Though Fiesta Restaurant Group posted revenue decline of 4.9 percent and a same-store sales drop of more than 4 percent at Taco Cabana and Pollo Tropical in its latest earnings report, executives remain confident in a strategic renewal plan.
Fiesta announced the plan during the first quarter—in which same-store sales fell 6.7 percent at Pollo Tropical and 4.5 percent at Taco Cabana, and the company reported a net loss of $15.1 million. The plan launched on April 24 following the closure of 30 company-owned Pollo Tropical restaurants.
The second quarter results reflect the impact of Fiesta’s planned reduction in media as part of the renewal strategy and moderated promotions and discounts, president and CEO Richard Stockinger said in a conference call.
“Our team is energized by the level of investment and focus being made across the organization to deliver a brand promise that will delight our guests and build upon an already strong affinity for our brands, especially in our core markets where we are focusing our efforts first,” Stockinger said. “While it's still early, we believe the rejuvenation of our brands is in process. Leading indicators that demonstrate positive momentum include qualitative guests and employee feedback, reduced customer complaints, increased complements and improved guest metrics and social media scores.”
Stockinger said Fiesta will relaunch Pollo Tropical in mid-October and Taco Cabana shortly after with new advertising campaigns. “During and after the relaunch of both brands, we will continue to make progress establishing platforms for growth for the future, including new restaurant prototypes that meet or exceed our return requirements, emerging market growth strategies, and systems and processes to build delivery, catering, online ordering and loyalty platforms,” he said.
The plan will also affect 90 percent of each brand menu with food and ingredient enhancements, including removing artificial ingredients. Fiesta also plans to vertically integrate its chicken supply chain to control the feed and breed of chickens, with a goal of serving a totally antibiotic and hormone free product.
Other aspects of Fiesta’s renewal plan include:
- New labor models are being tested at both brands with the intention to optimize the guest experience and increased speed of service and transaction flow.
- Brand and guest research has been conducted and is being utilized to refine Fiesta's operating and marketing initiatives.
- Pollo Tropical has retained a new advertising agency and new creative advertising campaigns are being developed at both brands based on refined positioning, marketing, and digital strategies.
- Fiesta has developed a priority list of deferred maintenance needs that will be addressed this year and in 2018. Fiesta is also enhancing signage and adding exterior lighting to improve visibility.
- Fiesta continues to reinforce strict adherence to cleanliness and food safety standards including engaging an outside firm to conduct food and safety audits at every restaurant four times per year.
- New incentive based compensation plans have been rolled out to the operations teams.
- Regional chefs are being added to the field structure to ensure adherence to high quality operating and food safety standards.
- Social media and guest feedback systems and processes are being revamped.
- Music selection and systems are being improved.
During the second quarter, comparable restaurant sales at Pollo Tropical decreased 7.7 percent and comparable restaurant transactions decreased 10 percent. At Taco Cabana, comparable restaurant sales decreased 4.7 percent and comparable restaurant transactions decreased 4.5 percent. Fiesta posted a net loss of $2.2 million, compared with a profit of $8.9 million during the same quarter last year.