Fiesta Restaurant Group, Inc. yesterday announced that it will close 19 Taco Cabana restaurants in Texas, effective immediately. Nearly all employees impacted by the closures will be offered positions at other Taco Cabana locations.
Fiesta President and Chief Executive Officer Richard Stockinger said, “During the fourth quarter, our Taco Cabana team began implementation of a margin improvement plan that we expect to improve restaurant-level Adjusted EBITDA margins by approximately 200 to 300 basis points in 2020 vs. 2019. The margin improvement plan includes efficiency initiatives in operations across food and operating expense categories and the closure of 19 underperforming restaurants in Texas. These closures eliminate all stores with significant losses, which we expect will result in a highly viable portfolio of restaurants.”
Mr. Stockinger concluded, “We continue to make progress on sales building initiatives across both Pollo Tropical and Taco Cabana in off premise sales, including catering, online and delivery. In addition, as our new senior management team enters their first full year together, we are optimistic about improving comparable restaurant sales at both brands in 2020.”
The 19 Taco Cabana restaurants contributed approximately $24.5 million in restaurant sales and an estimated $4.2 million in restaurant level pre-tax operating losses, including $2.0 million in depreciation expense, for the twelve months ended December 29, 2019.
The Company expects to recognize estimated non-cash long-lived asset impairment charges of approximately $7.0 million to $8.0 million and estimated lease right-of-use asset impairment charges of approximately $1.0 million to $3.0 million related to these 19 Taco Cabana restaurants in the fourth quarter of 2019. The Company also expects to recognize costs associated with de-imaging and removing equipment related to these restaurants in the first quarter of 2020, but it does not expect these additional closure related costs to be material.