~~Current Assets and Liabilities.~~


•	Current Assets and Liabilities. The carrying values reported on the balance sheet of cash, accounts receivable and accounts payable approximate fair value because of the short maturity of those financial instruments.

•

Revolving Credit Borrowings. The fair value of outstanding revolving credit borrowings under the Company's senior credit facility, which is considered Level 2, is based on current LIBOR rates. The ~~carrying values reported on the balance sheet of cash, accounts receivable and accounts payable approximate fair value because of the short maturity of those financial instruments.~~

~~Revolving Credit Borrowings.~~ ~~The fair value of outstanding revolving credit borrowings under the Company's senior credit facility, which is considered Level 2, is based on current LIBOR rates. At April 3, 2016, the~~ fair value and carrying value of the Company's senior credit facility were approximately $72.9 million at April 2, 2017 and $69.9 million at January 1, 2017.

Long-Lived Assets. The Company assesses the recoverability of property and equipment and definite-lived intangible assets by determining whether the carrying value of these assets can be recovered over their respective remaining lives through undiscounted future operating cash flows. Impairment is reviewed when events or changes in circumstances indicate that the ~~Company's senior credit facility was approximately $70.9 million.~~carrying amounts of these assets may not be fully recoverable. See Note 2.

Use of Estimates. The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the 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: accrued occupancy costs,

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FIESTA RESTAURANT GROUP, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(In thousands of dollars, except share and per share amounts)

insurance liabilities, evaluation for impairment of goodwill and long-lived assets and lease accounting matters. Actual results could differ from those estimates.

Guidance Adopted in 2017. In March 2016, the Financial Accounting Standards Board issued ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting (Topic 718), to simplify various aspects of the accounting and presentation of share-based payments, including the income tax effects of awards and forfeiture assumptions. In the first quarter of 2017, the Company prospectively adopted the amendments in this guidance that relate to the classification of excess tax benefits or tax benefit deficiencies from share-based payment arrangements in the statement of cash flows and income statement. Excess tax benefits from share-based payment arrangements result from share-based compensation windfall deductions in excess of compensation costs for financial reporting purposes and tax benefit deficiencies result from share-based compensation deduction shortfalls. During the three months ended April 2, 2017, the Company recognized $0.1 million of tax benefit deficiencies, which pursuant to the adopted guidance increased income tax expense and decreased net income by $0.1 million. Effective January 2, 2017, the Company elected to change its accounting policy to recognize forfeitures as they occur. The new forfeiture policy election was adopted using a modified retrospective approach with a $0.1 million cumulative-effect adjustment to beginning retained earnings in the first quarter of 2017 as a result of adopting the standard.

2. 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. Inaddition to considering management’s plans, known regulatory or governmental actions and damage due to acts of God (hurricanes, tornadoes, etc.), the Company considers a triggering event to have occurred related to a specific restaurant if the restaurant’s cash flows for the last twelve months are less than a minimum threshold or if consistent levels of cash flows for the remaining lease period are less than the carrying value of the restaurant’s assets. 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. There is uncertainty in the projected undiscounted future cash flows used in the Company's impairment review analysis. If actual performance does not achieve the projections, the Company may recognize impairment charges in future periods, and such charges could be material. For closed restaurant locations, the Company reviews the future minimum lease payments and

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~~FIESTA RESTAURANT GROUP, INC.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(In thousands of dollars, except share and per share amounts)~~

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.

~~Use~~A summary of ~~Estimates~~. The preparation of the condensed 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: accrued occupancy costs, insurance liabilities, evaluation for impairment ~~of goodwill and~~on long-lived assets and other lease ~~accounting matters. Actual results could differ from~~charges recorded by segment is as follows:



	Three Months Ended
	April 2, 2017		April 3, 2016
Pollo Tropical	$	32,071	$	—
Taco Cabana	343		12
	$	32,414	$	12

On April 24, 2017, the Company announced a strategic renewal plan to drive long-term value that includes the closure of 30 Pollo Tropical restaurants outside its core Florida markets. The Company has subsequently closed all Pollo Tropical locations in Dallas-Fort Worth and Austin, Texas, and Nashville, Tennessee. The Company will continue to operate 19 Pollo Tropical restaurants outside of Florida, including 13 in Atlanta and six in south Texas. Up to five closed restaurants in Texas may be rebranded as Taco Cabana restaurants.

