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Operations

Dismal quarter sparks changes at Taco Cabana

With same-store sales falling 8.1% in Q4, parent company Fiesta Restaurant Group parts ways with the fast casual’s president and plots a turnaround.
Photograph: Shutterstock

Taco Cabana is searching for a new president after parent company Fiesta Restaurant Group on Wednesday announced it had parted ways with Charles Locke following dismal Q4 earnings that were “partially self-inflicted,” according to CEO Rich Stockinger.

Same-store sales fell 8.1% at Taco Cabana for the quarter ended Dec. 29. Fiesta’s sister brand, Pollo Tropical, reported a modest 0.6% increase in same-store sales. Companywide revenue decreased 4.9% to $159.5 million for the quarter.

“While our operations initiatives in simplified menu achieved our goal of improved guest satisfaction, the unintended consequence was a greater-than-expected reduction in sales,” Stockinger told analysts. “In the first quarter of 2020, we brought certain items back to the menu and expanded daypart choices on select items to increase sales and have already seen positive results.”

What’s more, the chain’s TC Time value promotion didn’t drive enough incremental traffic to offset the discounted prices. Taco Cabana nixed the promotion in February.

Adding to the brand’s woes, Stockinger said, guests responded poorly to the lack of limited-time menu items, which was part of the menu simplification process.

“We have accelerated new item ideation in Q4 and into Q1 to identify exciting new items,” he said. “We’re also bringing back proven LTOS from the past that sold well. All LTOs in 2020 will include new items and special value offers.”

Fiesta’s future centers on “nurturing the existing Pollo business” and positioning it for growth, he said.

The fast-casual chicken concept more than doubled its off-premise sales in Q4 and is working to boost its catering program and launch an updated app in Q2. The chain is also expanding its partnerships with third-party delivery providers.

Earlier this year, hedge fund Arex Capital Management revealed it had boosted its stake in Fiesta Restaurant Group and was in discussions with the Dallas-based operator about strategy and operations.

The move followed news that Taco Cabana had shuttered 19 units in Texas—nearly 11% of the brand’s total stores.

During Q4, Fiesta opened one Pollo Tropical and closed an additional Taco Cabana unit. The company ended the quarter with 174 company-owned and franchised Pollo Tropical units and 172 company-owned and franchised Taco Cabana restaurants.

 

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