Fiesta Restaurant Group announced two executive hires and continues to show optimism for Pollo Tropical and Taco Cabana despite third-quarter sales decreases.
“Our team has been and will continue to be focused on the Pollo business as a top priority,” president and CEO Richard Stockinger said during Fiesta’s earnings call. “Although we had a tough year with the continuing market environment challenges, we are optimistic that we are beginning to turn the corner on returning to sustainable comparable store sales growth at Pollo Tropical.”
Stockinger said the team saw early signs of transaction stabilization. He said they’re in the process of simplifying the menu and operations to improve efficiency and customer service.
He added that the company fared reasonably well despite lapping tough 2018 comparisons and ended the third quarter at a point better than the beginning of the period due to a strong September.
Pollo Tropical’s comparable restaurant sales fell 3.8 percent in Q3, a two-year net increase of 2.7 percent, with 2018’s Q3 bump of 6.5 percent. Taco Cabana's same-store sales fell 4.8 percent in the period, year-over-year.
Stockinger also noted the potential catering and delivery options both brands have, even with services still in their beginning stages. Catering orders represented 0.8 percent of total sales in September and delivery through DoorDash representing 2.3 percent of September sales. He said Fiesta believe, in time, the delivery sales share can reach 10 or 15 percent.
Similar to Pollo Tropical, delivery represented 1.4 percent of total sales during September for Taco Cabana. Fiesta increased menu prices for both restaurants to offset delivery costs, and Stockinger noted there hasn’t been any pushback.
All Pollo Tropical restaurant locations will also be getting rapid pickup capabilities by Q1 2020. Stockinger said that while the rollout of this aspect is also in its early stages, his team is seeing solid sales pickup in the locations that have rapid pickup.
The delivery share of both Pollo Tropical and Taco Cabana’s sales will see a significant change in February when exclusivity with DoorDash ends. Fiesta has begun discussions with additional providers to expand reach.
“While DoorDash is a leader in the Florida market and has a meaningful presence in our largest Texas markets as well, we believe that making our food available on a variety of marketplace platforms is important to gaining share within the nascent market for delivery,” he said.
Even with delivery and catering growing as a part of sales share, total revenues decreased by 6 percent. Dirk Montgomery, Fiesta’s CFO, said this was due primarily to comparable restaurant sales declines at both restaurants, coupled with closures. Fiesta operated 15 fewer locations at the end of the quarter versus at the same time in 2018.
Montgomery said he was excited about joining Fiesta this year and that he and Hope Diaz, who was recently hired as chief marketing officer, believe they can refine and hone in on more effective revenue optimization analytics.
“We’re going to be working on optimizing our pricing and our promotion strategies,” he said. “I think both of us feel like we’re on the right track.”
Stockinger shared that sentiment, saying that strong progress was made during the third quarter despite some decreases.
“The improved sales momentum in September is only partially reflective of what we can accomplish as we've been investing for growth across all these initiatives. We believe they will continue to accelerate results for the remainder of the year and into 2020,” he said. “Our focus will remain on building sales growth capabilities across all channels, both in-store and off-premises, by continuing to enhance our brand’s attractiveness to guests."