In the first quarter of 2017, the Company recognized impairment charges with respect to the 30 restaurants that it subsequently closed in the second quarter of 2017, seven of which were impaired in 2016, as well as an additional impairment charge related to previously closed restaurants primarily as a result of the decision not to convert a location to a Taco Cabana restaurant. The Company also recognized an impairment charge with respect to three Taco Cabana restaurants that it continues to operate. Impairment and other lease charges for the three months ended April 2, 2017 consisted of impairment charges for Pollo Tropical and Taco Cabana restaurants of $32.0 million and $0.3 million, respectively, and lease and other charges related to closed Pollo Tropical restaurants of $0.1 million, net of recoveries. The Company will recognize lease and other charges related to the closed restaurants in the second quarter of 2017.

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FIESTA RESTAURANT GROUP, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(In thousands of dollars, except share and per share amounts)

The Company determined the fair value of restaurant equipment, for those ~~estimates.~~restaurants reviewed for impairment, based on current economic conditions, the Company’s history of using these assets in the operation of its business and the Company's expectation of how a market participant would value the assets. 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 the three months ended April 2, 2017 totaled $15.2 million, which primarily consist of leasehold improvements related to Pollo Tropical restaurants that may be rebranded as Taco Cabana restaurants and the estimated fair value of owned properties.

2.3. Other Liabilities

Other liabilities, current, ~~consisted~~consist of the following:



	April 2, 2017		January 1, 2017
Accrued workers' compensation and general liability claims	$	5,673	$	4,838
Sales and property taxes	1,834		1,844
Accrued occupancy costs	2,104		2,161
Other	2,844		2,473
	$	12,455	$	11,316

April 3, 2016 January 3, 2016
Accrued workers' compensation and general liability claims $ 5,448
$ 5,540
Sales and property taxes 1,669
3,031
Accrued occupancy costs 885
980
Other 1,076
2,545
$ 9,078
$ 12,096

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



	April 2, 2017		January 1, 2017
Accrued occupancy costs	$	20,175	$	20,172
Deferred compensation	1,826		2,027
Accrued workers’ compensation and general liability claims	4,030		4,030
Other	4,936		4,140
	$	30,967	$	30,369

April 3, 2016 January 3, 2016
Accrued occupancy costs $ 16,166
$ 15,349
Deferred compensation 1,581
1,665
Accrued workers' compensation and general liability claims 1,139
697
Other 3,705
3,286
$ 22,591
$ 20,997

Accrued occupancy costs include obligations pertaining to closed restaurant locations 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 ~~$1.2~~$2.6 million and $3.1 million are included in long-term accrued occupancy costs at April ~~3, 2016~~2, 2017 and January ~~3, 2016,~~1, 2017, respectively, with the remainder in other current ~~liabilities:~~liabilities.



	Three Months Ended April 2, 2017			Year Ended January 1, 2017
Balance, beginning of period	$	4,912		$	1,832
Provisions for restaurant closures	421			3,093
Additional lease charges, net of (recoveries)	(281		)	(237		)
Payments, net	(708		)	(806		)
Other adjustments	171			1,030
Balance, end of period	$	4,515		$	4,912

Three Months Ended April 3, 2016 Year Ended January 3, 2016
Balance, beginning of period $ 1,832
$ 1,251
Provisions for restaurant closures —
554
Additional lease charges, net of (recoveries) —
258
Payments, net (166 ) (358 )
Other adjustments 108
127
Balance, end of period $ 1,774
$ 1,832

3.4. Stock-Based Compensation

During the three months ended April 2, 2017 and April 3, 2016, ~~and March 29, 2015,~~ the Company granted ~~50,087~~certain employees 187,342 and ~~22,597~~50,087 non-vested restricted shares, respectively, under the Fiesta Restaurant Group, Inc. 2012 Stock Incentive Plan (the "Fiesta Plan") ~~to certain employees.~~. These shares generally vest and become non-forfeitable over a four year vesting period. The weighted average fair value at grant date for these non-vested shares issued to employees during the three months ended April 2, 2017 and April 3, 2016 was $20.75 and ~~March 29, 2015 was~~ $35.25, ~~and $62.05,~~ respectively.

