Divide and conquer: Tim Taft cooks up the perfect recipe for growth at Fiesta Restaurant Group Featured

2:43pm EDT December 18, 2013
Tim Taft, president and CEO, Fiesta Restaurant Group Tim Taft, president and CEO, Fiesta Restaurant Group

Tim Taft learned the art of feeding a crowd at an early age — he was one of 11 kids. His family dining adventures led to a career in the restaurant industry, where he started as a pot washer at a local steakhouse and went on to become the president and COO of Texas-based Whataburger and the CEO of such notable chains as Grandy’s, Souper Salad and Pizza Inn.

Given Taft’s track record, it’s not surprising that Carrols Restaurant Group recruited the retired gentleman rancher when it decided to expand in 2011. Carrols wanted to focus on its 570 Burger King restaurants by bifurcating Pollo Tropical and Taco Cabana to form Fiesta Restaurant Group.

“The theory was that the two brands were worth more on their own, since some people don’t want to invest in Latin restaurants, while others don’t want to invest in burgers,” says Taft, who serves as Fiesta’s president and CEO. “In addition, Carrols’ board thought that a dedicated management team would bring focus and a fresh perspective.”

The challenge was that Pollo Tropical, which offers Caribbean-inspired fare, wasn’t known outside of Florida and folks outside of Texas hadn’t heard of Taco Cabana. Worse yet, Pollo Tropical’s five under-performing stores represented the brand’s lone foray into the Northeast. Still, after visiting nearly 50 restaurants, the affable Taft willingly traded his branding iron for a spatula and hasn’t looked back.

Under his direction, Fiesta’s stock price has risen from $12 to a high of $40 per share since the spinoff in May 2012, making it one of the fastest-growing restaurant stocks in the country. Revenues increased 9.4 percent in the third quarter of 2013 to $140.9 million, compared to $128.8 million in the prior year period. And the newly formed group has opened 34 domestic and 15 international restaurants, with dozens more planned.  

Here’s a look at the key ingredients in Taft’s recipe for growth.   

Assess strengths and weaknesses

The revenue numbers for Taco Cabana and Pollo Tropical convinced Taft to join the fiesta.

“The revenue was off the charts,” he says. “No matter what else I found during my due diligence, I knew that they had to be doing something right.”

 

Taco Cabana restaurants were averaging $1.6 million in annual revenue, while Pollo Tropical stores were averaging $2.3 million. To give you some perspective, Wall Street darling Chipotle averages about $2.1 million per store.

Another selling point was the fact that fast casual restaurants have seen client traffic soar by an average of 6 percent over the last three years. When Taft observed a broad range of customers dining at the restaurants he was convinced that he could drive sales through both new and existing stores.

“There were guys in white starched shirts eating next to construction workers,” Taft says. “The customers were ethnically diverse which told me that both brands have unlimited appeal.”

Results from the recent quarter seem to confirm Taft’s initial hypothesis. Same store sales at Pollo Tropical increased 6.4 percent while Taco Cabana stores posted an increase of 1.1 percent.

But viewing the restaurants through the eyes of the customer also exposed a few problems. While the food was good, the dishes varied by location. Taft discovered that someone named Connie originally developed Taco Cabana’s recipes, but the exact formula was a mystery because the recipes weren’t written down.

The look and feel of Pollo’s décor didn’t support the brand and some of Taco Cabana’s restaurants hadn’t been updated in years. There were no standard processes for food preparation or delivery and the staff didn’t always greet customers when they entered the restaurant. And outside focus groups thought Pollo Tropical served Mexican cuisine. Unless Pollo’s brand was clearly defined, expanding to Texas could potentially erode Taco Cabana’s market share.

“You need to develop a strong brand and transferable concept before you expand,” Taft says. “My first goal was to develop a prototype and fix what we had.” 

Build a prototype

Taft used the results of his SWOT assessment to position Pollo Tropical and Taco Cabana for growth.

He started by relocating Fiesta’s headquarters from New York to Dallas and hiring a management team.

“In my mind, Dallas-Fort Worth made sense because there are so many restaurants headquartered in this area,” he says. “We needed to build a management team from scratch, and there are a lot of experienced professionals in the area.”

Next, he gave aging Taco Cabana stores a facelift and completely overhauled the Pollo Tropical brand.

“We didn’t want Pollo to be perceived as Mexican,” he says. “So we changed the design and décor of the restaurants and our promotions to reflect a Caribbean feel.”

He appeased shareholders by executing strategies to increase sales and productivity. For instance, he invested millions in new kitchen designs and equipment and set his sights on improving customer satisfaction by installing his trademark five points of focus system and retraining the staff.

