Investment Firm to Buy El Pollo Loco

The parent company of El Pollo Loco, the Irvine-based fast-food chain that specializes in flame-broiled chicken, agreed Tuesday to sell it to a New York City investment firm for $114 million.

The new owner would be American Securities Capital Partners, which said the management team of the 274-outlet chain would remain intact as the company moves to open more restaurants in its core areas, mostly in California.

The chain, founded almost 25 years ago in Mexico, has “tremendous growth potential,” said David Horing, American Securities managing director.

The investment firm also would assume $14 million in debt in acquiring the chain from Advantica Restaurant Group Inc. of Spartanburg, S.C.

Advantica put El Pollo Loco up for sale in June, saying it wanted to focus on remodeling its family-dining chains--Denny’s, Coco’s and Carrows. The sale of El Pollo Loco, Advantica’s only fast-food business, is expected to close by the end of the year and generate more than $100 million for the remodeling effort, Advantica said.

The deal would also give El Pollo Loco a chance “to stand on our own and grow our brand,” chain President Nelson Marchioli said Tuesday.

The company has struggled in its efforts to grow beyond California and the Southwest over the years, in part because it has been a small unit of a big company that has been through several ownership changes and a bankruptcy reorganization.

Marchioli said El Pollo Loco will concentrate on expanding in areas of California where it is already established and where 90% of its restaurants are located, as well as in Arizona, Nevada and Texas.

Terms of the deal call for Marchioli and four other top managers to invest an undisclosed amount in the company.

But restaurant consultant Randall Hiatt of Irvine said that El Pollo Loco faces stiff competition even in its established markets.

“It’s not like it’s an open field,” he said. “You have Taco Bell and then there is Del Taco, which is being very aggressive, and Rubio’s is growing at a fast pace. Baja Fresh is also doing well, and it is still to be seen what the Santa Barbara Restaurant Group is going to do with La Salsa.”

El Pollo Loco posted a record operating profit of $21 million for 1998 as sales grew 2% to $127.1 million.

Advantica stock closed at $2.22, up 3 cents, on Nasdaq.