During the three months ended April 2, 2017 and April 3, 2016, ~~and March 29, 2015,~~ the Company granted ~~5,762~~certain employees 11,745 and ~~10,007~~5,762 restricted stock units, respectively, under the Fiesta ~~Plan to certain employees.~~Plan. The restricted stock units granted during the three months ended April 2, 2017 and April 3, 2016 vest and become non-forfeitable at the end of a four year vesting period. The weighted average fair value

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(In thousands of dollars, except share and per share amounts)

April 3, 2016 vest and become non-forfeitable at the end of a four year vesting period. The restricted stock units granted during the three months ended March 29, 2015 vest and become non-forfeitable over a four year vesting period or, for certain units, at the end of a four year vesting period. The weighted average fair value at grant date for these restricted stock units issued to employees during the three months ended April 2, 2017 and April 3, 2016 was $20.75 and ~~March 29, 2015 was~~ $35.25, ~~and $62.05,~~ respectively.

Also during the three months ended April 3, 2016, ~~and March 29, 2015,~~ the Company granted 33,691 ~~and 17,501~~ non-vested restricted shares ~~respectively,~~ and 33,691 ~~and 17,501~~ restricted stock units, respectively, under the Fiesta Plan to certain employees subject to performance conditions. The non-vested restricted shares vest and become non-forfeitable over a four year vesting period subject to the attainment of financial performance conditions. The restricted stock units vest and become non-forfeitable at the end of a three year vesting period. The number of shares into which the restricted stock units convert is ~~determined~~ based on the attainment of certain financial performance conditions and for the restricted stock units granted during the three months ended April 3, 2016, ~~and March 29, 2015,~~ ranges from no shares, if the minimum financial performance condition is not met, to 67,382 ~~and 35,002~~ shares, ~~respectively,~~ if the maximum performance condition is met. The weighted average fair value at grant date for both restricted non-vested shares and restricted stock units subject to financial performance conditions granted during the three months ended April 3, 2016 ~~and March 29, 2015~~ was ~~$35.25 and $65.01, respectively.~~$35.25.

Stock-based compensation expense for the three months ended April ~~3, 2016 and March 29, 2015~~2, 2017 was ~~$1.0~~$0.6 million, and ~~$0.9 million, respectively. As of~~for the three months ended April 3, 2016 was $1.0 million. At April 2, 2017, the total unrecognized stock-based compensation expense ~~relating~~related to non-vested restricted shares and restricted stock units was approximately ~~$9.2~~$7.0 million. At April ~~3, 2016,~~2, 2017, the remaining weighted average vesting period for non-vested restricted shares was ~~1.7~~3.2 years and restricted stock units was ~~2.6~~2.0 years.

A summary of all non-vested restricted shares and restricted stock units activity for the three months ended April ~~3, 2016 was~~2, 2017 is as follows:



	Non-Vested Shares				Restricted Stock Units
	Shares		Weighted Average Grant Date Price		Units		Weighted Average Grant Date Price
Outstanding at January 1, 2017	129,352		$	37.94	51,445		$	46.59
Granted	187,342		20.75		11,745		20.75
Vested/Released	(31,463	)	35.04		(102	)	50.38
Forfeited	(8,636	)	40.95		(914	)	42.39
Outstanding at April 2, 2017	276,595		$	26.53	62,174		$	41.76

Non-Vested Shares Restricted Stock Units
Weighted Weighted
Average Average
Grant Date Grant Date
Shares Price Units Price
Outstanding at January 3, 2016 257,618
$ 30.69
42,840
$ 56.46
Granted 83,778
35.25
39,453
35.25
Vested/Released (58,918 ) 33.00
(122 ) 51.45
Forfeited (4,700 ) 37.62
(1,093 ) 47.02
Outstanding at April 3, 2016 277,778
$ 31.46
81,078
$ 46.27

The fair value of the non-vested restricted shares and restricted stock units is based on the closing price on the date of grant.

4.5. Business Segment Information

The Company is engaged in the fast-casual restaurant industry, with two restaurant concepts (each of which is an operating segment): Pollo Tropical and Taco Cabana. Pollo Tropical restaurants offer a wide variety of freshly prepared Caribbean inspired food while our Taco Cabana restaurants offer a broad selection of ~~hand-made,~~ freshly prepared ~~and authentic~~ Mexican inspired food.

