- Fiesta Restaurant Group, parent company of Taco Cabana and Pollo Tropical, has taken out a new $75 million loan with a $10 million revolving credit facility, which replaced its previous credit agreement with a longer-term loan through 2025, according to a press release. This extended period will provide "ample liquidity during the remainder of this challenging period and beyond," CEO Richard Stockinger said in the release.
- The company has improved its comparable sales from a negative 11.1% during Q3 2020 to a negative 8.2% during Q4 2020 at Pollo Tropical, and from a negative 14.2% during Q3 to a negative 10% during Q4 at Taco Cabana.
- Fiesta received $15 million in PPP loans in April, but returned them with the news that a majority of small, non-chain restaurants were not able to access the loans. As an alternative to the PPP funds, Fiesta drew down all of its revolver capacity under its senior credit facility early in Q2 and had a total cash balance of approximately $91.6 million as of May 6.
Stockinger said the company's net debt reduction, combined with this new credit facility, will enable the company to exit the crisis in a stronger position and poised for growth. Although being saddled with this debt could create some roadblocks on the path to recovery, this longer-term loan will provide more time and therefore should give the company more flexibility.
The company's cash balance improved from $75.1 million in April to $101.6 million in late June. By the end of Q3, the company significantly reduced its revolving credit facility and net revolver debt balances, Stockinger said in a Q3 earnings release. The company's total debt was $21.4 million in early November, while net revolver debt was $9 million. In March, total debt was $148.4 million, while net revolver debt was $74.4 million, according to the Q3 earnings release.
Though Fiesta worked with vendors and landlords to achieve more flexible payment terms and cost reductions in early Q2, both chains navigated a rocky environment. This was particularly true for its Pollo Tropical brand, which has traditionally had a bigger dine-in mix than Taco Cabana. By the end of April, Pollo Tropical sales were down nearly 50%, for instance.
However, Fiesta Restaurant Group’s sales improvements came as it shifted its focus to off-premise channels, including to-go alcohol sales at Taco Cabana, as well as opening 143 out of its 146 Texas dining rooms just in time for Cinco de Mayo, which saw a 24% boost in sales compared to 2019. The company also leaned into curbside delivery, adding geofencing technology, and upgraded digital ordering and payment capabilities at the drive-thru, Stockinger said in the Q4 press release.
More chains could seek new loan structures, like Fiesta did, with access to the second round of PPP loans expected to be more difficult. Only 8% of hotels and restaurants received PPP loans during the first round. Kevin Boehm, co-owner of Chicago's Boka Restaurant Group, predicts fewer banks will participate this time around.