Dive Brief:
- Fiesta Restaurant Group's Q2 2020 comparable sales were down 31.6% for Pollo Tropical and down 19.2% for Taco Cabana, according to a Thursday press release. These results improved to a negative 17.8% for Pollo Tropical and negative 18% for Taco Cabana in fiscal June.
- For the first two weeks in July, Pollo Tropical's comparable sales fell 12.2% while Taco Cabana posted a decline fo 13.4%.
- "We are very encouraged by the significant sequential improvement in comparable restaurant sales at both brands in the second quarter, which has continued into the third quarter," Richard Stockinger, Fiesta Restaurant Group CEO and president, said in a statement. "These improving trends have come despite the fact that we are operating in two of the most challenged states in terms of COVID and economic conditions, Florida and Texas."
Dive Insight:
Though these numbers improve upon the chain's April sales, when Pollo Tropical was down 49.2% and Taco Cabana was down 26.2%, Fiesta's recovery is happening slowly. According to Crunchtime and reported by Restaurant Business, QSR sales were down only 0.8% in the week ended July 12, while Facteus data shows QSR sales up 5% in mid-July.
This disparity could very well be because of Fiesta's heavy presence in Florida and Texas, which have quickly become coronavirus hotspots, with rising cases and deaths recorded this month in both states. Both states restricted dining room capacity in late June in an attempt to control these rising numbers.
Fiesta Restaurant Group has gone a step further, closing all of its dining rooms July 12, according to the release. The company has shifted its operations to drive-thru, delivery and pickup. It isn't the only restaurant company that's done so, either. Earlier this week, for example, KFC closed its company-operated restaurant dining rooms in Florida, and suggested restaurant operators in other hot spot states like Texas and Arizona to do the same. McDonald's also paused reopening of its dining rooms on July 1 as cases surge in many states. But KFC and McDonald's likely fall in that strong-recovery category because of their robust drive-thru and delivery presence and, for KFC, group order sales.
Meanwhile, Stockinger said his company is focused on "creating a better business model that is easier and safer for our consumers including expanded delivery options, new curbside and pick-up capabilities, and a much-enhanced online ordering experience." In May, Stockinger told investors the brands are making pickup and curbside faster and safer for customers and providing drive-thru customers with credit card processing devises outside the drive-thru to allow for distancing. The company now works with all major third party delivery providers as well with the addition of Grubhub in May.
Both Pollo Tropical and Taco Cabana offered delivery prior to COVID-19, but if they're just now enhancing their online ordering experiences, they have some serious catching up to do. There are still bright spots for the company, however. Taco Cabana reported strong off-premise alcohol sales — a high-margin differentiator that could help financially insulate the brand from extended dine-in closures.
"We believe that the added benefit of home delivery of alcohol represents a big potential and incremental participations, and we will leverage the popularity of drive-thru alcohol and food sales that are currently producing drive-thru lines throughout the day at Taco [Cabana]," Stockinger said during the May call.
Pollo Tropical, however, may have a tougher road ahead. In May, Stockinger said the chain has difficulties because its customers, espeically those in South Florida, were already struggling financially even before COVID-19 hit. That situation is not likely to get better as unemployment checks dry up and jobs continue to disappear. Still, for now at least, it seems as though Stockinger isn't the only one encouraged by sequential sales improvements. The company’s stock prices jumped by double-digits on this sales report Thursday.