Fiesta Restaurant Group: Menu drove 2Q same-store sales increase

The company reports for the first time as a standalone entity since its Carrols spinoff

Fiesta Restaurant Group Inc. credited menu item strength for its increases in same-store sales in the second quarter, the first it reported as a standalone company with the Taco Cabana and Pollo Tropical brands.

Fiesta was spun off May 7 from Syracuse, N.Y.-based Carrols Restaurant Group Inc. [3], which is the nation’s largest Burger King franchisee.

Miami-based Fiesta on Wednesday reported net income for the second quarter, ended July 1, rose 8.3 percent to $3.9 million, or 17 cents a share, compared with $3.6 million, or 16 cents a share, in the prior-year quarter. Revenue rose 6.3 percent to $128.8 million from $121.2 million in the prior-year quarter.

Same-store sales in the quarter increased 7.8 percent at the 89 company-owned Pollo Tropical stores and 4.5 percent at the 158-unit Taco Cabana.

In a call with analysts after the earnings release, Tim Taft, Fiesta’s president and chief executive, credited menu items for helping to drive sales.

For Pollo Tropical, he said, “This result was exceptional considering we grew [same-store] restaurant sales in the prior-year period by over 10 percent.” He credited strong sales in the TropiChops menu feature, which offers customizable bowl meals with rice, vegetables and beans, and a choice of chicken, pork or shrimp.

Taco Cabana’s same-store sales increase of 4.5 percent matched the prior-year quarter’s growth. Taft said sales were driven by hickory-smoked brisket in April and May, and chipotle-corn tacos in June.

Taft said July same-store sales at Pollo Tropical rose 6 percent and at Taco Cabana “a little above flat.” At Taco Cabana, he added, “We’re rolling over a big price increase from the year before.”

The company currently has 40 Pollo Tropical units outside the United States, but it plans to seek more international growth, Taft said.

“We continue to pursue international franchise development as a long-term growth strategy with new and existing franchisees,” Taft said, adding that the company sees it as an “increasingly important, high-margin business segment.”

In March, the company opened two franchised restaurants in Costa Rica and is building a presence in Panama, Taft said. The company has recently signed new franchise agreements in Guatemala and India.

The company is also continuing to remodel its Taco Cabana units. Cost of the remodels in older stores is $125,000 to $225,000 each, Taft said, and about $100,000 to $125,000 in new units. The Dallas market is largely remodeled and renovations in the Houston and San Antonio markets are to be completed by this time next year, he said.

In the quarter, Fiesta incurred $800,000 in spinoff-related expenses in the quarter, said Lynn Schweinfurth, Fiesta’s chief financial officer since mid-July. She said the company continues to use Carrols for many back-office services, such as accounting and support functions.

Taft said the transition services agreement spans three years.

Fiesta Restaurant Group Inc. has 247 company owned stores and 40 franchised units in the United States, the Bahamas, Costa Rica, Ecuador, Honduras, Panama, Puerto Rico, Trinidad and Venezuela.

Contact Ron Ruggless at [email protected] [7].
Follow him on Twitter: @RonRuggless [8]