~~The~~Each segment's accounting policies ~~of each segment~~ are the same as those described in the summary of significant accounting policies ~~discussed~~ in Note 1.1 to the Company's audited financial statements contained in the Company's Annual Report on Form 10-K for the fiscal year ended January 1, 2017. The Company reports more than one measure of segment profit or loss to the chief operating decision maker for the purposes of allocating resources to the segments and assessing their performance. The primary measures of segment profit or loss used to assess performance and allocate resources are income (loss) before taxes and Adjusted EBITDA, which is defined as earnings attributable to the applicable operating segment before interest, income taxes, depreciation and amortization, impairment and other lease charges, stock-based compensation expense and other income and expense. Although the chief operating decision maker uses Adjusted EBITDA as a measure of segment profitability, in accordance with Accounting Standards Codification 280, Segment Reporting, the following table includes segment income (loss) before taxes, which is the measure of segment profit or loss determined in accordance with the measurement principles that are most consistent with the principles used in measuring the corresponding amounts in the consolidated financial statements.

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(In thousands of dollars, except share and per share amounts)

The “Other” column includes ~~corporate related~~corporate-related items not allocated to reportable segments and consists primarily of ~~corporate owned~~corporate-owned property and equipment, miscellaneous prepaid costs, capitalized costs associated with the issuance of indebtedness, corporate cash accounts, a current income tax receivable, and advisory fees related to a previously proposed and terminated separation transaction.



Three Months Ended	Pollo Tropical			Taco Cabana		Other			Consolidated
April 2, 2017:
Restaurant sales	$	99,310		$	75,667	$	—		$	174,977
Franchise revenue	449			181		—			630
Cost of sales	29,947			21,001		—			50,948
Restaurant wages and related expenses ⁽¹⁾	24,046			24,086		—			48,132
Restaurant rent expense	5,375			4,487		—			9,862
Other restaurant operating expenses	13,389			10,679		—			24,068
Advertising expense	4,325			3,214		—			7,539
General and administrative expense⁽²⁾	8,894			7,114		—			16,008
Depreciation and amortization	6,083			3,103		—			9,186
Pre-opening costs	332			92		—			424
Impairment and other lease charges	32,071			343		—			32,414
Interest expense	249			335		—			584
Income (loss) before taxes	(25,096		)	1,394		—			(23,702		)
Capital expenditures	8,663			2,696		315			11,674
April 3, 2016:
Restaurant sales	$	98,906		$	77,033	$	—		$	175,939
Franchise revenue	577			161		—			738
Cost of sales	31,604			22,446		—			54,050
Restaurant wages and related expenses ⁽¹⁾	22,896			22,156		—			45,052
Restaurant rent expense	4,644			4,277		—			8,921
Other restaurant operating expenses	12,592			9,796		—			22,388
Advertising expense	3,762			3,233		—			6,995
General and administrative expense⁽²⁾	7,685			5,462		701			13,848
Depreciation and amortization	5,278			3,058		—			8,336
Pre-opening costs	1,114			68		—			1,182
Impairment and other lease charges	—			12		—			12
Interest expense	251			307		—			558
Income (loss) before taxes	9,669			6,615		(701		)	15,583
Capital expenditures	14,099			1,634		1,058			16,791
Identifiable Assets:
April 2, 2017	$	247,967		$	170,169	$	8,509		$	426,645
January 1, 2017	263,868			165,195		12,502			441,565

