On June 27, 2021, Fiesta Group announced they had entered into a stock purchase agreement to sell the Taco Cabana restaurant brand for $85 million to YTC Enterprises, LLC. The deal will allow The Fiesta Group to focus on the growth of their Pollo Tropical brand.
YTC Enterprises is an affiliate of Yadav Enterprises, Inc, which operates close to 400 restaurants in 18 states, including the Jack in the Box, El Pollo Loco, TGI Friday’s, and Denny’s restaurant chains. The parties will close on the deal in the third quarter of 2021 once the closing conditions have been satisfied.
Use of Proceeds from the Sale
The Fiesta Restaurant Group will use the proceeds from the sale to fully repay approximately $74.6 million in outstanding term loan borrowings. They will also pay divestiture transaction fees as well as a loan prepayment premium, all of which totals approximately $4.6 million.
They will then use a portion of their $67.6 million cash balance for investments that will accelerate the growth of the Pollo Tropical brand. Additionally, the Board of Directors for the company will evaluate other strategies for increasing shareholder value which includes repurchasing stock in the future.
Richard Stockinger, the Fiesta Group President, and Chief Executive Officer stated, “We made the strategic decision to sell the Taco Cabana business to allow our leadership team to focus completely on accelerating Pollo growth, and we are very excited about the tremendous growth opportunities we have for the Pollo Tropical business.”
He added that the CEO of Yadav Enterprises, Anil Yadav, is highly respected as a restaurant operator with an impressive entrepreneurial background and a proven track record. Stockinger asserted the Fiesta Group is confident, “he will be an effective steward of the Taco Cabana brand for the long-term.”
The Future of Pollo Tropical
Stockinger stated that the sale of Taco Cabana will allow the Fiesta Group to apply appropriate resources for accelerating the growth of the Pollo Tropical brand.
He noted the company will be able to create a more effective, efficient, organization that will focus on upgrading customer experience across all their service channels.
They will also be able to continue their investment in the expansion of their digital growth platform and finalize their new unit expansion plans for 2022.
More About the Fiesta Group
Fiesta Restaurant Group, Inc., is the owner and operator of both the Pollo Tropical and Taco Cabana restaurant brands. They also franchise those brands. You can find more information about the company at their corporate website at www.frgi.com.
The Pollo Tropical and Taco Cabana brands are fast-casual, quick-service restaurants that specialize in offering distinct, unique flavors with a broad customer appeal at a compelling value. Each of the brands offers fresh-made cooking, drive-thru service, and catering.
For the year ending on January 3, 2021, Taco Cabana had generated $239.4 million in revenues and an adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) of $8.5 million. As of July 1, 2021, the Taco Cabana brand boasted 142 owned and operated restaurants in Texas and six franchised restaurants in New Mexico.
More About Yadav Enterprises, Inc.
This restaurant company operates nearly 400 restaurants located in Northern California, Texas, and 16 other states. They are the largest Jack in the Box franchisee as well as one of the largest franchisees of Denny’s and TGI Friday’s.
They are also a franchisee of El Pollo Loco and the Corner Bakery Cafe restaurant brands. Additionally, they are a major investor in TGI Friday’s ownership group and global parent company.
The Fiesta Restaurant Group’s Pollo Tropical brand finished the first quarter of 2021 with an increase of same-store sales of 4.3 percent. That’s a marked improvement from their 2020 fourth-quarter performance of negative 8.2 percent. This indicates the brand has momentum as it becomes the Fiesta Group’s sole focus.