El Pollo Loco may have found its white knight.
The fast-food chicken chain is in talks with the private-equity group CapitalSpring on a “potential extraordinary transaction,” according to a recent federal-securities filing.
The talks involve the company “and other third parties, including potential acquirers and financing sources, with which” the firm “may participate.”
CapitalSpring, a heavy investor in the restaurant business, has taken a 5.2% stake in the Costa Mesa, California-based El Pollo Loco. It’s listed as an activist investment, meaning that CapitalSpring is in talks with management.
Last month, CapitalSpring entered into a confidentiality agreement with El Pollo Loco.
The filing comes weeks after El Pollo Loco acknowledged that it was talking with Biglari Holdings, the owner of Steak n Shake—and more than 13% of El Pollo Loco stock—on a potential acquisition.
The discussion between El Pollo Loco and CapitalSpring “are separate from, and do not involve” the Biglari Holdings discussions, the filing said.
The discussions appear to increase the chances that El Pollo Loco could be sold, and CapitalSpring could be involved in any number of ways.
CapitalSpring owns several restaurant companies, including Newk’s and Beef O’Brady’s-owner FSC Franchise Co. and the Detroit-style pizza chain Buddy’s Pizza. In April, the firm agreed to sell the 750-unit mega-franchisee Sizzling Platter in a $1 billion deal.
But it is also involved in debt financing in the restaurant space.
News of CapitalSpring’s filing on El Pollo Loco has provided a big boost to the company’s shares, which are up 14% over the past week.
Yet the shares are still down nearly 10% so far this year amid concerns with the broader restaurant industry environment—particularly in California.
It could also mean the end to what’s been a ho-hum life on the public markets for the restaurant chain, which went public a decade ago. El Pollo Loco’s shares have hovered between $10 and $15 per share since its 2015 initial public offering.
But system sales are up 52% over that period, average unit volumes are up 24% and unit count is up 20%. In 2024, the chain generated $1.1 billion in system sales on unit volumes of $2.2 million, according to data from Restaurant Business sister company Technomic.
The company expects to open 10 new restaurants this year, many of which are outside of its home state of California. And it is eyeing second-generation restaurant sites in a bid to improve the unit economics of those locations.
Members help make our journalism possible. Become a Restaurant Business member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.