Franchising

Fiesta Group reports negative Q3 sales, making improvements

Taco Cabana launched family meals deals earlier this summer. Provided

October 6, 2020

Although Fiesta Restaurant Group's comparable sales were negative, the parent company of Pollo Tropical and Taco Cabana saw major improvements during Q3 and has reduced its debt from $56 million on July 31 to $42 million on Sept. 27.

"We are very encouraged by the continued improvement in comparable restaurant sales at both brands during the third quarter," Fiesta President and CEO Richard Stockinger said in a press release, pointing out that Pollo Tropical's comp sales acceleration was the most significant, improving from -31.6% in the second quarter to -11.1% in the third quarter. That included monthly comp momentum within the third quarter to -8.7% in September.

"Taco Cabana's comp sales increased 500 basis points from the second quarter to -14.2% in the third quarter," he said. "The sales acceleration at both brands was realized despite our dining rooms being closed across most units for the majority of the quarter along with continued challenges in terms of COVID and economic conditions in Florida and Texas."

The chain has been taking steps to ensure a safe operating environment throughout the pandemic, which included closing all dining rooms on July 12, but is now reopening dining rooms in select markets and locations.

"We continue to operate all of our restaurants for drive-thru, delivery and pickup, and we are accelerating efforts to better enable our customers to enjoy our brands safely and conveniently across all channels," Stockinger said. "We made very good progress during the third quarter on off-premise initiatives including the launch of curbside pickup capability at all units, the release of a greatly enhanced online experience for each brand including easier-to-use apps and expanded delivery options."

Regarding liquidity, since July 31, the chain has reduced its total debt by $14 million to $42 million and its net revolver debt by $21 million to $27 million as of Sept. 27.

"The net revolver debt reduction was funded by cash flow from operations and the sale or sale-leaseback of four company owned properties," he said. "We currently have offers or contracts in place for the sale or sale-leaseback of all 12 remaining company owned properties being marketed, with additional transactions expected to close in the fourth quarter to enable further debt paydown, although there can be no assurance that such transactions will be completed during the fourth quarter or at all.

"We are also exploring the potential refinancing of our current credit agreement, although we cannot make any assurance of the timing or certainty of completing any refinancing transactions at this time."