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Real Mex moves away from discounting

Real Mex Restaurants Inc. said it is shifting away from discounting, which dampened sales in its second quarter, to focus more on traffic-boosting promotions that offer value.

The parent of Chevys, Acapulco, El Torito and other brands reported that same-store sales declined 2.2 percent for the June 27-ended quarter, reflecting a 0.2-percent uptick in traffic offset by a 2.5-percent drop in the average check, in part because of discounting and menu mix.

In a call with analysts on Friday, chief executive Richard Rivera said Real Mex is moving away from the use of coupons and discounts, instead continuing successful promotional programs such as an all-you-can-eat Sunday brunch at El Torito Grill, more-for-the-money “Mucho Macho Platter” combinations at Acapulco, and kids-eat-free initiatives at both Chevys and El Torito.

Though the company did not break down same-store sales by brand, Rivera said that "all three major concepts showed improvement — some more than others."

In addition to the primary Chevys, Acapulco and El Torito brands, Real Mex also operates the more upscale El Torito Grill — dubbed Sinigual outside Southern California — and eight concepts under the Las Brisas, Casa Gallardo, El Paso Cantina, and Who-Song & Larry’s brands.

Real Mex narrowed its net loss in the second quarter to $770,000, compared with a year-ago loss of $4.1 million. Revenue fell 4.6 percent to $129.6 million because of a 4.1-percent decrease in restaurant revenue as a result of falling sales and the closure of seven restaurants during the quarter. The company also a recorded a 10.2-percent drop in revenue from its manufacturing and distribution arm.

In June, majority ownership of Real Mex was reclaimed by its previous owner, private-equity firm Sun Capital Partners Inc., which has a broad restaurant portfolio of investments including Bar Louie, Boston Market, Bruegger’s Bagel Bakery, Fazoli’s, Friendly’s Ice Cream, Souplantation, Sweet Tomatoes and Restaurants Unlimited.

Rivera said it was too soon to tell how the change in ownership would impact the brands. However, he said Sun Capital could bring possible “synergies” in purchasing or marketing.

“We’re optimistic that we’ll get some help both from a day-to-day operations basis and synergies from leveraging their portfolio,” Rivera said.

Real Mex operates 183 restaurants under the various brands, including 152 in California, which has been particularly hard hit by unemployment. Franchisees operate another 24 Chevys locations and eight international locations of El Torito are licensed.

Contact Lisa Jennings at [email protected].

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