News

Fiesta powers up leadership, pushes forward despite lukewarm 2016 results

February 28, 2017

Fiesta Restaurant Group Inc.,  parent company of the Pollo Tropical and Taco Cabana brands, released a freight-load of leadership, strategy and financial news Monday, including lukewarm FY and Q4 2016 financials, a new CEO and COO, a board appointment, a board promotion, and announcement that it will no longer seek a purchaser for the brands or pursue plans to spin off or divest the Taco Cabana brand, according to a series of news releases about the fast casual company.

Amid financial results showing a $2.4 million profit in Qr, Fiesta announced that Richard Stockinger, a restaurant industry consultant and former Benihana president and CEO, will assume the role of CEO of the group, and that interim CEO Danny Meisenheimer has been named chief operating officer and senior vice president. Fiesta also said that  Paul Twohig, president of Dunkin' Donuts U.S. and Canada, will join the board as a nonexecutive member and that nonexecutive company director Stacey Rauch will serve as nonexecutive board chair. 

"The opportunity at Fiesta is extraordinary," Stockinger said in a news release. "The competitive positioning and potential upside of both Pollo Tropical and Taco Cabana makes me optimistic about the future of the company. I look forward to working closely with the board, the rest of management and all of our dedicated team members to establish a comprehensive operating and growth plan that we can deliver as a cohesive unit."

The company also said that over the last four months a board committee has been studying options for the company going forward, including sale to another entity. But a news release said that te company's relatively disappointing recent performance finally led the committee to recommend taking actions to strengthen the overall performance of the two fast casual brands as a next step instead. 

"Given recent soft company performance and a weak industry outlook, the board concluded that the company should suspend the sale evaluation process, complete the hiring of a permanent CEO and new director to bolster company leadership and continue to pursue a business plan focused on value creation as a standalone company," a news release stated. .

"The board also affirmed its previously stated position that it will not pursue the spin-off of the Taco Cabana brand at this time. In addition, Fiesta will not pursue a divestiture of Taco Cabana given the opportunities the board believes remain with the brand and the significant tax inefficiencies currently inherent in a sale transaction."

Select 2016 Q4 results: 
•    Total revenues down 4.6 percent to $171.3 million, but without additional 2015 week figured in, total revenues actually grew 2.1 percent. 
•    Pollo Tropical comparable restaurant sales at Pollo Tropical down 4 percent and transactions down 7.3 percent, partly due to effectsof Hurrican Matthew. 
•    Taco Cabana comparable restaurant sales down 3.5 percent and transactions down 4.5 percent. 
•    Net income of $2.4 million, or $0.09 per diluted share, compared to net income in the prior year period of $8.8 million, or $0.33 per diluted share.
•    Adjusted net income of $7.3 million, or $0.27 per diluted share, compared to adjusted net income in the prior year period of $10.5 million, or $0.39 per diluted share.

Select full year 2016 results:
•    Total revenues grew 3.5 percent to $711.8 million, but without additional week in 2015, revenues actually grew 5.4 percent. 
•    Comparable restaurant sales at Pollo Tropical down 1.6 percent and transactions down 3.1 percent, partially due to sales cannibalization. 
•    Comparable restaurant sales at Taco Cabana down 2.5 percent and transactions down 3.6 percent. 
•    Net income of $16.7 million, or $0.62 per diluted share, compared to net income in the prior year of $38.5 million, or $1.44 per diluted share.
•    Adjusted net income of $34.8 million, or $1.29 per diluted share, compared to adjusted net income in the prior year of $41.0 million, or $1.53 per diluted share.

Going forward, the company plans to continue its growth initiatives and restaurant development focused on lower-risk and higher-return Florida markets for Pollo Tropical, while the focus remains on Texas markets for Taco Cabana. 

In 2017, Pollo Tropical will open 12 new company-owned Pollo Tropical restaurants in Florida. Ten new Taco Cabana restaurants are expected to open in Texas. The Company plans to remodel approximately 20 Pollo Tropical restaurants in south Florida, improve field operations for both brands through retraining and recertification of restaurant managers and team members, optimize the menus through new products, off-premise sales and impactful marketing.

"Significant opportunities remain for growth in Pollo Tropical and Taco Cabana’s existing markets, and while our expansion into Texas for Pollo Tropical has been challenging, we continue to believe in the long term attractiveness of the business model and its potential beyond its traditional markets," Rauch said in a news release.."In addition, we believe our 2017 priorities will enhance the overall brand experience, increase guest frequency and open additional channels of sales growth."