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Competition, especially from Chipotle, is hurting Pollo Tropical and Taco Cabana, CEO says

Parent company Fiesta Restaurant Group reported a decrease in same-store sales and traffic during Q2 for both brands.
Photograph: Shutterstock

Fiesta Restaurant Group, the parent company of fast-casual concepts Pollo Tropical and Taco Cabana, cited mounting competition—notably from Chipotle Mexican Grill—as one of the reasons for its slipping same-store sales during the second quarter.

Fiesta’s total revenues dropped 3.1% to $171.4 million for the quarter ended June 30, with same-store sales at Taco Cabana decreasing 3% and comps at Pollo Tropical falling 1.3% during the period.

Traffic remains a problem for both brands. Taco Cabana saw a 6.1% drop in transactions and Pollo Tropical reported a 1.8% traffic decline during the period.

“Chipotle is definitely a formidable competitor coming in, and they’ve identified South Florida as a market they’re coming in and they are coming into us,” CEO Rich Stockinger said Wednesday during a call with analysts. “We definitely have more competitive intrusion into the market than we did before.”

And, in the case of Pollo Tropical, the competition is coming from the chain itself, with sales falling 120 basis points due to cannibalization of existing restaurants by new ones.

“In these markets, we have opened new restaurants in the proximity of existing units with high sales in order to improve the customer experience and increase overall sales,” Stockinger said. “In essence, sales have been transferred from one Pollo restaurant to another, causing comparable restaurant sales to decline, but as a company we increase our penetration and share.”

Unlike Chipotle, which reported double-digit growth in Q2, driven largely by digital and off-premise sales, Fiesta Restaurant Group said both its delivery and rewards programs are in relative infancy.

In addition to building up delivery and rewards, both Pollo Tropical and Taco Cabana are reinvigorating their catering programs, with new menus, reduced prices and upgraded equipment.

Dallas-based Fiesta Restaurant Group operates 476 Taco Cabana locations and 662 Pollo Tropical units.

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