El Pollo Loco Franchisees Sue Parent Firm


Eleven El Pollo Loco franchisees have filed a lawsuit against the fast-food chicken chain’s parent company, alleging that its management has failed to live up to goals for marketing, development of new products and expansion, attorneys said Friday.

As a result, 13 of the 49 El Pollo Loco restaurants operated by the disgruntled franchisees have closed, says the lawsuit filed Wednesday in Orange County Superior Court. The suit seeks at least $90 million in damages.

James C. Verney, chief operating officer of El Pollo Loco, the Irvine-based subsidiary of TW Holdings Inc., acknowledged that some franchisees have faced difficult times. But he said the lawsuit is without merit and “the people raising hell are the people, frankly, who have not paid the bills.”


The lawsuit blames El Pollo’s parent for allegedly ignoring the chain, which it acquired in 1987. The disgruntled franchisees charge that South Carolina-based TW Holdings has poured most of its time and money into its other food operations, such as the Denny’s coffee shop chain.

“As a result of the acquisition . . . El Pollo has been left a mere shell, unable to fulfill its obligations to its franchisees,” the lawsuit states.

The company has broken its agreement with the franchisees by not living up to promises to adequately advertise, develop market information badly needed by the franchisees, roll out new products and help franchisees pool their purchasing so they can take advantage of volume discounts, according to the suit.

The franchising operation has come to a virtual halt and the company is falling far short of its goal of 500 restaurants by 1992, the suit states.

The El Pollo chain--which evolved from a Mazatlan, Mexico, restaurant whose name in English means the Crazy Chicken--has grown fast in Southern California. Today, there are 117 company-owned and 101 franchised stores.