Fiesta Restaurant Group amps up growth plansFiesta Restaurant Group amps up growth plans

Fiesta Restaurant Group Inc. plans to open more restaurants than projected this year as it builds on the sales success of its Pollo Tropical and Taco Cabana brands.

The Addison, Texas-based fast-casual operator will add planned openings, especially for its Caribbean-themed Pollo Tropical chain, and structure human resources functions to better manage increased growth, executives said in a call Thursday discussing fourth-quarter earnings.

“Due to additional progress, we are increasing our new company-owned restaurant projected openings in 2015 by two,” said Lynn Schweinfurth, Fiesta’s chief financial officer, noting that the company would open 28 to 32 new restaurants this fiscal year.

“One fact puts Pollo Tropical growth trajectory into crystal-clear perspective,” said Tim Taft, Fiesta’s president and CEO. “The company took 26 years to reach its 100th company-owned domestic location. We believe that it will take us less than four to get to our second 100.”

The company opened its first Pollo Tropical unit in Texas last March, with its “Big Blue Caribbean-style prototype” and reworked menu. It has since opened another 10 locations in the state.

“We have the opportunity to pick up that pace, but in order to do so we believe that we must operate at a higher level with uncompromising commitment to staffing and training,” Taft said. “With that in mind, we have three training restaurants in Texas, located in Houston, San Antonio and Dallas, and we will be adding more in the near future.”

At a January conference, analysts questioned Fiesta about the health of the Texas economy in the wake of plummeting oil prices, Taft said, but the effect was in exploration in West and South Texas, where Fiesta had less exposure, and was offset by consumer spending benefits due to lower gasoline prices.

“Lower gas prices should rightfully be viewed as a tailwind and not a headwind, as it currently costs about half as much for Texans to fill their gas tanks it did a year ago,” he said. “That is a lot of discretionary dollars flowing back into the economy.”

Fiesta is also launching a remodeling program at Pollo Tropical in the brand’s original Florida markets, the first of which is slated for the Orlando, Fla., market, Taft said.

“We will look to expand our reimaging efforts to the rest of the Florida markets starting in 2016,” he said. The effort will give the company a chance to increase throughput at older units in South Florida, which report the highest average volumes in its system — between $3 million and $4 million per unit.

Fiesta is also adding hand-held ordering devices at new units for staff to use in speeding service, Taft said, and will look at ways to increase sales through mobile apps, online ordering and catering.

Catering now represents only 1.5 percent of sales for both the Pollo Tropical and Taco Cabana brands. “Catering sales should be able to reach high-single digits for low-double digits as a percentage of restaurant sales over time,” he said.

Some older Florida restaurants have fewer than 20 parking spaces, Taft said, “so that is why this emphasis of off-premise consumption is such an important part, and especially in South Florida.”

Schweinfurth said the company raised menu prices about 1 percent at Taco Cabana in mid-October and more than 5 percent at Pollo Tropical in mid-November.

Full-year price increases for 2015 will be slightly more than 4 percent at Pollo Tropical and 2.5 percent at Taco Cabana, she said. This week, Taco Cabana raised menu prices 1.5 percent.

“Overall, we believe we can bridge the dollar impact of higher costs with pricing-cost mitigation tactics and expense-saving opportunities,” Schweinfurth said.

Pollo Tropical’s same-store sales increased 7.7 percent during the fourth quarter ended Dec. 28, and same-store traffic rose 3.8 percent, Fiesta said. Taco Cabana’s same-store sales grew 6.1 percent and traffic increased 1.6 percent.

Fiesta reported fourth-quarter net income of $9 million, or 35 cents a share, an increase from a loss of $5.6 million, or 22 cents a share, in the same quarter a year ago. Revenue in the quarter rose 14.7 percent, to $156.2 million, from $136.2 million the previous year.

During the fourth quarter, Fiesta opened five company-owned Pollo Tropical restaurants in Texas and one Cabana Grill restaurant, a version of its Taco Cabana concept, in Florida.

As of Dec. 28, the company owned and operated 124 Pollo Tropical units and 167 Taco Cabana locations, two under the Cabana Grill brand. Fiesta has an additional 37 franchised Pollo Tropical restaurants in the United States, Puerto Rico and Central America, and seven franchised Taco Cabana units in the United States.

Contact Ron Ruggless at: [email protected].
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