Three Months Ended Pollo Tropical Taco Cabana Other Consolidated
April 3, 2016:
Restaurant sales $ 98,906
$ 77,033
$ —
$ 175,939
Franchise revenue 577
161
—
738
Cost of sales 31,604
22,446
—
54,050
Restaurant wages and related expenses ⁽¹⁾
22,896
22,156
—
45,052
Restaurant rent expense 4,644
4,277
—
8,921
Other restaurant operating expenses 12,592
9,796
—
22,388
Advertising expense 3,762
3,233
—
6,995
General and administrative expense⁽²⁾
7,685
5,462
701
13,848
Depreciation and amortization 5,278
3,058
—
8,336
Pre-opening costs 1,114
68
—
1,182
Impairment and other lease charges —
12
—
12
Interest expense 251
307
—
558
Income before taxes 9,669
6,615
(701 ) 15,583
Capital expenditures 14,099
1,634
1,058
16,791
March 29, 2015:
Restaurant sales $ 86,889
$ 76,169
$ —
$ 163,058
Franchise revenue 681
136
—
817
Cost of sales 28,539
22,584
—
51,123
Restaurant wages and related expenses ⁽¹⁾
18,754
21,836
—
40,590
Restaurant rent expense 3,649
4,358
—
8,007
Other restaurant operating expenses 10,089
9,770
—
19,859
Advertising expense 2,358
3,196
—
5,554
General and administrative expense⁽²⁾
7,797
5,967
—
13,764
Depreciation and amortization 3,739
3,108
—
6,847
Pre-opening costs 870
81
—
951
Impairment and other lease charges —
94
—
94
Interest expense 185
253
—
438
Income before taxes 11,590
5,430
—
17,020
Capital expenditures 15,042
3,051
1,164
19,257
Identifiable Assets:
April 3, 2016: 251,099
161,303
11,987
424,389
January 3, 2016 237,065
165,549
13,031
415,645

(1) Includes stock-based compensation expense of ~~$36~~$109 and ~~$67~~$36 for the three months ended April 2, 2017 and April 3, 2016, ~~and March 29, 2015,~~ respectively.

(2) Includes stock-based compensation expense of ~~$975~~$537 and ~~$874~~$975 for the three months ended April 2, 2017 and April 3, 2016, ~~and March 29, 2015,~~ respectively.

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~~FIESTA RESTAURANT GROUP, INC.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(In thousands of dollars, except share and per share amounts)~~

5.6. Net Income (Loss) per Share

~~We compute~~The Company computes basic net income (loss) per share by dividing net income (loss) applicable to common shares by the weighted average number of common shares outstanding during each period. Our non-vested restricted shares contain a non-forfeitable right to receive dividends on a one-to-one per share ratio to common shares and are thus considered participating securities. The impact of the participating securities is included in the computation of basic net income per share pursuant to ~~the~~th

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FIESTA RESTAURANT GROUP, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(In thousands of dollars, except share and per share amounts)

e two-class method. The two-class method of computing earnings per share is an earnings allocation formula that determines earnings attributable to common shares and participating securities according to dividends declared (whether paid or unpaid) and participation rights in undistributed earnings. Net income per common share ~~was~~is computed by dividing undistributed earnings allocated to common ~~shareholders~~stockholders by the weighted average number of common shares outstanding for the period. In applying the two-class method, undistributed earnings are allocated to both common shares and non-vested restricted shares based on the weighted average shares outstanding during the period.

Diluted earnings per share reflects the potential dilution that could occur if our restricted stock units were to be converted into common shares. Restricted stock units with performance conditions are only included in the diluted earnings per share calculation to the extent that performance conditions have been met at the measurement date. We compute diluted earnings per share by adjusting the basic weighted average number of common shares by the dilutive effect of the restricted stock units, determined using the treasury stock method.

For the three months ended April 2, 2017, all restricted stock units outstanding were excluded from the computation of diluted earnings per share because to do so would have been antidilutive as a result of the net loss in the first quarter of 2017. Weighted average outstanding restricted stock units totaling 7,407 shares for the three months ended April 3, 2016, were not included in the computation of diluted earnings per share ~~for the three months ended April 3, 2016,~~ because to do so would have been antidilutive.

The computation of basic and diluted net income (loss) per share is as follows:



	Three Months Ended
	April 2, 2017			April 3, 2016
Basic and diluted net income (loss) per share:
Net income (loss)	$	(15,060	)	$	9,895
Less: income allocated to participating securities	—			(93		)
Net income (loss) available to common shareholders	$	(15,060	)	$	9,802
Weighted average common shares, basic	26,774,103			26,605,717
Restricted stock units	—			6,304
Weighted average common shares, diluted	26,774,103			26,612,021

Basic net income (loss) per share	$	(0.56	)	$	0.37
Diluted net income (loss) per share	$	(0.56	)	$	0.37

