El Pollo Loco shares have been soaring since debuting on the market last month.
Investors believe that the fast-casual chicken chain could be the next Chipotle.
El Pollo Loco will grow even bigger in the coming years, according to a recent report by Moody's Investors Service.
Here are a few reasons the restaurant is outpacing the competition.
1. Popularity with Hispanic population. Hispanics are set to outnumber whites in California, one of El Pollo Loco's key markets, by the end of the year. The U.S. Hispanic population is also growing, giving the chicken restaurant an advantage, according to Moody's.
2. More casual than sit-down, fancier than fast casual. El Pollo Loco has positioned itself between fast-casual chains, like Chipotle, and casual restaurants like Applebee's or Olive Garden, according to Moody's. This is a sweet spot in the market, according to Moody's. "This strategy has allowed the company to take on a blend of QSR and fast casual attributes including quick counter service, drive-thru functionality, higher quality healthier food offerings and a balanced day-part between lunch and dinner with attractive price points," Moody's analysts write.
3. Healthy offerings. American consumers are increasingly watching their calorie counts, and want to know where their food comes from. El Pollo Loco cooks whole chickens in-restaurant for hours, which is more appealing than a processed patty or nugget. The restaurant also offers a variety of fresh salsas and veggies.
4. Room to grow. El Pollo Loco has successfully introduced new menu items, such as fresh tortas and signature salads. The menu is relatively simple, meaning that the restaurant could easily add more menu items without burdening workers, according to Moody's.
5. Smart expansion plan. El Pollo Loco is opening several new stores in California, Nevada, and Texas this year, according to Moody's. After that, the company plans to grow its store footprint by 8 to 10%. That means that the company will be bringing in more business, but not expanding too quickly.
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