“Our operating philosophy is predicated on five points of focus, which include great food, cleanliness, hospitality, order consistency and accuracy, as well as well-maintained facilities.” he says. “If we execute on these restaurant basics, we can positively impact the guest experience, and improve their frequency and loyalty.”

To that end, he upgraded Fiesta’s POS system to speed-up the ordering process, improve accuracy and help stores fulfill customized requests. He added Web-based technology so customers can order online and request a specific pick-up time. And he recertified the chefs to make sure everyone uses the same recipe to prepare rice and beans.

“Goodness knows how many orders we got wrong because we had a high tolerance for errors,” he says. “We’ve cut the amount of mistakes in half, but we still have a ways to go.”

Finally, Taft focused his management team on expansion by closing Pollo’s struggling New Jersey stores.

“Operating a restaurant isn’t rocket science, but you need to consistently meet customers’ expectations and have a strong brand identity,” Taft says. “You can’t have everyone heading in a different direction, you need clear operational standards carried out by passionate, like-minded employees.” 

Expand strategically

Although Taft plans to move Taco Cabana east, Pollo Tropical west and fill in the areas in between, his target demographic, site selection and expansion strategies have evolved over the last two years based on the results of extensive research.

 

“We originally thought that Pollo Cabana was a Latin-centric brand, but our consultants told us to quit breathing our own fumes,” he says. “They advised us to target a more general audience by locating new stores in upscale centers that cater to big box retailers.”

Given the eye-opening data and the competitive landscape for Mexican cuisine, Taft decided to backfill Texas with new Taco Cabana restaurants in the near term and use Pollo Tropical as Fiesta’s primary expansion vehicle for the foreseeable future.

“Our development team has completed value-engineering our Pollo Tropical prototype,” he says.

“So we plan to accelerate new openings over the next several years as we backfill Florida, increase our penetration into Georgia and Tennessee and build a scalable footprint in Texas.”

Expanding Pollo gives Fiesta the opportunity to leverage its dynamic, family-oriented culture that Taft says is the impetus behind the brand’s phenomenal success.

“Many early employees defected from Cuba, came ashore in Key West and have been with Pollo for more than 20 years,” he says. “What’s challenging about managing growth is retaining the things that have made a company successful while leaving behind the things that have caused you to stumble in the past.

 “We want to make sure that Pollo doesn’t lose its el corazón, which is Spanish for heart.”

With that in mind, Taft’s team has taken steps to nurture the passion of Pollo employees for the brand’s culture and cuisine. For instance, Pollo employees have a shot at promotions or the opportunity to transfer to a newly opened store. Historically, more than 45 percent of Pollo’s field managers have started as hourly team members.

“A good number of Pollo’s general managers came up through the ranks and we want to continue that practice because it helps to maintain the culture,” Taft says. “For many employees, this is the only job they’ve ever had and running a $2 million operation is humbling.”

To further support Pollo’s family-oriented culture, Fiesta recently launched a 501(c)(3) called the Fiesta Family Foundation. The employee-funded nonprofit provides financial assistance to employees and their families who are affected by an emergency or personal hardship.

“One of our brands is 35 years old and the other is 25 years old,” Taft says. “But because we’ve formed a new company and hired a new management team, in many respects it feels like a startup. My job is to respect the past while pushing Fiesta into the future.” 

How to reach: Fiesta Restaurant Group (972) 702-9300 or www.frgi.com

Takeaways:

Assess your company’s strengths and weaknesses.
Build a prototype to establish a brand.
Honor the past while expanding strategically.

The Taft File

Name: Timothy P. Taft
Title: President and CEO
Company: Fiesta Restaurant Group

Birthplace: Vermillion, S.D., raised in Tampa, Fla.
Education: He studied business at the University of Texas, Austin. 

What was your first job and what did you learn from it?

I washed pots and pans in a local steakhouse for a $1.90 an hour. I leaned what a difficult business this is and how hard it is to get it right. But there’s something about the camaraderie and everyone working hard toward a single goal that gets into your blood. I have a great deal of respect for anyone who succeeds in the restaurant industry where you’re literally as good as your last meal.

What’s the best business advice you’ve ever received?

Someone once told me that information is not power. Selfless leaders who share information and give others credit are ultimately more successful.

Who do you admire most in business and why?

Bill Prather, the former CEO of Hardee’s and executive vice president and head of worldwide operations for Burger King, because he listens well and acts boldly. It’s hard to find people who do both of those things well. 

What’s your definition of business success?

I tend to agree with Herman Cain who refers to success as a journey and not a destination. When you’re opening more restaurants than you’re closing, selling more meals and hiring new people, you’re headed in the right direction. But you can’t be satisfied because there’s always someone out there looking to steal your piece of the pie.

Social Media Info:

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