Document and Entity Information

9 Months Ended

Sep. 30, 2012

Nov. 2, 2012

Document And Entity Information [Abstract]

Entity Registrant Name

FIESTA RESTAURANT GROUP, INC.

Entity Central Index Key

0001534992

Current Fiscal Year End Date

--12-30

Entity Filer Category

Accelerated Filer

Document Type

10-Q

Document Period End Date

Sep. 30, 2012

Document Fiscal Year Focus

2012

Document Fiscal Period Focus

Q3

Amendment Flag

false

Entity Common Stock, Shares Outstanding

23,517,098

Consolidated Balance Sheets (Unaudited) (USD $)

In Thousands, unless otherwise specified

Sep. 30, 2012

Jan. 1, 2012

Current assets:

Cash

$ 3,098

$ 13,670

Trade receivables

7,042

4,842

Inventories

2,173

2,264

Prepaid rent

2,066

2,397

Prepaid expenses and other current assets

2,747

2,660

Deferred income taxes

1,738

1,776

Total current assets

18,864

27,609

Property and equipment, net

124,892

195,122

Goodwill

123,484

Intangible assets, net

222

301

Deferred income taxes

12,914

11,659

Deferred financing costs, net

6,027

6,908

Other assets

3,270

5,083

Total assets

289,673

370,166

Current liabilities:

Current portion of long-term debt (Note 7)

61

59

Accounts payable

6,970

9,026

Accrued interest

2,222

7,152

Accrued income taxes

368

0

Accrued payroll, related taxes and benefits

12,985

12,154

Accrued real estate taxes

4,308

3,197

Other liabilities

5,059

5,085

Total current liabilities

31,973

36,673

Long-term debt, net of current portion (Note 7)

200,902

200,949

Lease financing obligations (Note 8)

3,027

123,019

Deferred income--sale-leaseback of real estate

35,107

4,055

Other liabilities (Note 5)

12,077

10,142

Total liabilities

283,086

374,838

Commitments and contingencies (Note 11)

Stockholder's equity (deficit):

Common stock, par value $.01; authorized 100,000,000 shares; issued 23,511,456 and 23,161,822 shares, respectively, and outstanding 22,748,221 and 23,161,822 shares, respectively

227

Additional paid-in capital

8,899

3,345

Retained earnings (deficit) (Note 5)

(2,539)

(8,244)

Total stockholder's equity (deficit)

6,587

(4,672)

Total liabilities and stockholder's equity (deficit)

$ 289,673

$ 370,166

Consolidated Balance Sheets (Unaudited) (Parenthetical) (USD $)

Sep. 30, 2012

Jan. 1, 2012

Statement of Financial Position [Abstract]

Common stock, par value

$ 0.01

Common stock, shares authorized

100,000,000,000

Common stock, shares issued

23,161,822,000

23,511,456,000

Common stock, shares outstanding

23,161,822,000

22,748,221,000

Consolidated Statements of Operations (Unaudited) (USD $)

In Thousands, except Share data, unless otherwise specified

3 Months Ended

9 Months Ended

Sep. 30, 2012

Oct. 2, 2011

Sep. 30, 2012

Oct. 2, 2011

Revenues:

Restaurant sales

$ 127,648

$ 120,781

$ 381,422

$ 356,780

Franchise royalty revenues and fees

525

376

1,726

1,242

Total revenues

128,173

121,157

383,148

358,022

Costs and expenses:

Cost of sales

41,021

38,833

123,106

114,852

Restaurant wages and related expenses (including stock-based compensation expense of $1, $3, $9 and $15 respectively)

33,860

32,544

101,821

96,949

Restaurant rent expense

6,311

4,232

15,700

12,526

Other restaurant operating expenses

16,655

16,604

48,725

47,091

Advertising expense

3,776

4,468

12,094

12,361

General and administrative (including stock-based compensation expense of $379, $437, $1,594 and $1,284, respectively)

11,198

9,118

32,800

27,086

Depreciation and amortization

4,486

4,837

13,703

14,583

Impairment and Other Lease Charges

(45)

(68)

6,816

1,016

Other Expenses

0

107

0

107

Total operating expenses

117,262

110,675

354,765

326,571

Income from operations

10,911

10,482

28,383

31,451

Interest Expense

5,036

6,651

19,334

16,338

Income (Loss) from Continuing Operations before Equity Method Investments, Income Taxes, Extraordinary Items, Noncontrolling Interest

5,875

3,831

9,049

15,113

Provision for income taxes

2,226

1,409

3,344

5,442

Net income

$ 3,649

$ 2,422

$ 5,705

$ 9,671

Basic and diluted net income (loss) per share

$ 0.16

$ 0.10

$ 0.25

$ 0.42

Basic and diluted weighted average common shares outstanding

22,747,044

23,161,822

22,937,270

23,161,822

Consolidated Statements of Operations (Unaudited) (Parenthetical) (USD $)

In Thousands, unless otherwise specified

3 Months Ended

9 Months Ended

Sep. 30, 2012

Oct. 2, 2011

Sep. 30, 2012

Oct. 2, 2011

Stock-based Compensation

$ 380

$ 440

$ 1,603

$ 1,299

Restaurant Wages And Related Expenses [Member]

Stock-based Compensation

1

3

9

15

Selling, General and Administrative Expenses [Member]

Stock-based Compensation

$ 379

$ 437

$ 1,594

$ 1,284

Consolidated Statements of Cash Flows (Unaudited) (USD $)

In Thousands, unless otherwise specified

9 Months Ended

Sep. 30, 2012

Oct. 2, 2011

Cash flows provided from (used for) operating activities:

Net income

$ 5,705

$ 9,671

Adjustments to reconcile net income (loss) to net cash provided from (used for) operating activities:

Loss on disposals of property and equipment

101

237

Allocated Share-based Compensation Expense

1,401

1,299

Impairment and Other Lease Charges

6,816

1,016

Loss on settlement of lease financing obligations

120

0

Depreciation and amortization

13,703

14,583

Amortization of deferred financing costs

1,234

407

Amortization of deferred gains from sale-leaseback transactions

(1,493)

(202)

Accretion of interest on lease financing obligations

220

37

Deferred income taxes

(1,221)

317

Changes in other operating assets and liabilities:

5,308

(3,886)

Net cash provided from (used for) operating activities

21,278

31,251

Capital expenditures:

New restaurant development

(16,790)

(10,007)

Restaurant remodeling

(5,931)

(3,492)

Other restaurant capital expenditures

(5,300)

(3,684)

Corporate and restaurant information systems

(849)

(514)

Total capital expenditures

28,870

17,697

Properties purchased for sale-leaseback

(2,082)

0

Proceeds from sale-leaseback transactions

1,491

7,783

Proceeds from Sale of Other Real Estate

934

0

Net cash used for investing activities

(28,527)

(9,914)

Cash flows provided by (used for) financing activities:

Proceeds from issuance of senior secured second lien notes

0

200,000

Payments to parent company, net

500

(133,492)

Capital contribution from parent company

2,500

0

Dividend to Carrols Restaurant Group, Inc.

