he said. In its infancy, the chain favored Latino neighborhoods. Denny’s acquired the chain from Juan Pancho Ochoa, its founder, in late 1983.