Fiesta Restaurant Group (FRGI) is jumping more than 9% today after the company announced that it is considering (again) the separation of its two brands – Taco Cabana and Pollo Tropical into distinct entities. The transaction is expected to be completed next year through a spin-off of the shares of Taco Cabana to Fiesta shareholders.
Fiesta is facing challenging market conditions which are affecting the entire industry. For the second quarter ended July 3, Fiesta revenue grew 5.6% but net income went down 9 cents (from 42 to 33). Pollo Tropical’s same-store sales were down 1.4 percent compare to Q2 2015 and Taco Cabana’s same-store sales were down 3.8 percent. The planned separation can assist both brands to better allocate their capital and increase growth rate and profitability.