0

(75,469)

Borrowings on revolving credit facility

2,100

0

Repayments on revolving credit facility

(2,100)

0

Principal payments on capital leases

(45)

(42)

Deferred financing costs

(231)

(7,457)

Settlement of lease financing obligations

(6,047)

0

Proceeds from lease financing obligations

1,736

Financing costs associated with issuance of lease financing obligations

0

(89)

Net cash provided by (used for) financing activities

(3,323)

(14,813)

Net increase (decrease) in cash

(10,572)

6,524

Cash, beginning of period

13,670

2,583

Cash, end of period

3,098

9,107

Supplemental disclosures:

Interest paid on long-term debt

18,668

0

Interest paid on lease financing obligations

4,143

8,259

Accruals for capital expenditures

579

515

Income tax payments, net

2,601

0

Elimination of LFO Requirement During Period [Member]

Supplemental disclosures:

Lease Financing Obligations, Reduction in Period

114,165

1,740

Assets Subject to Lease Financing, Reduction in Period

$ 80,419

$ 0

Basis of Presentation

Business Description. Fiesta Restaurant Group, Inc. ("Fiesta Restaurant Group" or "Fiesta") owns, operates and franchises two fast-casual restaurant brands through its wholly-owned subsidiaries Pollo Operations, Inc. and Pollo Franchise, Inc., (collectively “Pollo Tropical”) and Taco Cabana, Inc. and its subsidiaries (collectively “Taco Cabana”). Unless the context otherwise requires, Fiesta and its subsidiaries, Pollo Tropical and Taco Cabana, are collectively referred to as the “Company”. At September 30, 2012, Fiesta operated 90 Pollo Tropical® restaurants, of which 88 were located in Florida and two were located in Georgia, and franchised a total of 35 Pollo Tropical restaurants, 21 in Puerto Rico, two in Ecuador, one in Honduras, one in the Bahamas, one in Trinidad, three in Venezuela, two in Costa Rica, one in Panama and three on college campuses in Florida. At September 30, 2012, the Company also owned and operated 160 Taco Cabana® restaurants located primarily in Texas and franchised two Taco Cabana restaurants in New Mexico, two in Texas and one in Georgia.

Spin-Off from Carrols Restaurant Group, Inc. On May 7, 2012, Carrols Restaurant Group, Inc. ("Carrols Restaurant Group" or "Carrols") completed the spin-off of Fiesta into an independent public company, through the distribution of all of the outstanding shares of Fiesta Restaurant Group's common stock to the stockholders of Carrols Restaurant Group (the "Spin-off"). As a result of the Spin-off, Fiesta Restaurant Group is now an independent company whose common stock is traded on The NASDAQ Global Select Market under the symbol “FRGI.”

The Company filed with the Securities and Exchange Commission (the “SEC”) a Form 10 registration statement, File No. 001-35373, as amended (the “Registration Statement”), which includes as an exhibit thereto an information statement which describes the Spin-off. This Registration Statement, which registered the Company’s common stock under the Securities Exchange Act of 1934, as amended, was declared effective by the SEC on April 25, 2012.

In connection with the Spin-off, Fiesta and Carrols entered into several agreements that govern Carrols' post spin-off relationship with Fiesta, including a Separation and Distribution Agreement, Employee Matters Agreement, Tax Matters Agreement and Transition Services Agreement ("TSA"). See Note 6—Former Related Party Transactions.

Basis of Consolidation. The unaudited consolidated financial statements presented herein reflect the consolidated financial position, results of operations and cash flows of Fiesta and its wholly-owned subsidiaries. The consolidated financial statements have been prepared as if the Company was in existence for all periods presented.

Through the date of the Spin-off, these unaudited consolidated financial statements have been prepared on a stand-alone basis from the separate records maintained by Carrols and may not necessarily be indicative of the results of operations or cash flows that would have resulted had allocations and other related-party transactions been consummated with unrelated parties or had the Company been an independent, publicly traded company during all of the periods presented. The interim consolidated financial statements reflect the historical financial position, results of operations and cash flows of Fiesta as it has historically operated, in conformity with U.S. Generally Accepted Accounting Principles ("GAAP"). All intercompany transactions have been eliminated in consolidation.

In connection with the Spin-off of the Company to the stockholders of Carrols, the board of directors of the Company authorized a 23,161.8 for one split of its outstanding common stock that was effective on April 19, 2012. Accordingly, all references to share and per share amounts related to common stock included in the consolidated financial statements and accompanying notes have been adjusted to reflect the stock split and change in the number of authorized shares. The stock split has been retroactively applied to the Company’s financial statements.

Fiscal Year. The Company uses a 52-53 week fiscal year ending on the Sunday closest to December 31. The fiscal year ended January 1, 2012 contained 52 weeks. The three and nine months ended September 30, 2012 and October 2, 2011 contained thirteen and thirty-nine weeks, respectively.

Basis of Presentation. The accompanying unaudited consolidated financial statements for the three and nine months ended September 30, 2012 and October 2, 2011 have been prepared without an audit pursuant to the rules and regulations of the SEC and do not include certain information and the footnotes required by GAAP for complete financial statements. In the opinion of management, all normal and recurring adjustments considered necessary for a fair presentation of such financial statements have been included. The results of operations for the three and nine months ended September 30, 2012 and October 2, 2011 are not necessarily indicative of the results to be expected for the full year.

These unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended January 1, 2012 included in the Registration Statement. The January 1, 2012 balance sheet data is derived from those audited financial statements.

Allocations. Through the date of the consummation of the Spin-off, Carrols provided administrative support to the Company for executive management, information systems and certain accounting, legal and other administrative functions. The cost of these services were allocated to the Company based primarily on a pro-rata share of either the Company’s revenues, number of restaurants or number of employees. The allocations may not reflect the expense the Company would have incurred as an independent, publicly traded company for the periods presented. Following the Spin-off, certain of these functions continue to be provided by Carrols under the TSA and the Company is performing certain functions using its own resources or purchased services from third parties. Refer to Note 6—Former Related Party Transactions for further discussion related to agreements entered into effective as of the Spin-off.

The unaudited consolidated financial statements for the three and nine months ended October 2, 2011 also reflect interest expense allocated by Carrols to the Company. Effective with the financing discussed in Note 7, on August 5, 2011 the Company secured its own financing and interest allocations from Carrols ceased. Management believes that its allocations are reasonable and based on a systematic and rational method; however, they are not necessarily indicative of the actual financial results of the Company, including such expenses that would have been incurred by the Company had it been operating as a separate, stand-alone entity for the periods presented. As a stand-alone entity, the Company expects to incur expenses that may not be comparable in future periods to what is presented for the historical periods presented in the consolidated financial statements. Consequently, the financial information herein may not reflect the financial position, results of operations and cash flows of the Company in the future or if the Company had been an independent stand-alone entity during the periods presented. In our opinion, the consolidated financial statements include all adjustments necessary for a fair presentation of its results of operations.

Fair Value of Financial Instruments. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. In determining fair value, the accounting standards establish a three level hierarchy for inputs used in measuring fair value as follows: Level 1 inputs are quoted prices in active markets for identical assets or liabilities; Level 2 inputs are observable for the asset or liability, either directly or indirectly, including quoted prices in active markets for similar assets or liabilities; and Level 3 inputs are unobservable and reflect our own assumptions. The following methods were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate the fair value:


•	Current Assets and Liabilities. The carrying values of cash and accrued liabilities approximate fair value because of the short maturity of those instruments, which are considered Level 1.


•	Senior Secured Second Lien Notes. The fair value of outstanding senior secured second lien notes is based on recent trading values, which are considered Level 2, and at September 30, 2012, was approximately $213.5 million.


•	Revolving Credit Facility. There were no outstanding borrowings under the Company’s revolving credit facility at September 30, 2012. Fair value for any borrowings would be considered Level 3.

See Note 4 for discussion of the fair value measurement of non-financial assets.

Use of Estimates. The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements. Estimates also affect the reported amounts of expenses during the reporting periods. Significant items subject to such estimates and assumptions include: allocations of Carrols' general and administrative expenses and interest expense on amounts due to Carrols prior to the Spin-off, accrued occupancy costs, insurance liabilities, evaluation for impairment of goodwill and long-lived assets and lease accounting matters. Actual results could differ from those estimates.

Recent Accounting Developments. In September 2011, the Financial Accounting Standards Board (“FASB”) issued guidance on testing goodwill for impairment. The guidance provides entities an option to perform a “qualitative” assessment to determine whether further impairment testing is necessary. This guidance is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The Company is evaluating the impact of this guidance on its annual testing for goodwill impairment at December 31, 2012.

Subsequent Events. The Company reviewed and evaluated subsequent events through the issuance date of the Company’s financial statements.

