Although Fiesta is moving forward with these digital initiatives, the onslaught of staffing shortages continue to stall sales growth.
Pollo didn’t quite reach 2019 comparable restaurant sales levels in the second quarter. The chain’s same-store sales jumped 43.5 percent in Q2 compared to 2020, but decreased 1.8 percent compared to 2019. Meanwhile, Taco’s same-store sales grew 15.6 percent from 2020 in Q2, and dropped 6.7 percent versus 2019.
Dine-in and counter takeout same-store sales rose 117 percent in Q2 year-over-year. Compared to the first quarter, counter sales increased 7.2 percent, while drive-thru sales jumped 0.6 percent and online channels lifted 2.9 percent. Delivery continued to exceed 10 percent of sales, while dine-in's mix grew to 6 percent, still below 2019 levels.
With the labor shortage still hurting business, Fiesta looked to resolve the dilemma by temporarily increasing wages by $1—an initiative that began in May and will likely continue through August. The brand also provided incentives for managers, streamlined recruiting processes, and boosted Pollo’s minimum wage to $10 per hour, or $11 per hour with the temporary $1 increase.
But that might not be enough.
“Despite those efforts, staff availability issues intensified in the second quarter and had an increasingly negative impact on sales throughout the quarter,” Stockinger said.
Because of staffing challenges, Fiesta reduced operating hours by around 4 percent across all channels for the quarter. And even more, the company temporarily closed dining rooms and postponed delivery and online ordering. This allowed team members to focus on drive-thru and counter takeout sales, a predominant way of ordering throughout the pandemic.
Staffing levels gradually improved with these initiatives. However, Fiesta still searches for ways to get back to a healthy, thriving employee base.
“We continue to challenge our recruiting resources and processes, including the addition of additional resources dedicated to specific geographics that are currently experiencing greater issues as well as sign-on bonuses for hourly and management new hires,” Stockinger said.
Fiesta’s restaurant wages as a percentage of net sales increased from 23.9 percent in the second quarter of 2020 to 24.1 percent in 2021.
To improve margins, Fiesta, like many companies, continues to explore additional price increases. In April, the company increased prices by 3 percent. Fiesta CFO Dirk Montgomery believes it is possible for Fiesta to offset the cost impact of increased wages through these price hikes and still appeal to customers.
“Based on the research that we've done, we believe that there is a relatively low sensitivity in that channel to price increases,” said Montgomery, regarding delivery.
“With the increased wages and the increase of retention and the increased recruitment efforts that we're making, we believe that we're going to be able to bring more people on board or back that should increase the sales, which of course is margins and transactions,” Stockinger added.
Fiesta increased operations revenues by 43.7 percent to $91.2 million in Q2 from $63.4 million in 2020.