Fiesta Restaurant Group announced Thursday that it’s selling the 148-unit Taco Cabana business to franchise company Yadav Enterprises for $85 million.

Yadav Enterprises operates nearly 400 locations across Northern California, Texas, and 16 other states. The company is the largest Jack in the Box franchisee and one of the largest Denny’s and TGI Friday’s operators. Yadav is also a significant investor in the ownership group of TGI Friday’s, and serves as a franchisee for El Pollo Loco and Corner Bakery Cafe.

“Anil Yadav, the CEO of Yadav Enterprises, has an impressive entrepreneurial background and is a highly-respected restaurant operator with a proven record of success across a variety of limited and full-service concepts,” said Fiesta CEO Richard Stockinger. “We are confident he will be an effective steward of the Taco Cabana brand for the long-term.”

Taco’s same-store sales dropped 17.1 percent in Q1 compared to 2019. The chain earned revenue of $56.5 million, compared to $60.6 million in the year-ago period. Adjusted EBITDA for Taco Cabana was $700,000 in the first quarter, versus negative $900,000 last year. In Q1, the drive-thru channel mixed 77 percent, while online accounted for 2 percent of sales and delivery mixed 7 percent. Of Taco’s 148 stores, 142 are company-owned in Texas and six are franchised in New Mexico.

Proceeds from the sale will be used to fully repay Fiesta’s roughly $74.6 million in outstanding term loan borrowings and to pay $4.6 million for transaction fees and a loan prepayment premium. The cash purchase price of $85 million is subject to reduction for certain working capital and other closing adjustments, estimated to be between $7 million and $9 million. The transaction is expected to close in Q3.

Stockinger said Fiesta made the strategic decision to Sell Taco Cabana to allow its leadership team to focus on accelerating the growth of its other brand, Pollo Tropical. The chain saw comp sales decrease 3.3 percent in Q1. In the first quarter, drive-thru accounted for 60 percent of sales while online mixed 3 percent and delivery represented 10 percent of sales.

Pollo garnered revenue of $88.2 million in Q1, up from $86.1 million in 2020. The brand swung an adjusted EBITDA of $12.2 million in the first quarter, compared to $8.8 million last year. As of April 4, there were 167 Pollo Tropical stores—138 company-operated and 29 franchised. In the year-ago period, the chain had 174 outlets.

“We believe the Taco Cabana sale will provide great value to our shareholders, allowing us to create a more effective, efficient and focused organization, applying appropriate resources to accelerate delivery of the exciting growth potential we have in our Pollo Tropical brand,” Stockinger said. “This will include our continued efforts to drive an upgraded customer experience across all service channels, continuing to invest in expanding our growing digital platform and finalizing our new unit expansion plans targeted for 2022.”

The news comes just a day after Yum! Brands and 7-Eleven franchisee Ampex Brands acquired bakery-cafe concept Au Bon Pain from Panera. The agreement includes roughly $60 million in assets, according to the Wall Street Journal. The operator is taking over Au Bon Pain’s 171 locations and acquiring franchising rights to an additional 131 stores. 

Fast Casual, Finance, Franchising, Story, Pollo Tropical, Taco Cabana