Stock-based Compensation

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

Prior to the Spin-off, certain of the Company's employees participated in the Carrols Restaurant Group, Inc. 2006 Stock Incentive Plan, as amended (the "Carrols Plan"). In conjunction with the Spin-off, the Company established the Fiesta Restaurant Group, Inc. 2012 Stock Incentive Plan (the "Fiesta Plan") in order to be able to compensate its employees and directors by issuing stock options, stock appreciation rights, or stock awards to them under this plan. For the period from May 7, 2012 through September 30, 2012, the consolidated statements of operations include expenses related to the Company's employees' and directors' participation in both the Carrols Plan and the Fiesta Plan. For the period from January 1, 2012 through the Spin-off, and the three and nine months ended October 2, 2011, the Statement of Operations includes expenses related to the Company's employees' and directors' participation in the Carrols Plan.

Effective as of the completion of the Spin-off, all holders of Carrols unvested stock on April 26, 2012, the record date of the Spin-off, received one share of Fiesta Restaurant Group unvested stock for every one share of Carrols unvested stock held, with terms and conditions substantially similar to the terms and conditions applicable to the Carrols unvested stock. Future stock compensation expense on all unvested Carrols or Fiesta stock awards held by Fiesta employees will be recorded by the Company.

On June 8, 2012, the Company’s Chief Executive Officer was granted 165,563 shares of unvested Fiesta common stock with an aggregate value of $2.0 million. The number of shares granted was based upon the average trading price of Fiesta common stock for the first four weeks the shares commenced trading publicly. These unvested shares of Fiesta common stock vest over four years at the rate of 25% per annum beginning on the first anniversary of the date of grant and are subject to the Fiesta Plan.

Additionally, during the three months ended September 30, 2012, the Company granted in the aggregate 164,254 non-vested shares to certain employees and directors. In general, these shares vest and become non-forfeitable over vesting periods ranging from three to five years and will be expensed according to the specific vesting period.

Stock-based compensation expense for the three and nine months ended September 30, 2012 was $0.4 million and $1.6 million, which included $0.4 million of expense related to the accelerated vesting of the unvested shares of the former Chairman of the Company's board of directors upon his departure from the Company's board of directors in the first quarter of 2012. As of September 30, 2012, the total unrecognized stock-based compensation expense relating to non-vested shares was approximately $5.7 million. The Company currently anticipates recording an additional $0.4 million as compensation expense in the remainder of 2012. At September 30, 2012, the remaining weighted average vesting period for non-vested shares was 2.9 years.

Non-vested Shares

A summary of all non-vested shares activity for the nine months ended September 30, 2012 was as follows:



			Weighted
			Average
			Grant Date
	Shares		Price
Nonvested at January 1, 2012	—		$	—
Dividend from Spin-Off	434,397		11.10
Granted	363,256		13.97
Vested	(20,799	)	11.10
Forfeited	(13,619	)	11.10
Nonvested at September 30, 2012	763,235		$	12.47

The fair value of the non-vested shares is based on the closing price on the date of grant. The weighted average fair value at the grant date for non-vested shares issued during the three months ended September 30, 2012 was $15.50.

Goodwill

Goodwill and Intangible Assets Disclosure [Text Block]

Goodwill

The Company is required to review goodwill for impairment annually or more frequently when events and circumstances indicate that the carrying amount may be impaired. If the determined fair value of goodwill is less than the related carrying amount, an impairment loss is recognized. The Company performs its annual impairment assessment as of each fiscal year end and has determined its reporting units to be at the brand level for Pollo Tropical and Taco Cabana. The Company does not believe circumstances have changed since the last assessment date which would make it necessary to reassess their values.

There have been no changes in goodwill or goodwill impairment losses recorded during the nine months ended September 30, 2012 or the year ended January 1, 2012. Goodwill balances are summarized below:



	Pollo Tropical		Taco Cabana		Total
Balance, September 30, 2012	$	56,307	$	67,177	$	123,484

Impairment of Long-Lived Assets and Other Lease Charges

Impairment of Long Lived Assets and Other Lease Charges [Text Block]

Impairment of Long-Lived Assets and Other Lease Charges

The Company reviews its long-lived assets, principally property and equipment, for impairment at the restaurant level. If an indicator of impairment exists for any of its assets, an estimate of undiscounted future cash flows over the life of the primary asset for each restaurant is compared to that long-lived asset’s carrying value. If the carrying value is greater than the undiscounted cash flow, the Company then determines the fair value of the asset and if an asset is determined to be impaired, the loss is measured by the excess of the carrying amount of the asset over its fair value. For closed restaurant locations, the Company reviews the future minimum lease payments and related ancillary costs from the date of the restaurant closure to the end of the remaining lease term and records a lease charge for the lease liabilities to be incurred, net of any estimated sublease recoveries.

The Company determined the fair value of restaurant equipment, for those restaurants reviewed for impairment, based on current economic conditions and the Company’s history of using these assets in the operation of its business. These fair value asset measurements rely on significant unobservable inputs and are considered Level 3 in the fair value hierarchy. The Level 3 assets measured at fair value associated with impairment charges recorded during nine months ended September 30, 2012 totaled $0.4 million.

Impairment on long-lived assets for the Company’s segments and other lease charges (recoveries) recorded were as follows:



	Three Months Ended						Nine Months Ended
	September 30, 2012			October 2, 2011			September 30, 2012		October 2, 2011
Pollo Tropical	$	94		$	70		$	5,931	$	706
Taco Cabana	(139		)	(138		)	885		310
	$	(45	)	$	(68	)	$	6,816	$	1,016

During the nine months ended September 30, 2012, the Company recorded other lease charges, net of recoveries, of $1.5 million and impairment charges of $4.1 million associated with the closure of the Company’s five Pollo Tropical restaurants in New Jersey in the first quarter of 2012. The Company also recorded an impairment charge of $0.5 million related to a Pollo Tropical restaurant and $1.0 million related to two Taco Cabana restaurants and a recovery of other lease charges of $0.2 million related to a non-operating Pollo Tropical restaurant.

During the nine months ended October 2, 2011, the Company recorded other lease charges of $1.0 million associated with two previously closed Pollo Tropical restaurants and for two previously closed Taco Cabana restaurants and a Taco Cabana restaurant that was closed in the second quarter of 2011.

Other Liabilities, Long-Term

Other Liabilities Disclosure [Text Block]

Other Liabilities, Long-Term

Other liabilities, long-term, consisted of the following:



	September 30, 2012		January 1, 2012
Accrued occupancy costs	$	8,102	$	7,459
Accrued workers’ compensation and general liability claims	1,874		1,251
Deferred compensation	765		710
Other	1,336		722
	$	12,077	$	10,142

Accrued occupancy costs include obligations pertaining to closed restaurant locations, contingent rent and accruals to expense operating lease rental payments on a straight-line basis over the lease term.

The following table presents the activity in the closed-store reserve, of which $1.6 million and $1.1 million are included in long-term accrued occupancy costs above at September 30, 2012 and January 1, 2012, respectively, with the remainder in other current liabilities:



	Nine Months Ended September 30, 2012			Year Ended January 1, 2012
Balance, beginning of period	$	2,246		$	1,665
Provisions for restaurant closures	1,796			800
Accruals (recoveries) for additional lease charges	(565		)	649
Payments, net	(1,241		)	(1,021		)
Other adjustments	207			153
Balance, end of period	$	2,443		$	2,246

Related Party Transactions

Related Party Transactions Disclosure [Text Block]

6. Former Related Party Transactions

Effective upon the completion of the Spin-off, Fiesta Restaurant Group ceased to be a related party of Carrols.

Prior to the date of the Spin-off, the Company's expenses included allocations from Carrols of costs associated with administrative support functions which included executive management, information systems, finance, legal, accounting, internal audit and human resources and certain other administrative functions. The Company's allocated administrative expenses from Carrols were $4.2 million for the nine months ended September 30, 2012, and $2.9 million and $8.8 million for the three and nine months ended October 2, 2011, respectively.

