The Costa Mesa-based El Pollo Loco is in legal hot water after a jury ruled in favor of a Lancaster, California franchise owner. The December 11 ruling determined that the mega-grilled chicken giant infringed on a franchisee’s territory, while failing to offer those franchisees the right to operate these new, neighboring locations.
El Pollo Loco has numerous company-owned and franchise-owned restaurants throughout the U.S., and relies on good faith and fair dealing practices to ensure that locations do not encroach upon one another. Michael and Janice Bryman opened their Lancaster franchise in 1999, and it remained the only location in the northern LA County city for over 15 years. In 2014, then Triman Capital Market took El Pollo Loco public and allegedly began an aggressive growth strategy that seemed to encroach on the Brymans’ territory. El Pollo Loco’s corporate opened two additional Lancaster locations that encroached on the Bryman’s.
The corporate arm purportedly used a form franchise agreement to justify the placement of a competing corporate restaurant “in the immediate vicinity of or adjacent to” an existing franchise restaurant. Corporate allegedly also used another tactic, by looking at the Brymans’ gross sales to decide where to build the new outlets.
The presiding judge saw all of this activity as problematic, and the jury agreed. The Bryman’s legal team believes the decision will level the playing field between the existing franchises and El Pollo Loco.
Juan Francisco Ochoa started the restaurant in 1975, and expanded throughout Mexico before opening in the U.S. on Alvarado near 6th Street in 1979, with a second location in Santa Ana opening in 1981. The chain’s popularity spread quickly, with a frequent stream of new owners, acquisitions, and franchisees that popped up all over Southern California, and the U.S. The judge expects to hand down a decision in early 2018.