Fiesta Restaurant Group, Inc. (FRGI, Financial) owns and operates two chains of fast-casual restaurants: Pollo Tropical and Taco Cabana with about 300 restaurants between the two brands, predominantly in Texas and Florida. The stock’s weakness was driven by lower-than-expected unit volumes at new Pollo locations in new markets and some deceleration in traffic as new openings slightly cannibalize existing stores. Both concepts continue to generate high unit volumes and cash on cash returns relative to competing brands in the limited service category, and should grow their unit base across existing and adjacent markets for years. In 2015, we saw the fastest pace of growth for the Pollo brand, and the highest percentage of new stores in the system that the company has experienced. We believe some of the weakness in performance represents growing pains that will subside over time, and we remain shareholders.
From Baron Discover Fund's fourth quarter 2015 commentary.