   Three Months Ended
   April 3, 2016 March 29, 2015
Basic and diluted net income per share:
Net income    $ 9,895
$ 10,501
Less: income allocated to participating securities    (93 ) (142 )
Net income available to common stockholders    $ 9,802
$ 10,359
Weighted average common shares, basic 26,605,717
26,435,166
Restricted stock units 6,304
7,436
Weighted average common shares, diluted    26,612,021
26,442,602

Basic net income per common share    $ 0.37
$ 0.39
Diluted net income per common share $ 0.37
$ 0.39

6.7. Commitments and Contingencies

Lease Assignments. Taco Cabana has assigned ~~four~~three leases to various parties on properties where it no longer operates restaurants with lease terms expiring on various dates through ~~2029 to various parties. Although~~2029. The assignees are responsible for making the payments required by the leases. The Company is a ~~not a~~ guarantor under ~~these~~one of the leases, and it remains secondarily liable as a surety ~~for these~~with respect to two of the leases. The maximum potential liability for future rental payments that the Company could be required to make under these leases at April ~~3, 2016~~2, 2017 was ~~$2.2~~$1.6 million. The Company could also be obligated to pay property taxes and other lease related costs. The obligations under these leases will generally continue to decrease over time as the operating leases expire. The Company does not believe it is probable that it ~~would~~will be ultimately responsible for the obligations under these leases.

Legal Matters. The Company is a party to legal proceedings incidental to the conduct of business, including the matter

described below. The Company records accruals for outstanding legal matters when it believes it is probable that a loss will be

incurred and the amount can be reasonably estimated. The Company evaluates, on a quarterly basis, developments in legal matters that could affect the amount of any accrual and developments that would make a loss contingency both probable and reasonably estimable. If a loss contingency is not both probable and estimable, the Company does not establish an accrued liability.

On November 24, 2015, Pollo Tropical received a legal demand letter alleging that assistant managers were misclassified as exempt from overtime wages under the Fair Labor Standards Act. On September 30, 2016, prior to any suit being filed, Pollo Tropical reached a settlement with seven named individuals and a proposed collective action class that will allow current and former assistant managers to receive notice and opt-in to the settlement. Pollo Tropical denies any liability or unlawful conduct. The Company has recorded a charge of $0.8 million to cover the estimated costs related to the settlement, including estimated payments to individuals that opt-in to the settlement, premium payments to named individuals, attorneys’ fees for the individuals'

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(In thousands of dollars, except share and per share amounts)

~~On September 29, 2014, Daisy, Inc.,~~counsel, and related settlement administration costs. The charge does not include legal fees incurred by Pollo Tropical in defending the action. The settlement, which is subject to approval by an ~~automotive repair shop~~arbitrator and a judicial body, will result in ~~Cape Coral, Florida, filed a putative class action suit against Fiesta's subsidiary, Pollo Operations, Inc. ("Pollo Operations") in the United States District Court~~dismissal with prejudice for the ~~Middle District of Florida. The suit alleged~~named individuals and all individuals that ~~Pollo Operations engaged in unlawful activity in violation of~~opt-in to the Telephone Consumer Protection Act, § 227 et seq. occurring in December 2010 and January 2011. As of April 3, 2016, Pollo Operations reached a settlement with the plaintiff which resulted in dismissal of the case and has paid all settlement claims.settlement.

The Company is also a party to various other 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.

