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Fiesta Restaurant Group, Inc. (FRGI - Free Report) is in a full scale turnaround as its two brands struggle in a competitive restaurant market. This Zacks Rank #5 (Strong Sell) recently saw comparable store sales drop for the quarter for both of its brands.

Fiesta Restaurant Group is the parent of Pollo Tropical and Taco Cabana. Both brands offer fast-casual dining featuring made-from-scratch cooking.

As of July 2, 2017, there were 153 company-owned Pollo Tropical restaurants, 169 company-owned Taco Cabanas, 32 franchised Pollo Tropicals in the US, Puerto Rico, the Bahamas, Guyana, Panama, Honduras and Venezuela and 7 franchised Taco Cabanas in the US.

Another Miss in the Second Quarter

On Aug 7, Fiesta reported its second quarter results and missed on the Zacks Consensus by 3 cents. Earnings were $0.30 versus the consensus of $0.33.

Revenue fell 4.89% to $172.6 million.

But more importantly, for restaurants, was the comparable sales metrics. They weren't good.

Comparable sales at Pollo Tropical fell 7.7% while transactions decreased 10%. At Taco Cabana, they fell 4.7% while comparable transactions decreased 4.5%.

The company closed 30 company-owned Pollo Tropicals in Texas, Georgia and Tennessee as it attempts to get back to its core markets. It also closed 4 company-owned Taco Cabanas in Texas subsequent to the second quarter.

But Fiesta still has 6 Pollo Tropicals in southern Texas and 13 locations in Atlanta, Georgia.

The Strategic Renewal Plan

With the expansion plans a flop, the company has retrenched with a new "strategic renewal plan" to boost sales and get the brands back on track.

It has implemented major operational changes, cut back on its media ad buys and moderated promotions and discounts. It is looking at everything, including a new digital media program and even the music it plays in the restaurants.

It will roll out new video menu boards this year and is developing delivery, catering, online ordering and loyalty platforms for implementation in 2018.

The company has also hired a new advertising agency.

It will relaunch Pollo Tropical in October and Taco Cabana shortly thereafter once it has more pieces of the Plan in place.

Earnings to Decline in 2017

With all the changes taking place, and the negative comparable store sales, it's not surprising that earnings are expected to drop 13.4% in 2017.

Analysts are looking for $1.12 compared to $1.29 a year ago.

Doom or Buying Opportunity?

But shares actually rose on the earnings results as the shares look like they may be a bargain here.



They've now declined 38% in 2017. Shares are trading with a forward P/E of just 15. That's among the cheaper of the restaurant stocks.

But investors may want to wait and see if the Strategic Renewal Plan can turn it around. If you're looking for a restaurant chain, consider Yum! Brands, Inc. (YUM - Free Report) which is a Zacks Rank #2 (Buy).

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