Fiesta Restaurant Group Inc. is closing 19 Taco Cabana restaurants immediately, the company said Monday.
Dallas-based Fiesta, which also owns the fast-casual Pollo Tropical brand, said all the closures were of stores that had posted significant losses.
As of Sept. 29, Fiesta had 173 Taco Cabana units, with 165 company-owned and eight franchised. The closures represent more than 10% of the brand’s base.
Richard Stockinger, Fiesta’s president and CEO, said the company in the fourth quarter began implement a margin-improvement plan that it expected to increase restaurant level earnings before insurance, taxes, depreciation and amortization by 200 to 300 basis points in 2020 over 2019.
“The margin-improvement plan includes efficiency initiatives in operations across food and operating expense categories and the closure of 19 underperforming restaurants in Texas,” Stockinger said in a statement. “These closures eliminate all stores with significant losses, which we expect will result in a highly viable portfolio of restaurants.”
Nearly all employees impacted by the closures will be offered positions at other Taco Cabana locations, the company said.
“We continue to make progress on sales-building initiatives across both Pollo Tropical and Taco Cabana in off-premise sales, including catering, online and delivery,” Stockinger said. “In addition, as our new senior management team enters their first full year together, we are optimistic about improving comparable restaurant sales at both brands in 2020.”
The 19 Taco Cabana restaurants to be closed contributed about $24.5 million in restaurant sales and an estimated $4.2 million in restaurant level pre-tax operating losses, including $2 million in depreciation expense, for the 12 months ended Dec. 29, the company said.
Related to the 19 closures, Fiesta expects impairment charges of about $7 million to $8 million and estimated lease right-of-use asset impairment charges of about $1 million to $3 million in the fourth quarter 2019. Other costs will include equipment removal and removal of signage.
As of Sept. 29, Fiesta owned and operated 141 Pollo Tropical restaurants and 165 Taco Cabana units. All of the Pollo Tropical restaurants were in Florida and all of the Taco Cabana restaurants were in Texas. At Sept. 29, 2019, Fiesta franchised 31 Pollo Tropical restaurants and eight Taco Cabana units.
Correction Jan. 13, 2020: This story has been edited to correct one brand reference to Taco Cabana.
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