Prior to August 5, 2011, interest expense was allocated to the Company based on the amount due to parent company during the year and the weighted average interest rate in effect for the period for Carrols on its long-term debt obligations, excluding lease financing obligations. Effective with the Company’s debt financings on August 5, 2011, intercompany interest allocations from Carrols ceased. Interest expense on the amount due to parent company was $0.7 million for the three months ended October 2, 2011 and $4.7 million for the nine months ended October 2, 2011.

As discussed in Note 1, the Company believes the assumptions and methodologies underlying the allocation of administrative expenses and stock-based compensation are reasonable. However, such expenses may not be indicative of the actual expenses that would have been or could be incurred by the Company if it was to operate as a stand-alone company. As such, the financial information herein may not necessarily reflect the consolidated financial position, results of operations, and cash flows of the Company in the future or if the Company had been a stand-alone entity during the periods presented.

In the first quarter of 2012, Carrols made a capital contribution in cash to the Company of $2.5 million. This capital contribution was a portion of the excess cash proceeds from the debt financings in 2011 discussed in Note 7. In 2012 and prior to the Spin-off, Carrols made non-cash capital contributions of $2.7 million to the Company which represented $1.0 million in stock compensation expense applicable to equity awards in Carrols' common stock and $1.7 million for the transfer of income tax related assets and liabilities.

Amounts shown as due to parent company at January 1, 2012 in the accompanying consolidated balance sheets represent amounts related to administrative support provided by Carrols and taxes payable by the Company to Carrols due to the Company’s inclusion in Carrols’ consolidated federal and certain state income tax returns. As of September 30, 2012, the Company owed $1.5 million to Carrols, which is included in accounts payable in the accompanying consolidated balance sheets.

All significant intercompany transactions between the Company and Carrols were included in the Company's historical financial statements and are considered to be effectively settled at the time of the Spin-off. The settlement of these intercompany transactions is reflected in the statement of cash flows as a financing activity.

Relationship Between Fiesta and Carrols After the Spin-Off

For purposes of governing certain of the ongoing relationships between the Company and Carrols at and after the Spin-off, the Company and Carrols have entered into the following agreements:

•

Tax Matters Agreement. The tax matters agreement dated April 24, 2012, (the "Tax Matters Agreement"), (1) governs the allocation of the tax assets and liabilities between the Company and Carrols and Carrols Corporation, a subsidiary of Carrols ("Carrols Corp."), (2) provides for certain restrictions and indemnities in connection with the tax treatment of the Spin-off and (3) addresses certain other tax related matters, including, without limitation, those relating to (a) the obligations of Carrols, Carrols Corp. and the Company with respect to the preparation or filing of tax returns for all periods, and (b) the control of any income tax audits and any indemnities with respect thereto. The Tax Matters Agreement provides that if the Company takes any actions after Carrols’ distribution of our shares in the Spin-off that result in or cause the distribution to be taxable to Carrols, the Company will be responsible under the Tax Matters Agreement for any resulting taxes imposed on us or on Carrols or Carrols Corp. Further, the Tax Matters Agreement provides that the Company will be responsible for 50% of the losses and taxes of Carrols and its affiliates resulting from the Spin-off not attributable to any such action of the Company or an equivalent action by Carrols.

•

Transition Services Agreement. Under the TSA, Carrols and Carrols Corp. agreed to provide certain support services (including accounting, tax accounting, treasury management, internal audit, financial reporting and analysis, human resources and employee benefits management, information systems, restaurant systems support, legal, property management and insurance and risk management services) to the Company, and the Company agreed to provide certain limited management services (including certain legal services) to Carrols and Carrols Corp. The charge for transition services is intended to allow Carrols to recover its direct and indirect costs incurred in providing those services. The TSA became effective upon consummation of the Spin-off and will continue for a period of three years provided that the Company may extend the term of the TSA by one additional year upon 90 days prior written notice to Carrols or may terminate the TSA with respect to any service provided thereunder at any time upon 90 days prior written notice to Carrols. During the three and nine months ended September 30, 2012 the Company incurred costs of $1.5 million and $2.6 million, respectively, related to the TSA.

Because the terms of these agreements were entered into in the context of a related party transaction, the terms may not be comparable to terms that would be obtained in a transaction between unaffiliated parties.

Long-term Debt

Long term debt at September 30, 2012 and January 1, 2012 consisted of the following:



	September 30, 2012			January 1, 2012
Collateralized:
Fiesta Restaurant Group 8.875% Senior Secured Second Lien Notes	$	200,000		$	200,000
Capital leases	963			1,008
	200,963			201,008
Less: current portion of long-term debt	(61		)	(59		)
	$	200,902		$	200,949

Senior Secured Credit Facility. On August 5, 2011 the Company entered into a first lien senior secured credit facility providing for aggregate revolving credit borrowings of up to $25.0 million (including $10.0 million available for letters of credit) which was undrawn at closing. The facility also provides for incremental increases of up to $5.0 million, in the aggregate, to the revolving credit borrowings available under the senior credit facility, and matures on February 5, 2016. On September 30, 2012, there were no outstanding borrowings under the Company’s senior credit facility.

Borrowings under the senior credit facility bear interest at a per annum rate, at the Company’s option, of either (all terms as defined in the senior credit facility):

1) the Alternate Base Rate plus the applicable margin of 2.00% to 2.75% based on the Company’s Adjusted Leverage Ratio (with a margin of 2.50% at September 30, 2012), or

2) the LIBOR Rate plus the applicable margin of 3.00% to 3.75% based on the Company’s Adjusted Leverage Ratio (with a margin of 3.50% at September 30, 2012).

The Company’s obligations under its senior credit facility are guaranteed by all of the Company's material subsidiaries and are secured by a first priority lien on substantially all of the Company’s assets and of its material subsidiaries, as guarantors, (including a pledge of all of the capital stock and equity interests of its material subsidiaries).

The Company’s senior credit facility contains certain covenants, including without limitation, those limiting the Company and the Company's guarantor subsidiaries' ability to, among other things, incur indebtedness, incur liens, sell or acquire assets or businesses, change the character of its business in all material respects, engage in transactions with related parties, make certain investments, make certain restricted payments or pay dividends. In addition, the senior credit facility requires the Company to meet certain financial ratios, including a Fixed Charge Coverage Ratio and Adjusted Leverage Ratio (as defined under the senior credit facility). The senior credit facility also includes customary default provisions, including without limitation, a cross default provision pursuant to which it is an event of default under this facility if there is a default under any indebtedness of the Company having an outstanding principal amount of $2.5 million or more which results in the acceleration of such indebtedness prior to its stated maturity or is caused by a failure to pay principal when due. As of September 30, 2012, the Company was in compliance with the covenants under its senior credit facility. After reserving $9.4 million for letters of credit guaranteed by the senior credit facility, $15.6 million was available for borrowing at September 30, 2012.

Senior Secured Second Lien Notes. On August 5, 2011, the Company issued $200.0 million of 8.875% Senior Secured Second Lien Notes due 2016 (the "Notes") pursuant to an indenture dated as of August 5, 2011 governing such Notes. The proceeds from the issuance of the Notes were used by Carrols to repay amounts outstanding under Carrols LLC's senior credit facility and Carrols Corp.'s 9% senior subordinated notes due 2013, as well as to pay related fees and expenses. The Notes mature and are payable on August 15, 2016. Interest is payable semi-annually on February 15 and August 15. The Notes are guaranteed by all of the Company’s material subsidiaries and are secured by second-priority liens on substantially all of the Company’s and its material subsidiaries’ assets, (including a pledge of all of the capital stock and equity interests of its material subsidiaries).

The indenture governing the Notes and the security agreement provide that any capital stock and equity interests of any of the Company’s material subsidiaries will be excluded from the collateral to the extent that the par value, book value or market value of such capital stock or equity interests exceeds 20% of the aggregate principal amount of the Notes then outstanding.

