Floundering Red Robin Picks the Wrong CEO in El Pollo Loco Exec
Troubled restaurant chain Red Robin (RRGB), which ousted its CEO in March after a shareholder revolt, has picked a new leader -- El Pollo Loco CEO Steve Carley. Which doesn't help either chain. Instead, Red Robin needed to find a new chief executive with successful sit-down restaurant experience, while the chicken chain needs a marketing genius, and won't benefit from having to launch a CEO search.
There are two problems for Red Robin here: First off, Carley is coming off nearly a decade at a chain that's been floundering in the downturn, so it's not clear he has the savvy to help Red Robin pull off a turnaround. In the past three years, El Pollo Loco has not grown much -- from 371 units to about 400 -- and has struggled to sell customers on the value of its tasty, citrus-marinated chicken.
Second, Carley's recent work history is all in fast food. Full-service restaurants are a more complicated animal, and it's curious Red Robin would choose an executive who doesn't have any recent experience in its niche.
It's likely the Red Robin board was under pressure to find a replacement for CEO Dennis Mullen, and didn't have an easy time convincing anyone with relevant experience to take the risk of jumping into Red Robin's problems. Yet the company needed to find a new chief fairly quickly, as a leaderless, troubled chain often gets into deeper trouble, and finds itself buyout fodder -- especially chains where aggressive restaurant investor Sardar Biglari (owner of Steak n Shake) already has a 6 percent stake.
Biglari's a mover who recently disclosed he also holds nearly 6 percent of yet another troubled chain, Sonic Corp. (SNIC), and is rumored to be trying to create a new restaurant conglomerate. Carley was probably the best Red Robin could do under the circumstances to keep Red Robin from being rudderless too long. But plugging in someone who isn't a turnaround specialist at this point may not solve anything.
Over at El Pollo Loco, after Carley announced his departure, money-losing parent company EPL Intermediate elevated senior vp Steve Sather to the top slot as acting president and CEO. Given that Sather previously served as COO at Rubio's Restaurants (RUBO), and has held management posts at Rally's Hamburgers and La Salsa, he might make a better fit for the Red Robin top slot than Carley. Too bad Red Robin didn't lure Sather away, and leave El Pollo Loco with a chief at the helm, so it could concentrate on finding what it really needs: a marketing visionary.
This is a chain with a great food offering, but it needs a zingy marketing campaign to get diners' attention and drive customers in the door. Currently, El Pollo is giving away $5-off coupons and handing customers a second 12-piece chicken order for just $5 -- so essentially, it's giving away its signature product. That doesn't work well for any business.
El Pollo Loco could learn from what another fast-Mexican-themed chain, Taco Del Mar, has accomplished with marketing. Instead of getting sucked into the fast-food price wars, TDM has focused on being unique and creating enthusiasm for the brand, encouraging diners to experience their "inner Baja." A recent sassy ad is simply titled Bite Me. Hopefully, the management shakeup at El Pollo Loco will provide an opportunity to change up the marketing to find a campaign that can bust through the ad clutter and get customers interested.
Photo via Flickr user jencu
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