This is a pivotal year for Fiesta Restaurant Group Inc., parent to the Pollo Tropical and Taco Cabana brands, president and chief executive Tim Taft said Tuesday.
This year, the company will “fine-tune and evolve our brands, enter new markets, accelerate development and ensure that we position ourselves for sustainable growth well into the future,” Taft said in a call with analysts after reporting strong second-quarter results.
The company’s achievements to date “support the confidence we have in our direction,” he added.
Net income for the second quarter ended June 29 rose 87.4 percent, to $9.3 million, or 35 cents a share, from $5 million, or 21 cents a share, in the prior-year period, Addison, Texas-based Fiesta reported Tuesday. Revenue increased 9.4 percent, to $154.2 million, from $149.9 million in the same quarter last year.
The revenue increase was “due the impact of 18 new company restaurant openings over the past year and comparable restaurant sales growth at both brands,” Fiesta chief financial officer Lynn Schweinfurth said.
Same-store sales at Pollo Tropical increased 6.7 percent during the quarter, and comps at Taco Cabana rose 2.8 percent.
“So far, the comparable sales growth momentum experienced in the second quarter has continued in the third quarter, with third-quarter to-date comp sales of 5.2 percent at Pollo and 2.2 percent at Taco [Cabana],” Schweinfurth said.
In a research note, Piper Jaffray & Co. senior research analyst Nicole Miller Regan called the company’s third-quarter same-store sales momentum “industry leading.”
Bryan Elliott, a Raymond James & Associates analyst, wrote in a note Wednesday: “Despite widespread industry softness, Pollo Tropical is sustaining very strong comp momentum, and early sales results in the recently entered Texas market affirms our favorable view regarding the brand’s key points of differentiation and open-ended growth potential. We are also encouraged by solid comp and margin trends at the more mature Taco Cabana concept, which also continued to buck soft industry trends.”
The first Pollo Tropical restaurant opened in March near the company’s headquarters in Addison. A second location opened in the market in July.
“Both Texas openings are exceeding our expectations,” Taft said. “We attribute this earlier traction to having applied insights from prior restaurant openings in Jacksonville [Fla.], Georgia and Nashville [Tenn.] to tweak and evolve the brand. This has culminated in initial volumes in Texas that are similar to some of our Florida-based restaurants.”
The company is targeting 22 to 26 new company-owned restaurants this year. Those include 20 to 22 Pollo Tropical locations, two Taco Cabana units and two Cabana Grill restaurants.
A detailed expansion plan
“In April, we opened the first Cabana Grill outside of Atlanta with promising results, and since opening this restaurant there continues to be a good mix of new repeat and guests and high intent-to-return scores,” Taft said.
Some learnings include awareness around the drive thru, value offerings and kids’ meals, Taft said. The company is expanding its Cabana Grill test to Jacksonville, Fla., in the fourth quarter, he added.
“The restaurant is less than two miles from an existing Pollo Tropical restaurant,” Taft said. “This additional restaurant will enhance our ability to stem our media and marketing dollars that will benefit both brands in the market.
“Under this strategy of planned cannibalization, we expect that sales of mature high volume stores will steadily build back, and we’re seeing evidence of that already,” he said.
Fiesta plans to open five more Pollo Tropical units in Texas in the third quarter, Taft said.
“Our intention is to create beachheads at three key Texas [designated market areas] of Dallas-Fort Worth, Houston and San Antonio, where we already have a strong presence with Taco Cabana,” he said. “In addition to sharing infrastructure and supply chain optimization, we stand the benefit from efficiencies in media and marketing.”
Menu items introduced at Pollo Tropical in Texas, such as Calypso Beef, are testing well in some Florida restaurants “and will be considered for future promotional efforts,” he said
Fiesta is also testing online ordering with a smartphone app in select markets “with future expansion of this initiative scheduled for the fall,” he said.
Additionally, Fiesta said it will consolidate food distribution for both its brands with Performance Food Group, or PFG. Pollo Tropical has used PFG for more than eight years.
“While we are growing in Texas with Pollo, and at the same time building our elevated Taco Cabana concept in the Southeast with Cabana Grill, centralized distribution is key” for long-term growth, Fiesta vice president of supply-chain management Joe Brink said in a statement.
As of June 29, Fiesta owned and operated 112 Pollo Tropical restaurants and 166 Taco Cabana locations. It also franchises 35 Pollo Tropical units in the United States, Puerto Rico, the Bahamas, Costa Rica, the Dominican Republic, Ecuador, Guatemala, Honduras, Panama, Trinidad and Tobago, and Venezuela. It franchises seven Taco Cabana restaurants domestically.
Contact Ron Ruggless at [email protected]
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