After a disappointing fourth quarter, Fiesta Group is making further changes to Taco Cabana, including within its leadership.
Taco Cabana revenue in the same store declined 8.1 percent in the fourth quarter (between 164 business units and eight franchises), compared to a 5.1 percent growth in 2018, a decrease in comp transactions of 7.1 percent and a 1 percent decrease in the average check. In the year under review, the brand fell by 4.1 percent. Total revenue declined from $ 76 million to $ 69 million in the fourth quarter and from $ 312 million to $ 297 million in 2019.
Fiesta announced the departure of Chuck Locke, president of Taco Cabana, on Wednesday. CEO Richard Stockinger said during a call reporting on fourth quarter results that the move will allow Locke to spend more time with his family.
Taco Cabana has been trying for the past few months to resolve its customer satisfaction issues through operations and menu simplification. The brand reduced all-day breakfast and weekend breakfast availability and eliminated complex menu items. The idea was to reduce the number of offers and to limit articles to certain parts of the day in order to improve the service speed. And it worked: The drive-through order times were reduced by two minutes and the satisfaction values increased.
But sales suffered – more than Fiesta expected.
On January 19, Taco Cabanas closed in Texas, where the brand has a strong presence. Fiesta hadn’t announced double-digit closings since December 2018.
Stockinger noted that Taco Cabana’s value promotion, TC Time, was not incremental enough, so it was discontinued in February. The campaign spanned several parts of the day: two tacos with bacon, egg and cheese for $ 2.99 at breakfast; two beef tacos with beans and rice for $ 3.99 for lunch; two bean and rice chicken fajita tacos for $ 4.99 for dinner; and six chicken fajita tacos and six lulls with beans and rice for $ 14.99 on the weekends.
Additionally, there were no new items introduced in the final window of the fourth quarter that weren’t well received by customers, Stockinger said.
In response, Taco Cabana put certain items back on the menu and expanded the selection of daytime parties for selected items to increase sales (including the return of the all-day breakfast menu). Instead of the TC Time promotion, Taco Cabana will offer targeted value promotions in each of its eight marketing windows through 2020. The brand is also accelerating innovation (Stockinger mentioned a pipeline of 15-20 potential new items) and bringing back proven LTOs. The chain hopes the changes will lead to growth while maintaining the improved customer satisfaction scores.
In February, Taco Cabana brought back its Shrimp Tampico and new products with Kiolbassa Jalapeño Sausage. A new happy hour menu with strawberry and lime margaritas, draft beer and nachos made from beans and cheese or ground beef was also introduced.
“These top-line results are disappointing, but they do not in any way reflect the performance we can ultimately achieve with this brand,” said Stockinger during the company’s fourth quarter and annual report. “As mentioned earlier, the challenges in the fourth quarter focused on issues that were partly self-created. We are already making progress on each of these points in the first quarter. “
Pollo Tropical sales in the same store rose 0.6 percent in the fourth quarter (between 142 business units and 32 franchises) compared to 1.9 percent in 2018. This was the brand’s first positive quarter since the third quarter of 2018. The company had five consecutive months of positive traffic growth.
In 2019, Comp numbers fell 1.8 percent after rising 2.2 percent in 2018. Revenue in the fourth quarter declined approximately $ 1.2 million year over year to $ 90.2 million. For the full year, sales decreased from $ 376 million to $ 363 million.
The Quarter Chicken Lunch Platter did as well as the Churrasco Steak Platter LTO and GrillMaster Trio LTO, despite a $ 0.50 increase. Each of these elements increased the traffic and the average control compared to the previous year. The brand is testing new fried chicken and chicken steak, different types of empanadas, picadillo and coconut shrimp.
Stockinger was very excited about the potential of both brands to sell outside of the company. The business accounts for 5.6 percent of sales at Pollo Tropical and 4.2 percent at Taco Cabana, but the CEO sees an upward trend.
Fiesta has teamed up with EzCater, an online B2B ordering company, to boost the catering business. The parent company will also be adding third-party vendors and installing fast pick-up stations in high-volume stores by the end of the first quarter. For Pollo Tropical in particular, sales outside the company more than doubled in the fourth quarter. Catering sales increased by 33 percent compared to the previous year. Delivery makes up 2.5 percent of sales, but Stockinger said the brand sees 10 percent as the brand’s potential. A new Pollo Tropical app is expected to be released in the second quarter, while the new Taco Cabana app is expected in the third quarter.
“We anticipate online growth for both brands will accelerate over the course of the year,” said Stockinger.
Fiesta expects Pollo Tropical to have positive sales and sales growth in the low to mid single digits in 2020, partly due to growth outside the company. Four to eight units will open in 2020, some in non-traditional locations such as universities, rest stops and airports.
The company will work to stabilize Taco Cabana sales in 2020. Fiesta projects improve as the year progresses, but negative numbers in the first half of 2020.
“We are optimistic about our momentum at Pollo Tropical,” said Stockinger. “The key to Fiesta’s future lies in nurturing the existing Pollo business and positioning our mission statement to achieve its full potential. We believe we are making progress at Taco and the issues that impacted sales in the fourth quarter. And also have significant external growth opportunities that we will take advantage of beyond 2020. “