KFC Winning Chicken War Over El Pollo Loco

(MoneyWatch)  It looks like KFC is winning its highly publicized "chicken war" with more recent upstart El Pollo Loco, according to the latter's latest financial numbers. The two chains are getting a lot of attention of late for their competing chicken-giveaway promotions, which are obviously popular with cash-tight consumers.

By almost any measure, 415-location El Pollo Loco's third-quarter numbers were miserable. Sales at company-owned restaurants open at least a year slipped 9.1 percent, and franchise-operated units reported an 11-percent plunge. El Pollo Loco's net loss came in at $5 million during the period, reported Nov. 16.

Meanwhile, same-restaurant sales at Yum! Brands-owned KFC units in the United States only fell by two percent, according to management during its third-quarter conference call. Unfortunately for El Pollo Loco, KFC seems to be especially zeroing in on the smaller chain's specialty -- grilled chicken. "The investment we have made in Kentucky Grilled Chicken will help us be much more competitive in 2010 and beyond," said David Novak, chairman, president and chief executive officer, during Yum's earnings call. "We needed to broaden the appeal of this brand and we have done it."

Part of Mexico-founded El Pollo Loco's problem is that its expansion plans were possibly too ambitious. Just over two years ago, in April 2007, the company operated 364 restaurants, and management was geared up to open 30 restaurants that fiscal year.

To its credit, when the economy started to enter a free fall, El Pollo Loco's executives reversed those ambitious growth plans. It only opened nine units so far this fiscal year and closed seven.

Of course, compared to KFC's legacy of Colonel Sanders and its massive stockpile of 5,200 units across the country, El Pollo Loco is still a relatively small player in the fast-food arena. To El Pollo Loco's credit, it can cater to an ever-growing Hispanic population in the United States.

But so far, it's losing the chicken war. For now, it looks like American consumers are favoring the brands they're familiar with during the recession, and KFC is mirroring much of McDonald's success during the recession.