News

Fiesta Restaurant Group to separate Taco Cabana, Pollo Tropical

Fiesta Restaurant Group plans to separate the Pollo Tropical and Taco Cabana brands by 2017 or 2018.

February 29, 2016

Fiesta Restaurant Group, parent company of  Pollo Tropical and Taco Cabana, reported total revenues increased 14.9 percent during the fourth quarter of 2015, and that it plans to separate the Pollo Tropical and Taco Cabana brands by 2017 or 2018. It will implement a tax-efficient distribution of 100 percent of Taco Cabana’s stock to Fiesta shareholders and rename Fiesta as Pollo Tropical, said Fiesta President and CEO Tim Taft.

"We believe each of our two brands can be even more successful as standalone companies through focused strategies and fully dedicated execution," he said. "Pollo Tropical is a unique, once-in-a-generation brand and it has been our growth engine since the company spun out of Carrols Restaurant Group in 2012."

To facilitate this, the company expects to build two fully independent management teams and gradually invest in corporate infrastructures. At the same time, the company intends to continue to focus on executing its business plan, including building scale in its new Pollo Tropical markets to reach media efficiency as quickly as possible, thereby driving brand awareness and higher sales volumes, and beginning to accelerate new restaurant development at Taco Cabana.

According to Taft, Pollo Tropical has delivered operating metrics and results that are considered among the best in the fast casual segment. In 2015 Taco Cabana achieved record-operating performance, reaching average annual restaurant sales volumes of $1.9 million.

"We are also developing a cost-efficient Taco Cabana prototype to begin accelerating its restaurant growth, initially in smaller Texas markets," he said. "We believe establishing two entirely focused companies through our proposed separation offers both the potential for improved shareholder value and for aligning each brand with its respective shareholders' objectives."

Additional Q4 highlights include:

• Total revenues increased 14.9 percent to $179.5 million, including an extra fourteenth week in 2015. Excluding the fourteenth week in 2015, total revenues increased 7.4 percent to $167.7 million.
• Comparable restaurant sales (on a 13-week comparable basis) at Pollo Tropical increased 0.4 percent, which included a decrease in comparable transactions of 1.1 percent, largely driven by sales cannibalization from new units on existing restaurants that negatively impacted comparable transactions by 1.9 percent.
• Comparable restaurant sales (on a 13-week comparable basis) at Taco Cabana increased 3.3 percent, which included a decrease in comparable transactions of 0.7 percent, largely driven by unfavorable weather that negatively impacted transactions by 2.0 percent.
• Six company-owned Pollo Tropical restaurants were opened and one Cabana Grill restaurant was closed.
• Net income decreased $0.1 million to $8.8 million, or $0.33 per diluted share, compared to the prior year period of net income of $9.0 million, or $0.34 per diluted share; and
• Adjusted net income increased $1.3 million to $10.4 million, or $0.39 per diluted share, compared to the prior year period adjusted net income of $9.1 million, or $0.34 per diluted share (see non-GAAP reconciliation table below).

Highlights of the full year 2015 results included:

• Total revenues increased 12.5 percent to $687.4 million, including an extra 53rd week in 2015. Excluding the 53rd week in 2015, total revenues increased 10.5 percent to $675.6 million.
• Comparable restaurant sales (on a 52-week comparable basis) at Pollo Tropical increased 3.8 percent, which included a decrease in comparable guest traffic of 0.4 percent,
• Comparable restaurant sales (on a 52-week comparable basis) at Taco Cabana increased 4.4 percent, which included an increase in comparable guest traffic of 0.1 percent.
• General and administrative expenses included a charge of $1.6 million resulting from a class action settlement and related legal fees and other costs;
• 34 company-owned restaurants were opened, including 32 Pollo Tropical restaurants and two Taco Cabana restaurants, and eight restaurants were closed, including one Pollo Tropical restaurant and seven Taco Cabana restaurants (including two Cabana Grill restaurants of which one was converted into a Pollo Tropical restaurant);
• Net income increased $2.4 million to $38.5 million, or $1.44 per diluted share, compared to the prior year period of net income of $36.2 million, or $1.35 per diluted share;
• Adjusted net income increased $5.1 million to $40.8 million, or $1.52 per diluted share, compared to the prior year period of adjusted net income of $35.7 million, or $1.33 per diluted share (see non-GAAP reconciliation table below).

"I’m very pleased with what our team accomplished in 2015, as we capped off another excellent year at Fiesta by delivering significant top line and adjusted net income growth and positive comparable restaurant sales at both brands, while also setting a new development record of 34 new restaurant openings," Taft said. "Through accelerated development, product innovation and other planned brand initiatives, including increased investment in marketing and media spend across most Pollo Tropical markets, we believe our momentum will carry through to a promising 2016."