After a report from a minority shareholder group accusing Fiesta Restaurant Group of having poor corporate governing practices, weak operating performance, and no strategic plan for Taco Cabana, the company is biting back.
JCP Investment Management, which owns 9 percent of Fiesta shares, produced the report and is calling for the replacement of two board members.
Fiesta calls the report a “cookie-cutter plan that would cause serious harm to Fiesta if adopted.”
“Now, 14 days prior to the annual meeting, [JCP] presents for the first time a purported ‘plan.’ JCP’s last minute ‘plan’ is what you would expect from a novice investment banker: a handful of amateurish and shallow back-of-the envelope calculations on an Excel spreadsheet,” Fiesta representatives say in a statement. “This ‘plan’ is completely detached from the important nuances and realities of the Company’s operations and the inner-workings of a real public company, and lacks analytical rigor.”
Fiesta had a difficult recent quarter, shuttering 30 Pollo Tropicals amid a comparable-restaurant sales drop of 6.7 percent. Fiesta president and CEO Richard Stockinger said earlier this month that the company is in the early stages of a “strategic renewal plan” to drive long-term creation.
Clearly investor JCP isn’t happy with Fiesta’s direction and is calling for two of its employees to be elected to the board at the annual meeting scheduled for June 7.
“The same board that agreed to add 47 new Pollo Tropical restaurants over the course of four years recently announced the closure of 30 of these locations. This, coupled with new CEO Rich Stockinger’s list of 170 action items that must be taken to address Fiesta’s ever-worsening performance, indicates to us that the incumbent directors were unaware of the deteriorating performance of the Company,” JCP says in a statement. “It is evident to us that Fiesta is desperately in need of directors who will bring proper oversight and an enhanced level of accountability. Even Fiesta’s recently announced ‘Strategic Renewal Plan’ appears reactionary as it is light on details and appears to simply offer the incumbent Board several more months to find strategic visions for its two brands.”
After Fiesta’s stock began to drop in 2015 following near all-time highs of $58 per share, the company says it took steps to address deteriorating sales including evaluating strategic alternatives, naming Stockinger as the new CEO, and suspending the expansion of Pollo Tropical into Texas.