The Notes are redeemable at the Company’s option in whole or in part at any time after February 15, 2014 at a price of 104.438% of the principal amount plus accrued and unpaid interest, if any, if redeemed before February 15, 2015, 102.219% of the principal amount plus accrued and unpaid interest, if any, if redeemed after February 15, 2015 but before February 15, 2016 and 100% of the principal amount plus accrued and unpaid interest, if any, if redeemed after February 15, 2016. Prior to February 14, 2014, the Company may redeem some or all of the Notes at a redemption price of 100% of the principal amount of each note plus accrued and unpaid interest, if any, and a make-whole premium. In addition, at any time prior to February 15, 2014, the Company may redeem up to 35% of the Notes with the net cash proceeds from specified equity offerings at a redemption price equal to 108.875% of the principal amount of each note to be redeemed, plus accrued and unpaid interest, if any, to the date of redemption.

The Notes are jointly and severally guaranteed, unconditionally and in full by all of the Company’s material subsidiaries which are directly or indirectly wholly-owned by the Company. Separate condensed consolidating information is not included because the Company is a holding company with all of its operations conducted through the guarantor subsidiaries. There are no significant restrictions on the ability of the Company or any of the guarantor subsidiaries to obtain funds from its respective subsidiaries. All consolidated amounts in the Company’s financial statements are representative of the combined guarantors.

The indenture governing the Notes includes certain covenants, including limitations and restrictions on the Company and its material subsidiaries who are guarantors under such indenture to incur additional debt, issue preferred stock, pay dividends or make distributions in respect of capital stock or make certain other restricted payments or investments, incur liens, sell assets, enter into transactions with affiliates, agree to payment restrictions affecting certain of its material subsidiaries and enter into mergers, consolidations or sales of all or substantially all of the Company’s or its material subsidiaries’ assets.

The indenture governing the Notes contains customary default provisions, including without limitation, a cross default provision pursuant to which it is an event of default under the Notes and the indenture if there is a default under any indebtedness of the Company having an outstanding principal amount of $15.0 million or more which results in the acceleration of such indebtedness prior to its stated maturity or is caused by a failure to pay principal when due. The Company was in compliance as of September 30, 2012 with the restrictive covenants of the indenture governing the Notes.

Lease Financing Obligations

Lease Financing Obligations [Text Block]

8. Lease Financing Obligations

The Company entered into sale-leaseback transactions in various years that did not qualify for sale-leaseback accounting due to certain forms of continuing involvement and, as a result, the leases were classified as financing transactions in the Company’s consolidated financial statements.

Under the financing method, the assets remain on the consolidated balance sheet and the net proceeds received by the Company from these transactions are recorded as a lease financing liability. Payments under these leases are applied as payments of imputed interest and deemed principal on the underlying financing obligations.

These leases generally provide for an initial term of 20 years plus renewal options. The rent payable under such leases includes a minimum rent provision and in some cases, includes rent based on a percentage of sales. These leases also require payment of property taxes, insurance and utilities.

During the second quarter of 2012, the Company exercised its purchase options under the leases for five restaurant properties previously accounted for as lease financing obligations and purchased these properties from the lessor. As a result, the Company reduced its lease financing obligations by $6.0 million in the second quarter of 2012. The Company also recorded a loss of $0.1 million included in interest expense representing the net amount by which the purchase price of the five restaurant properties acquired exceeded the balance of the respective lease financing obligations.

For certain of the Company’s historical sale-leaseback transactions, Carrols has guaranteed the lease payments on an unsecured basis or is the primary lessee on the leases associated with certain of the Company’s sale-leaseback transactions. Prior to the Spin-off, ASC 840-40 “Sale-Leaseback Transactions” required the Company to classify these leases as lease financing transactions in the Company’s consolidated financial statements because the guarantee from a related party constituted continuing involvement and caused the sale to not qualify for sale-leaseback accounting. The accompanying consolidated balance sheets include lease financing obligations associated with these transactions of $114.1 million at January 1, 2012.

At the time of the Spin-off, these sale-leaseback transactions qualified for sale-leaseback accounting (and the treatment of such related leases as operating leases) due to the cure or elimination of the provisions that previously precluded sale-leaseback accounting in the Company's financial statements. As a result of the qualification for sale-leaseback accounting during the second quarter of 2012, the Company removed the associated lease financing obligations, property and equipment, and deferred financing costs from its balance sheet, and recognized deferred gains on sale-leaseback transactions related to the qualification of $32.1 million that will be amortized as a reduction of rent expense over the individual remaining lease terms. This resulted in a decrease in lease financing obligations of $114.2 million, a decrease in assets under lease financing obligations of $80.4 million, and a decrease of $1.6 million in deferred financing fees.

The interest rates on lease financing obligations ranged from 8.6% to 8.8% at September 30, 2012. Interest expense associated with lease financing obligations for the three months ended September 30, 2012 and October 2, 2011 was $0.1 million and $2.8 million, respectively and was $4.4 million and $8.5 million for the nine months ended September 30, 2012 and October 2, 2011, respectively.

Income Taxes

Income Tax Disclosure [Text Block]

9. Income Taxes

Prior to the Spin-off, the Company’s taxable income has been included in the consolidated U.S. federal income tax return of Carrols and in income tax returns filed by Carrols on a consolidated basis with certain state taxing jurisdictions. Subsequent to the Spin-off, the Company will be responsible for filing its own U.S. consolidated federal and state tax returns. Prior to the Spin-off, the Company determined its provision for income taxes on a separate return basis.

The Tax Matters Agreement governs the methodology for allocating responsibility for federal, state, local and foreign income and other taxes related to taxable periods prior to and subsequent to the Spin-off. Under the Tax Matters Agreement, Carrols is generally responsible for Federal income taxes related to the Company for all periods prior to the date of the Spin-off and the Company is responsible for Federal income taxes for periods after the date of the Spin-off. The Company is also responsible for all state taxes that were filed on a consolidated basis both before and after the date of Spin-off, specifically Florida and Texas, and any other states where the Company was filing or will file separate state tax returns.

The Company’s income tax provision was comprised of the following for the three and nine months ended September 30, 2012 and October 2, 2011:



	Three Months Ended				Nine Months Ended
	September 30, 2012		October 2, 2011		September 30, 2012			October 2, 2011
Current	$	683	$	610	$	4,565		$	5,125
Deferred	1,543		799		(1,221		)	317
	$	2,226	$	1,409	$	3,344		$	5,442

The provision for income taxes for the three and nine months ended September 30, 2012 was derived using an estimated effective annual income tax rate for 2012 of 39.3%, which excludes any discrete tax adjustments. Discrete tax adjustments increased the provision for income taxes by $25 in the three months ended September 30, 2012 and decreased the provision for income taxes by $212 in the nine months ended September 30, 2012.

The provision for income taxes for the three and nine months ended October 2, 2011 was derived using an estimated effective annual income tax rate for 2011 of 37.1%, which excludes any discrete tax adjustments. Discrete tax adjustments decreased the provision for income taxes by $18 and $188 for the three and nine months ended October 2, 2011.

The Company recognizes interest and/or penalties related to uncertain tax positions in income tax expense. As of September 30, 2012 and January 1, 2012, the Company had no unrecognized tax benefits and no accrued interest related to uncertain tax positions.

The tax years 2009-2011 remain open to examination by the taxing jurisdictions to which the Company is subject. Although it is not reasonably possible to estimate the amount by which unrecognized tax benefits may increase within the next twelve months due to uncertainties regarding the timing of any examinations, the Company does not expect unrecognized tax benefits to significantly change in the next twelve months.

