Fiesta Restaurant Group’s stock price jumped more than 10% early Thursday on news that the parent company of fast casuals Pollo Tropical and Taco Cabana was seeing sales growth in Q3.
The operator is banking on its drive-thrus, investing in improving the customer experience and speed of service, as well as adding drive-thru-friendly menu items, such as a new line of Cuban pressed sandwiches at Pollo Tropical.
At Pollo Tropical, drive-thru sales in Q3 were up 29% year over year, the brand said during a call with analysts Wednesday. Drive-thru sales penetration increased to 67% of net sales for the quarter ended Sept. 27 and average check for drive-thru grew more than 14.6% year over year.
At Taco Cabana, the drive-thru saw 37% growth in average weekly sales in Q3 over the previous year. Fiesta said its margarita promotions during the quarter have helped fuel those sales, helping to drive check averages up more than 17% year over year.
Fiesta said it is working on improving its drive-thru order-taking devices and menu boards.
As previously announced last month, same-store sales for Q3 at Pollo Tropical fell 11.1%. Same-store sales declined 14.2% at Taco Cabana during the period. Total revenues fell 16.4% to $137.3 million.
In addition to drive-thru growth, Fiesta has also seen growth of its delivery operations amid the pandemic.
“Our business mix historically had been more heavily weighted towards the dining-in occasion compared to our fast-casual peers for both brands at approximately 26% of our revenue,” Fiesta CEO Rich Stockinger said during the call. “The evolving status of the pandemic has clearly had an impact on consumer comfort levels with the dining experience.”
Pollo Tropical currently has 23 dining rooms open, while Taco Cabana has 20 open dining rooms and 70 patios in operation.
Pollo Tropical’s delivery sales in Q3 more than tripled compared to last year, driven in part by the company’s expansion to four delivery platforms versus just one last year. At Taco Cabana, delivery average weekly sales in Q3 more than tripled from the previous year.
Taco Cabana launched a new app in September and the chain said it expect to see significant growth in online sales because of the streamlined customer experience.
On Tuesday, Florida voters narrowly approved a ballot proposal to raise the state’s minimum wage to $15 an hour by 2026.
Currently, the average wage for a Pollo Tropical employee is about $9.60, the company said. The minimum wage increase would cost the company about $2.5 million, CFO Dirk Montgomery.
But, Montgomery said, “A large percentage of our customer base is likely service employees that would be positively benefitted by any kind of wage legislation.”