Pollo Tropical Ron Ruggless

Fiesta to slow Pollo Tropical development

COO says company went “too far, too fast”

Fiesta Restaurant Group Inc. will slow the development of Pollo Tropical this year under the direction of its new CEO, the company said Tuesday. 

Danny Meisenheimer, chief operating officer of Addison, Texas-based Fiesta, said the company was resetting its growth plan, which will be refined further under CEO Richard Stockinger, who spoke briefly on the company’s fourth-quarter earnings call.

“In hindsight, Fiesta simply went too far, too fast, with the Pollo Tropical store development,” Meisenheimer said. “This taxed our ability to consistently operate restaurants with a level of execution that built this great brand.”

Last October, the company closed 10 Pollo Tropical units. On Tuesday’s call, Meisenheimer said at least three of those in Texas would be converted to the Taco Cabana sister concept.

As of Jan. 1, Fiesta had 177 company-owned Pollo Tropical restaurants and 166 company-owned Taco Cabana restaurants. The company also franchised 35 Pollo Tropical units and seven Taco Cabana locations.

Site selection for some of the newer Pollo Tropical units “was not optimal,” Meisenheimer said.

“As a result, we lost both time and money and efforts in Texas,” he said, adding that the company’s focus this year would be on strengthening the brands’ foundations.

Meisenheimer said the company would focus on operations, a menu strategy that would include simplification for easier kitchen operations, expansion of the delivery and catering businesses, the use of the Pollo Tropical loyalty program, and the reimaging of Pollo Tropical units in South Florida.

The company would also start adding nutritional information on all menu displays in the coming months, he said.

A new loyalty program for Pollo Tropical, which was piloted in the Orlando, Fla., market, rolled out to more markets in the fourth quarter, Meisenheimer said. 

“We will be launching loyalty across the balance of the system later this year,” he said. “With learnings from Pollo’s program, we are now planning to pilot the Taco Cabana loyalty program this spring and implement systemwide later in the year.”

In addition, 17 Pollo Tropical units were testing third-party delivery, and Fiesta targeted 80 units by the end of the second quarter this year, he said. Taco Cabana was expected to begin testing third-party delivery later this year. 

Stockinger, who officially took the CEO role on Wednesday, said he would look at the success and failures of the two brands.

“Our brands have so much potential, which makes me bullish about the future of this company,” Stockinger told analysts. “We will work closely with the board on refining our approach to the business in both the short term and the long term. We will put together a very detailed strategic plan to maximize the results of our existing restaurants, expand widely and look for strategic opportunities.”

For the fourth quarter ended Jan. 1, Fiesta reported net income of $2.4 million, or 9 cents per share, down from $8.8 million, or 33 cents per share, the previous year. Revenue declined 4.6 percent, to $171.3 million, from $179.5 million.  

Same-store sales at Pollo Tropical declined 4 percent in the fourth quarter, and fell 3.5 percent at Taco Cabana.  

Contact Ron Ruggless at [email protected]

Follow him on Twitter: @RonRuggless

TAGS: Operations
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