Business Segment Information

The Company is engaged in the fast-casual restaurant industry, with two restaurant concepts: Pollo Tropical and Taco Cabana. Pollo Tropical is a fast-casual restaurant brand offering a wide selection of tropical and Caribbean inspired food, featuring grilled chicken marinated in a proprietary blend of tropical fruit juices and spices. Taco Cabana is a fast-casual restaurant brand offering a wide selection of fresh Tex-Mex and traditional Mexican food, including sizzling fajitas, quesadillas, enchiladas, burritos and other Tex-Mex dishes.

The accounting policies of each segment are the same as those described in the summary of significant accounting policies discussed in Note 1. The following table includes Adjusted Segment EBITDA which is the measure of segment profit or loss reported to the chief operating decision maker for purposes of allocating resources to the segments and assessing their performance. Adjusted Segment EBITDA is defined as earnings attributable to the applicable segment before interest, income taxes, depreciation and amortization, impairment and other lease charges, stock-based compensation expense, other income and expense and gains and losses on extinguishment of debt.

The “Other” column includes corporate related items not allocated to reportable segments and consists primarily of corporate owned property and equipment and capitalized costs associated with the issuance of indebtedness in 2011 discussed in Note 7.



Three Months Ended	Pollo Tropical		Taco Cabana		Other		Consolidated
September 30, 2012:
Revenues	$	57,784	$	70,389	$	—	$	128,173
Cost of sales	18,998		22,023		—		41,021
Restaurant wages and related expenses	13,254		20,606		—		33,860
Restaurant rent expense	2,308		4,003		—		6,311
Other restaurant operating expenses	6,912		9,743		—		16,655
Advertising expense	1,865		1,911		—		3,776
General and administrative expense	5,550		5,648		—		11,198
Adjusted Segment EBITDA (1)	9,079		6,653
Depreciation and amortization	2,008		2,473		5		4,486
Capital expenditures	4,149		7,045		252		11,446
October 2, 2011:
Revenues	$	52,675	$	68,482	$	—	$	121,157
Cost of sales	17,499		21,334		—		38,833
Restaurant wages and related expenses	12,114		20,430		—		32,544
Restaurant rent expense	1,560		2,672		—		4,232
Other restaurant operating expenses	6,984		9,620		—		16,604
Advertising expense	1,919		2,549		—		4,468
General and administrative expense	4,324		4,794		—		9,118
Adjusted Segment EBITDA (1)	8,472		7,326
Depreciation and amortization	2,264		2,573		—		4,837
Capital expenditures	3,187		2,508		—		5,695
Nine Months Ended
September 30, 2012:
Revenues	172,808		210,340		—		383,148
Cost of sales	56,895		66,211		—		123,106
Restaurant wages and related expenses	39,745		62,076		—		101,821
Restaurant rent expense	5,506		10,194		—		15,700
Other restaurant operating expenses	20,678		28,047		—		48,725
Advertising expense	4,134		7,960		—		12,094
General and administrative expense	15,852		16,948		—		32,800
Adjusted Segment EBITDA (1)	30,743		19,762
Depreciation and amortization	6,191		7,507		5		13,703
Capital expenditures	13,409		15,034		427		28,870
October 2, 2011:
Revenues	157,553		200,469		—		358,022
Cost of sales	52,062		62,790		—		114,852
Restaurant wages and related expenses	36,721		60,228		—		96,949
Restaurant rent expense	4,419		8,107		—		12,526
Other restaurant operating expenses	19,905		27,186		—		47,091
Advertising expense	4,239		8,122		—		12,361
General and administrative expense	12,986		14,100		—		27,086
Adjusted Segment EBITDA (1)	27,809		20,647
Depreciation and amortization	6,813		7,770		—		14,583
Capital expenditures, including acquisitions	7,344		10,353		—		17,697
Identifiable Assets:
September 30, 2012:	126,916		153,683		9,074		289,673
January 1, 2012	156,093		206,807		7,266		370,166

(1) Stock-based compensation expense of $0.4 million, $1.6 million, $0.4 million, and $1.3 million has been excluded from Adjusted Segment EBITDA for the three and nine months ended September 30, 2012 and October 2, 2011, respectively.

A reconciliation of Adjusted Segment EBITDA to consolidated net income follows:



	Three Months Ended						Nine Months Ended
	September 30, 2012			October 2, 2011			September 30, 2012		October 2, 2011
Adjusted Segment EBITDA:
Pollo Tropical	$	9,079		$	8,472		$	30,743	$	27,809
Taco Cabana	6,653			7,326			19,762		20,647
Less:
Depreciation and amortization	4,486			4,837			13,703		14,583
Impairment and other lease charges	(45		)	(68		)	6,816		1,016
Interest expense	5,036			6,651			19,334		16,338
Provision for income taxes	2,226			1,409			3,344		5,442
Stock-based compensation	380			440			1,603		1,299
Other expense	—			107			—		107
Net income	$	3,649		$	2,422		$	5,705	$	9,671

Net Income (Loss) per Share

Earnings Per Share [Text Block]

11. Net Income per Share

The Company has determined that non-vested share awards (also referred to as restricted stock awards) issued by the Company are participating securities because they have non-forfeitable rights to dividends. Basic net income per share is computed on the basis of weighted average outstanding common shares. The numerator of the diluted net income per share calculation is increased by the allocation of net income and dividends declared to non-vested shares, if the net impact is dilutive. Accordingly, basic net income per share is calculated under the two-class method.

On May 7, 2012, the Company ceased to be a subsidiary of Carrols and became an independent publicly traded company. On the distribution date of May 7, 2012, Carrols distributed approximately 23.2 million shares of $.01 par value Fiesta Restaurant Group common stock to Carrols' stockholders of record as of the close of business on the record date of April 24, 2012. For periods presented prior to 2012, this share amount is being utilized for the calculation of basic net income per share as all shares of the Company's common stock outstanding prior to May 7, 2012 were held by Carrols. The same share amount as basic net income per share is also being used for diluted net income per share for periods prior to 2012 as there were no dilutive securities outstanding for any prior period.

For 2012, in determining the weighted average number of shares outstanding for basic net income per share, the approximately 23.2 million shares distributed from Carrols on May 7, 2012 were assumed to be outstanding for the period from January 2, 2012 through May 6, 2012. Diluted net income per share subsequent to the distribution date of May 7, 2012 reflects the potential dilution of outstanding equity-based compensation awards by application of the treasury stock method.

The computation of basic and diluted net income per share for the three and nine months ended September 30, 2012 and October 2, 2011 is as follows:



	Three Months Ended					Nine Months Ended
	September 30, 2012			October 2, 2011		September 30, 2012			October 2, 2011
Basic and diluted net income per share:
Net income	$	3,649		$	2,422	$	5,705		$	9,671
Less: income allocated to participating securities	(82		)	—		(96		)	—
Net income available to common stockholders	$	3,567		$	2,422	$	5,609		$	9,671
Basic and diluted weighted average common shares outstanding	22,747,044			23,161,822		22,937,270			23,161,822
Basic and diluted net income per share	$	0.16		$	0.10	$	0.25		$	0.42

Commitments and Contingencies

Commitments Disclosure [Text Block]

12. Commitments and Contingencies

The Company is a party to various litigation matters incidental to the conduct of business. The Company does not believe that the outcome of any of these matters will have a material effect on its consolidated financial statements.

Basis of Presentation Accounting Policies (Policies)

Consolidation, Policy [Policy Text Block]

Basis of Consolidation. The unaudited consolidated financial statements presented herein reflect the consolidated financial position, results of operations and cash flows of Fiesta and its wholly-owned subsidiaries. The consolidated financial statements have been prepared as if the Company was in existence for all periods presented.

Through the date of the Spin-off, these unaudited consolidated financial statements have been prepared on a stand-alone basis from the separate records maintained by Carrols and may not necessarily be indicative of the results of operations or cash flows that would have resulted had allocations and other related-party transactions been consummated with unrelated parties or had the Company been an independent, publicly traded company during all of the periods presented. The interim consolidated financial statements reflect the historical financial position, results of operations and cash flows of Fiesta as it has historically operated, in conformity with U.S. Generally Accepted Accounting Principles ("GAAP"). All intercompany transactions have been eliminated in consolidation.

