Fiesta Restaurant Group, Inc. (NASDAQ:FRGI), parent company of the Pollo Tropical and Taco Cabana fast casual restaurant brands, today announced that it has closed 10 Pollo Tropical restaurants and will rebrand up to three of these restaurants in Texas as Taco Cabana restaurants. The Company also announced expected impairment, lease and other charges for the third and fourth quarters 2016 and third quarter 2016 comparable restaurant sales results.
The decision to close restaurants was based on a restaurant portfolio examination as part of the Company’s strategic review process to enhance long-term shareholder value. Affected restaurants include eight in Texas, one in Nashville, Tennessee and one in Atlanta, Georgia. Nearly all employees impacted by closures will be offered positions at nearby restaurants.
Interim Fiesta President and Chief Executive Officer Danny Meisenheimer said, “After a period of aggressively growing Pollo Tropical in Texas we have hit the pause button to focus on building brand affinity, frequency and awareness, while continuing balanced system development over time. We believe closing or rebranding these underperforming stores provides the opportunity to further strengthen our operational and financial performance across the remaining restaurants in Texas and across our Pollo Tropical brand as a whole.”
Mr. Meisenheimer added, “We remain optimistic about the future growth opportunities for both our Pollo Tropical and Taco Cabana brands and believe that the steps we are taking now provide opportunity for success in 2017 and beyond.”
The Company currently estimates it will recognize impairment charges of approximately $18 million to $21 million in the third quarter 2016, and related lease and other charges of $2 million to $4 million in the fourth quarter 2016 based upon the actual timing of restaurant closures. The closed restaurants contributed approximately $4.8 million of pre-tax operating losses to results in 2016 through the end of the third quarter 2016.
Preliminary Third Quarter 2016 Comparable Restaurant Sales Results
The Company also announced the following comparable restaurant sales results for the third quarter 2016, which ended October 2, 2016:
- Comparable restaurant sales at Pollo Tropical decreased 1.0%; and
- Comparable restaurant sales at Taco Cabana decreased 4.1%.
Mr. Meisenheimer concluded, “As always, we are focused on delivering the best products and experience to our guests. Although the industry backdrop remains soft and comparable sales at Pollo Tropical continue to be negatively impacted by sales cannibalization, traffic trends improved at the end of the third quarter at both brands driven, in part, by compelling product and value promotions.”
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