Parrot cichlids are egg layers and will prepare a smooth flat surface just as most other cichlids do. The female will lay eggs and the male will proceed to fertilize them. The only problem with male parrot cichlids is that most of them are born sterile and have no ability to reproduce. So once every few months the pair of parrot cichlids will go through the act of spawning without ever having a brood to show for. Some fish breeders will inject parrot cichlids with hormones to help increase fertility; it is an unreliable method since it only works some of the time. It has been reported that the female parrot cichlids can be bred with other species of cichlid males to produce successful spawning which is probably why there are so many different types of parrot cichlid varieties available.
Parrots that are found in the trade today are usually fertile and can be breed in aquarium without to muck trouble. Early Blood parrot cichlids males where infertile but this is usually no longer the case. They can be breed in the same way as other South American cichlids and usually spawn in a cave or under a rock/piece of bogwood. Blood parrot cichlids are not always the best parents and you might have to raise the fry separated from their parents but I recommend that you give the parents a chance or two to test their skills as parents before using this method. The fry can be feed newly hatched as soon as their yolk sack is consumed.