In connection with the Spin-off of the Company to the stockholders of Carrols, the board of directors of the Company authorized a 23,161.8 for one split of its outstanding common stock that was effective on April 19, 2012. Accordingly, all references to share and per share amounts related to common stock included in the consolidated financial statements and accompanying notes have been adjusted to reflect the stock split and change in the number of authorized shares. The stock split has been retroactively applied to the Company’s financial statements.

Fiscal Period, Policy [Policy Text Block]

Fiscal Year. The Company uses a 52-53 week fiscal year ending on the Sunday closest to December 31. The fiscal year ended January 1, 2012 contained 52 weeks. The three and nine months ended September 30, 2012 and October 2, 2011 contained thirteen and thirty-nine weeks, respectively.

Allocations [Policy Text Block]

Allocations. Through the date of the consummation of the Spin-off, Carrols provided administrative support to the Company for executive management, information systems and certain accounting, legal and other administrative functions. The cost of these services were allocated to the Company based primarily on a pro-rata share of either the Company’s revenues, number of restaurants or number of employees. The allocations may not reflect the expense the Company would have incurred as an independent, publicly traded company for the periods presented. Following the Spin-off, certain of these functions continue to be provided by Carrols under the TSA and the Company is performing certain functions using its own resources or purchased services from third parties. Refer to Note 6—Former Related Party Transactions for further discussion related to agreements entered into effective as of the Spin-off.

The unaudited consolidated financial statements for the three and nine months ended October 2, 2011 also reflect interest expense allocated by Carrols to the Company. Effective with the financing discussed in Note 7, on August 5, 2011 the Company secured its own financing and interest allocations from Carrols ceased. Management believes that its allocations are reasonable and based on a systematic and rational method; however, they are not necessarily indicative of the actual financial results of the Company, including such expenses that would have been incurred by the Company had it been operating as a separate, stand-alone entity for the periods presented. As a stand-alone entity, the Company expects to incur expenses that may not be comparable in future periods to what is presented for the historical periods presented in the consolidated financial statements. Consequently, the financial information herein may not reflect the financial position, results of operations and cash flows of the Company in the future or if the Company had been an independent stand-alone entity during the periods presented. In our opinion, the consolidated financial statements include all adjustments necessary for a fair presentation of its results of operations.

Fair Value of Financial Instruments, Policy [Policy Text Block]

Fair Value of Financial Instruments. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. In determining fair value, the accounting standards establish a three level hierarchy for inputs used in measuring fair value as follows: Level 1 inputs are quoted prices in active markets for identical assets or liabilities; Level 2 inputs are observable for the asset or liability, either directly or indirectly, including quoted prices in active markets for similar assets or liabilities; and Level 3 inputs are unobservable and reflect our own assumptions. The following methods were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate the fair value:


•	Current Assets and Liabilities. The carrying values of cash and accrued liabilities approximate fair value because of the short maturity of those instruments, which are considered Level 1.


•	Senior Secured Second Lien Notes. The fair value of outstanding senior secured second lien notes is based on recent trading values, which are considered Level 2, and at September 30, 2012, was approximately $213.5 million.


•	Revolving Credit Facility. There were no outstanding borrowings under the Company’s revolving credit facility at September 30, 2012. Fair value for any borrowings would be considered Level 3.

Use of Estimates, Policy [Policy Text Block]

Use of Estimates. The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements. Estimates also affect the reported amounts of expenses during the reporting periods. Significant items subject to such estimates and assumptions include: allocations of Carrols' general and administrative expenses and interest expense on amounts due to Carrols prior to the Spin-off, accrued occupancy costs, insurance liabilities, evaluation for impairment of goodwill and long-lived assets and lease accounting matters. Actual results could differ from those estimates.

Subsequent Events, Policy [Policy Text Block]

Subsequent Events. The Company reviewed and evaluated subsequent events through the issuance date of the Company’s financial statements.

Goodwill Goodwill Policy (Policies)

Goodwill and Intangible Assets, Policy [Policy Text Block]

The Company is required to review goodwill for impairment annually or more frequently when events and circumstances indicate that the carrying amount may be impaired. If the determined fair value of goodwill is less than the related carrying amount, an impairment loss is recognized. The Company performs its annual impairment assessment as of each fiscal year end and has determined its reporting units to be at the brand level for Pollo Tropical and Taco Cabana. The Company does not believe circumstances have changed since the last assessment date which would make it necessary to reassess their values.

Impairment of Long-Lived Assets and Other Lease Charges Impairment Accounting Policy (Policies)

Impairment or Disposal of Long-Lived Assets, Policy [Policy Text Block]

The Company reviews its long-lived assets, principally property and equipment, for impairment at the restaurant level. If an indicator of impairment exists for any of its assets, an estimate of undiscounted future cash flows over the life of the primary asset for each restaurant is compared to that long-lived asset’s carrying value. If the carrying value is greater than the undiscounted cash flow, the Company then determines the fair value of the asset and if an asset is determined to be impaired, the loss is measured by the excess of the carrying amount of the asset over its fair value. For closed restaurant locations, the Company reviews the future minimum lease payments and related ancillary costs from the date of the restaurant closure to the end of the remaining lease term and records a lease charge for the lease liabilities to be incurred, net of any estimated sublease recoveries.

Lease Financing Obligations (Policies)

Lease Financing Obligations [Policy Text Block]

The Company entered into sale-leaseback transactions in various years that did not qualify for sale-leaseback accounting due to certain forms of continuing involvement and, as a result, the leases were classified as financing transactions in the Company’s consolidated financial statements.

Under the financing method, the assets remain on the consolidated balance sheet and the net proceeds received by the Company from these transactions are recorded as a lease financing liability. Payments under these leases are applied as payments of imputed interest and deemed principal on the underlying financing obligations.

These leases generally provide for an initial term of 20 years plus renewal options. The rent payable under such leases includes a minimum rent provision and in some cases, includes rent based on a percentage of sales. These leases also require payment of property taxes, insurance and utilities

Net Income (Loss) per Share (Policies)

Earnings Per Share, Policy [Policy Text Block]

The Company has determined that non-vested share awards (also referred to as restricted stock awards) issued by the Company are participating securities because they have non-forfeitable rights to dividends. Basic net income per share is computed on the basis of weighted average outstanding common shares. The numerator of the diluted net income per share calculation is increased by the allocation of net income and dividends declared to non-vested shares, if the net impact is dilutive. Accordingly, basic net income per share is calculated under the two-class method.

Stock-based Compensation Stock-based Compensation (Tables)

Schedule of Nonvested Share Activity [Table Text Block]

Non-vested Shares

A summary of all non-vested shares activity for the nine months ended September 30, 2012 was as follows:



			Weighted
			Average
			Grant Date
	Shares		Price
Nonvested at January 1, 2012	—		$	—
Dividend from Spin-Off	434,397		11.10
Granted	363,256		13.97
Vested	(20,799	)	11.10
Forfeited	(13,619	)	11.10
Nonvested at September 30, 2012	763,235		$	12.47

The fair value of the non-vested shares is based on the closing price on the date of grant. The weighted average fair value at the grant date for non-vested shares issued during the three months ended September 30, 2012 was $15.50.