7.8. Recent Accounting Pronouncements

In May 2014, and in subsequent updates, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (Topic 606), which amends the guidance in former Topic 605, Revenue Recognition, and provides for either a full retrospective adoption in which the standard is applied to all of the periods presented or a modified retrospective adoption in which the cumulative effect of initially applying the standard is recognized at the date of initial application. The new standard provides accounting guidance for all revenue arising from contracts with customers and affects all entities that enter into contracts to provide goods or services to their customers unless the contracts are in the scope of other US GAAP requirements. The guidance also provides a model for the measurement and recognition of gains and losses on the sale of certain non-financial assets, such as property and equipment, including real estate. The Company is currently evaluating the impact of the provisions of Topic 606; however, the Company does not believe the standard will impact its recognition of revenue from company-owned restaurants or its recognition of franchise royalty revenues, which are based on a percent of gross sales. The Company expects the provisions to primarily impact ~~certain~~ franchise ~~revenues~~and development fees as well as gift card programs and does not expect the standard to have a material effect on its financial statements. The Company does not plan to early adopt the standard and plans to use the modified retrospective approach to adopt the standard. For the Company, the new standard is effective for interim and annual periods beginning after December 15, 2017.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which requires lessee recognition of lease assets and lease liabilities on the balance sheet and disclosure of key information about leasing arrangements. For the Company, the new standard is effective for interim and annual periods beginning after December 15, 2018, and early adoption is permitted. A modified retrospective approach is required with an option to use certain practical expedients. The new guidance is required to be applied at the beginning of the earliest comparative period presented. The Company is currently evaluating the impact on its financial statements. Although the impact is not currently estimable, the Company expects to recognize lease assets and lease liabilities for most of the leases it currently accounts for as operating leases. In addition, for the Company's leases that are classified as sale-leaseback transactions, the Company will be required to record an initial adjustment to retained earnings associated with the previously deferred gains, and for any future transactions, the gain, adjusted for any off-market terms, will be recorded immediately. Currently the Company amortizes sale-leaseback gains over the lease term. The Company is continuing its assessment, which may identify other impacts.

In March 2016, the FASB issued ASU No. 2016-04, Recognition of Breakage for Certain Prepaid Stored-Value Products (Topic 405-20), which creates an exception under Topic 405-20 to derecognize financial liabilities related to certain prepaid stored-value products using a breakage model consistent with the revenue breakage model in Topic 606. The new guidance will be effective concurrent with Topic 606, which is effective for the Company for interim and annual periods beginning after December 15, 2017. The Company does not expect this standard to have a material effect on its financial statements.

In March 2016, the FASB issued ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting (Topic 718), to simplify various aspects of the accounting and presentation of share-based payments, including the income tax effects of awards and forfeiture assumptions. Currently, tax deductions in excess of compensation costs (excess tax benefits) are recorded in equity and tax deduction shortfalls (tax deficiencies), to the extent of previous excess tax benefits, are recorded in equity and then to income tax expense. Under the new guidance, all excess tax benefits and tax deficiencies will be recorded to income tax expense in the income statement, which could create volatility in the Company's income statement. The new guidance will also change the classification of excess tax benefits in the cash flow statement and impact the diluted earnings per share calculation. The guidance will be effective for interim and annual periods beginning after December 15, 2016, and early adoption is permitted. Different components of the guidance require prospective, retrospective and/or modified retrospective adoption. The Company is currently evaluating the impact on its financial statements and it is not currently estimable.

ITEM 2-MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management's Discussion and Analysis of financial condition and results of operations ("MD&A") is written to help the reader understand our company. The MD&A is provided as a supplement to, and should be read in conjunction with, our unaudited condensed consolidated financial statements and the accompanying financial statement notes. Any reference to restaurants refers to company-owned restaurants unless otherwise indicated. Throughout this MD&A, we refer to Fiesta Restaurant Group, Inc., together with its consolidated subsidiaries, as "we," "our" and "us."

We use a 52-53 week fiscal year ending on the Sunday closest to December 31. The fiscal year ended January ~~3, 2016~~1, 2017 contained 5352 weeks. The three months ended April 2, 2017 and April 3, 2016 ~~and March 29, 2015~~ each contained thirteen weeks. The fiscal year ending ~~January 1,~~December 31, 2017 will contain 52 weeks.

Company Overview

We own, operate and franchise two fast-casual restaurant brands, Pollo Tropical^® and Taco Cabana^®, which have almost 30 years and 40 years, respectively, of operating history and loyal customer ~~bases.~~bases in their core markets. Our Pollo Tropical restaurants offer a wide variety of freshly prepared Caribbean inspired food, while our Taco Cabana restaurants offer a broad selection of ~~hand-made,~~ freshly prepared ~~and authentic~~ Mexican inspired food. We believe that both brands are differentiated from other restaurant concepts and offer a unique dining experience. We are positioned within the value-oriented fast-casual restaurant segment, which combines the convenience and value of quick-service restaurants with the variety, food quality, décor and atmosphere more typical of casual dining restaurants. Our open display kitchen format allows guests to view and experience our food being freshly-prepared and cooked to order. Additionally, nearly all of our restaurants offer the convenience of drive-thru windows. As of April ~~3, 2016,~~2, 2017, our company-owned restaurants included ~~161~~180 Pollo Tropical restaurants and ~~162~~167 Taco Cabana restaurants.

