Flagstar to Sell or Close as Many as 180 Denny’s and El Pollo Locos : Restaurants: Virtually all affected chicken outlets are in Southland. Parent company will take $1.7 billion in charges.

Flagstar Cos., operator of the Denny’s and El Pollo Loco chains, plans to sell or close as many as 180 of those restaurants--including many California sites.

The Spartanburg, S.C.-based company said Monday that it will close or sell up to 45 of the 212 El Pollo Locos. It would not specify the locations, but 137 of the 139 company-owned El Pollo Locos are in Southern California. The rest are owned by franchisees.

Nationwide, the company also plans to close or sell up to 135 of the 1,515 Denny’s. It will also shut down 90 of its 213 Quincy’s Family Steakhouses, located in the Southeast.

Flagstar said the actions are in response to declining customer traffic, increased competition and adverse economic conditions. The company said it will take about $1.7 billion in charges to pay for the moves.

All of the targeted restaurants have had poor earnings. Outlets put on the sales block will be sold to franchisees, Flagstar said.

“Virtually all the (targeted) Denny’s tend to be in good business locations,” said Coleman Sullivan, a spokesman for Flagstar. “For that reason, we expect to sell those stores or generate a sales turnaround at those locations.”

However, the company is expected to have more difficulty selling its El Pollo Locos, which sell broiled chicken. Sales have been rising, but El Pollo Loco has been losing money because the unit has been forced to engage in heavy price cutting to compete with other restaurants.

“Restaurants face a lot of stress and competition because of the weak economic situation in Southern California,” said Gerald Breitbart, a consultant for the California Restaurant Assn. “We’re talking about discretionary spending, and restaurants in this area are struggling for that business.”

In particular, El Pollo Loco faces increased competition with other restaurants that offer chicken products. Carl Karcher Enterprises, operator of Carl’s Jr. restaurants, recently announced plans to open as many as 300 Boston Chicken outlets in Southern California and Sacramento. Koo Koo Roo, another Southland-based broiled chicken chain, has been expanding.

Flagstar has had to contend with controversy as well as more competitive markets. The company spent $4.2 million on advertising in 1993 to counter adverse publicity stemming from allegations of racial discrimination at some Denny’s locations.

Denny’s was founded in 1953 in Lakewood, and Flagstar acquired it in 1987 from a private company based in La Mirada.

For 1993, Flagstar reported a loss of $1.72 billion, or $40.93 a share, on revenue of $3.97 billion, compared to a loss $225 million, or $9.29 a share, on revenue of $3.72 billion a year earlier.

Flagstar shares fell 25 cents after the announcement Monday to close at $10.25 on the Nasdaq market.