Goodwill Goodwill (Tables)

Schedule of Intangible Assets and Goodwill [Table Text Block]

Goodwill balances are summarized below:



	Pollo Tropical		Taco Cabana		Total
Balance, September 30, 2012	$	56,307	$	67,177	$	123,484

Impairment of Long-Lived Assets and Other Lease Charges Impairment by segment (Tables)

Impairment of long lived assets and other lease charge [Table Text Block]

Impairment on long-lived assets for the Company’s segments and other lease charges (recoveries) recorded were as follows:



	Three Months Ended						Nine Months Ended
	September 30, 2012			October 2, 2011			September 30, 2012		October 2, 2011
Pollo Tropical	$	94		$	70		$	5,931	$	706
Taco Cabana	(139		)	(138		)	885		310
	$	(45	)	$	(68	)	$	6,816	$	1,016

Other Liabilities, Long-Term Other Liabilities (Tables)

Schedule of Accrued Liabilities [Table Text Block]

Other liabilities, long-term, consisted of the following:



	September 30, 2012		January 1, 2012
Accrued occupancy costs	$	8,102	$	7,459
Accrued workers’ compensation and general liability claims	1,874		1,251
Deferred compensation	765		710
Other	1,336		722
	$	12,077	$	10,142

Schedule of Restructuring Reserve by Type of Cost [Table Text Block]

The following table presents the activity in the closed-store reserve, of which $1.6 million and $1.1 million are included in long-term accrued occupancy costs above at September 30, 2012 and January 1, 2012, respectively, with the remainder in other current liabilities:



	Nine Months Ended September 30, 2012			Year Ended January 1, 2012
Balance, beginning of period	$	2,246		$	1,665
Provisions for restaurant closures	1,796			800
Accruals (recoveries) for additional lease charges	(565		)	649
Payments, net	(1,241		)	(1,021		)
Other adjustments	207			153
Balance, end of period	$	2,443		$	2,246

Long-term Debt Long-term debt table (Tables)

Schedule of Long-term Debt Instruments [Table Text Block]

Long term debt at September 30, 2012 and January 1, 2012 consisted of the following:



	September 30, 2012			January 1, 2012
Collateralized:
Fiesta Restaurant Group 8.875% Senior Secured Second Lien Notes	$	200,000		$	200,000
Capital leases	963			1,008
	200,963			201,008
Less: current portion of long-term debt	(61		)	(59		)
	$	200,902		$	200,949

Income Taxes (Tables)

Schedule of Components of Income Tax Expense (Benefit) [Table Text Block]

The Company’s income tax provision was comprised of the following for the three and nine months ended September 30, 2012 and October 2, 2011:



	Three Months Ended				Nine Months Ended
	September 30, 2012		October 2, 2011		September 30, 2012			October 2, 2011
Current	$	683	$	610	$	4,565		$	5,125
Deferred	1,543		799		(1,221		)	317
	$	2,226	$	1,409	$	3,344		$	5,442

Business Segment Information Business Segment (Tables)

Schedule of Segment Reporting Information, by Segment [Table Text Block]

The following table includes Adjusted Segment EBITDA which is the measure of segment profit or loss reported to the chief operating decision maker for purposes of allocating resources to the segments and assessing their performance. Adjusted Segment EBITDA is defined as earnings attributable to the applicable segment before interest, income taxes, depreciation and amortization, impairment and other lease charges, stock-based compensation expense, other income and expense and gains and losses on extinguishment of debt.

The “Other” column includes corporate related items not allocated to reportable segments and consists primarily of corporate owned property and equipment and capitalized costs associated with the issuance of indebtedness in 2011 discussed in Note 7.



Three Months Ended	Pollo Tropical		Taco Cabana		Other		Consolidated
September 30, 2012:
Revenues	$	57,784	$	70,389	$	—	$	128,173
Cost of sales	18,998		22,023		—		41,021
Restaurant wages and related expenses	13,254		20,606		—		33,860
Restaurant rent expense	2,308		4,003		—		6,311
Other restaurant operating expenses	6,912		9,743		—		16,655
Advertising expense	1,865		1,911		—		3,776
General and administrative expense	5,550		5,648		—		11,198
Adjusted Segment EBITDA (1)	9,079		6,653
Depreciation and amortization	2,008		2,473		5		4,486
Capital expenditures	4,149		7,045		252		11,446
October 2, 2011:
Revenues	$	52,675	$	68,482	$	—	$	121,157
Cost of sales	17,499		21,334		—		38,833
Restaurant wages and related expenses	12,114		20,430		—		32,544
Restaurant rent expense	1,560		2,672		—		4,232
Other restaurant operating expenses	6,984		9,620		—		16,604
Advertising expense	1,919		2,549		—		4,468
General and administrative expense	4,324		4,794		—		9,118
Adjusted Segment EBITDA (1)	8,472		7,326
Depreciation and amortization	2,264		2,573		—		4,837
Capital expenditures	3,187		2,508		—		5,695
Nine Months Ended
September 30, 2012:
Revenues	172,808		210,340		—		383,148
Cost of sales	56,895		66,211		—		123,106
Restaurant wages and related expenses	39,745		62,076		—		101,821
Restaurant rent expense	5,506		10,194		—		15,700
Other restaurant operating expenses	20,678		28,047		—		48,725
Advertising expense	4,134		7,960		—		12,094
General and administrative expense	15,852		16,948		—		32,800
Adjusted Segment EBITDA (1)	30,743		19,762
Depreciation and amortization	6,191		7,507		5		13,703
Capital expenditures	13,409		15,034		427		28,870
October 2, 2011:
Revenues	157,553		200,469		—		358,022
Cost of sales	52,062		62,790		—		114,852
Restaurant wages and related expenses	36,721		60,228		—		96,949
Restaurant rent expense	4,419		8,107		—		12,526
Other restaurant operating expenses	19,905		27,186		—		47,091
Advertising expense	4,239		8,122		—		12,361
General and administrative expense	12,986		14,100		—		27,086
Adjusted Segment EBITDA (1)	27,809		20,647
Depreciation and amortization	6,813		7,770		—		14,583
Capital expenditures, including acquisitions	7,344		10,353		—		17,697
Identifiable Assets:
September 30, 2012:	126,916		153,683		9,074		289,673
January 1, 2012	156,093		206,807		7,266		370,166

Business Segment Information Business Segment Reconciliation (Tables)

Reconciliation of Operating Profit (Loss) from Segments to Consolidated [Table Text Block]

A reconciliation of Adjusted Segment EBITDA to consolidated net income follows:



	Three Months Ended						Nine Months Ended
	September 30, 2012			October 2, 2011			September 30, 2012		October 2, 2011
Adjusted Segment EBITDA:
Pollo Tropical	$	9,079		$	8,472		$	30,743	$	27,809
Taco Cabana	6,653			7,326			19,762		20,647
Less:
Depreciation and amortization	4,486			4,837			13,703		14,583
Impairment and other lease charges	(45		)	(68		)	6,816		1,016
Interest expense	5,036			6,651			19,334		16,338
Provision for income taxes	2,226			1,409			3,344		5,442
Stock-based compensation	380			440			1,603		1,299
Other expense	—			107			—		107
Net income	$	3,649		$	2,422		$	5,705	$	9,671

Net Income (Loss) per Share (Tables)

Schedule of Earnings Per Share, Basic, by Common Class, Including Two Class Method [Table Text Block]

The computation of basic and diluted net income per share for the three and nine months ended September 30, 2012 and October 2, 2011 is as follows:



	Three Months Ended					Nine Months Ended
	September 30, 2012			October 2, 2011		September 30, 2012			October 2, 2011
Basic and diluted net income per share:
Net income	$	3,649		$	2,422	$	5,705		$	9,671
Less: income allocated to participating securities	(82		)	—		(96		)	—
Net income available to common stockholders	$	3,567		$	2,422	$	5,609		$	9,671
Basic and diluted weighted average common shares outstanding	22,747,044			23,161,822		22,937,270			23,161,822
Basic and diluted net income per share	$	0.16		$	0.10	$	0.25		$	0.42

Basis of Presentation Fair Value Disclosures (Details) (USD $)

In Millions, unless otherwise specified

Sep. 30, 2012

Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]

Debt Instrument, Fair Value Disclosure

$ 213.5

Basis of Presentation Basis of Presentation Narrative (Details)

3 Months Ended

9 Months Ended

12 Months Ended

Sep. 30, 2012

Jan. 1, 2012