News

Taco Cabana reports poor Q4 earnings, replacing president

February 27, 2020

Fiesta Restaurant Group Inc, parent company of Pollo Tropical and Taco Cabana, reported Thursday that total Q4 revenues were down nearly 5%. While Pollo Tropical generated positive comparable restaurant sales of 0.6%, Taco Cabana reported an 8.1% decrease in comparable sales stemming from failed efforts to improve execution through menu simplification and ineffective promotions, Fiesta President and CEO Richard Stockinger said in a company press release.

"We attribute Pollo's traction and ability to outpace its peers during the fourth quarter to the popularity of the Pollo Time everyday value platform along with successful Limited Time Offer promotions, including our recent Churasco and GrillMaster LTO's," he said. "The brand's positive sales momentum and market share gains have extended into the first quarter of 2020."

On the other hand, Taco Cabana's menu-simplifying strategy fell flat. Although the removal of certain items and limiting other items to certain dayparts, enabled it to reduce order cycle times over the fourth quarter, it also resulted in transaction declines.

"In the first quarter of 2020, we are re-introducing select items back to the menu and expanding some daypart choices to regain sales traction without sacrificing the customer satisfaction gains we achieved in the fourth quarter," Stockinger said.

The company also told investors that Taco Cabano President Charles "Chuck" Locke was no longer with the company, and it has begun an external search for his replacement. 

"On a full-year basis, we were pleased that consolidated restaurant-level adjusted EBITDA margins were roughly flat compared to 2018 after adjusting for accounting changes and the impact of Summer named storms, with full-year 2019 Pollo margins up slightly and Taco margins down slightly," he said. "In 2020, we expect restaurant margins to be stable at Pollo and at Taco we are targeting a 200 to 300 basis point increase in restaurant margins compared to 2019, driven by efficiency and operations simplification initiatives."

Stockinger said Pollo was focused on product innovation, effective LTOs and check-building strategies.

"As those initiatives ramp up, we expect Pollo comparable restaurant sales to grow sequentially over the course of the year," he said.

Taco Cabana's goal, however, will be to stabilize sales by optimizing key daypart choices, improving value promotions and maintaining a focus on product innovation.

"For both brands, we plan to build on the traction we established in the fourth quarter of 2019 in catering and will be expanding the number of delivery service provider partnerships in the first and second quarters of 2020," he said. "We also expect to see significant growth in our online business in the second half of the year as we implement a much improved digital customer experience, with better ease of access across all digital applications including our mobile and loyalty apps."

Fiesta closed 19 Taco Cabana units earlier this year and in December 2019 said it was closing 14 Pollo Tropical locations in Florida and Georgia and nine Taco Cabanas in Texas.