We franchise our Pollo Tropical restaurants primarily internationally and as of April ~~3, 2016,~~2, 2017, we had 3127 franchised Pollo Tropical restaurants located in Puerto Rico, ~~Honduras, Trinidad & Tobago,~~ the Bahamas, Venezuela, Panama, ~~and~~ Guatemala and ~~five~~Guyana, and seven licensed locations on college campuses and at a hospital in Florida. We have agreements for the continued development of franchised Pollo Tropical restaurants in certain of our existing franchised ~~markets, and we have commitments for additional non-traditional locations in U.S. markets in which we currently operate.~~markets.

As of April ~~3, 2016,~~2, 2017, we had ~~four~~five franchised Taco Cabana ~~franchised~~ restaurants located in New Mexico and two non-traditional Taco Cabana licensed locations on college campuses in Texas.

Recent Events Affecting our Results of Operations

On April 24, 2017, we announced a strategic renewal plan to drive long-term value (the "Renewal Plan") that initially focuses on revitalizing restaurant performance in core markets and included the closure of 30 Pollo Tropical restaurants outside our core Florida markets. We closed all Pollo Tropical locations in Dallas-Fort Worth and Austin, Texas, and Nashville, Tennessee. We will continue to operate 19 Pollo Tropical restaurants outside of Florida, including 13 in Atlanta and six in south Texas. Up to five closed restaurants in Texas may be rebranded as Taco Cabana restaurants.

Strategic Renewal Plan Designed to Drive Long-Term Value Creation

As part of the Renewal Plan, we intend to relaunch the Pollo Tropical brand in September of this year and to relaunch the Taco Cabana brand late in the year once priority initiatives under the Renewal Plan are achieved.

Priority initiatives include the following:

Revitalizing Our Brands in Core Markets

Return to the founding principles that made each brand iconic

Improve quality and freshness of natural ingredients across the entire menu at both brands

Staff and manage restaurants to deliver the exceptional hospitality necessary to further build affinity and loyalty

Implement high quality systems that improve the guest experience and operational efficiency, including state-of-the-art digital platforms

Address deferred maintenance needs to bring restaurants up to a high quality standard

Managing Capital and Financial Discipline

Reduce costs throughout the organization to offset investments being made to enhance the guest experience

Until the relaunch, reduce broadcast media where possible and optimize post-launch advertising support

Analyze price elasticity across the restaurant portfolio, retaining a strong value proposition

Curtail new restaurant development and remodeling until revitalization is established

Establishing Platforms for Long Term Growth

Differentiate brands through refined positioning, marketing and digital strategies

Enhance catering and delivery capabilities, utilizing digital platforms including online ordering

Reformulate strategy to position each brand for successful future expansion outside of its core markets by leveraging a robust analytical process and deep industry expertise

Maximize cash-on-cash returns by refining restaurant prototypes to appeal to our target audience and optimizing the restaurant footprint

Store Closures

We closed all Pollo Tropical locations in Dallas-Fort Worth and Austin, Texas, and Nashville, Tennessee, however, we will continue to own and operate 19 Pollo Tropical restaurants outside of Florida, including 13 in Atlanta and six in south Texas in which to apply and prove successful regional strategies for future Pollo Tropical expansion beyond Florida

Up to five closed restaurants in Texas may be rebranded as Taco Cabana restaurants

Where possible, employees impacted by restaurant closures were offered positions at nearby restaurants

As a result, we recognized impairment charges in the first quarter of 2017, with respect to the 30 restaurants that we subsequently closed in the second quarter of 2017, seven of which were impaired in 2016, as well as an additional impairment charge related to previously closed restaurants primarily as a result of the decision not to convert a location to a Taco Cabana restaurant. We also recognized an impairment charge with respect to three Taco Cabana restaurants that we continue to operate. Impairment and other lease charges for the three months ended April 2, 2017 consisted of impairment charges for Pollo Tropical and Taco Cabana restaurants of $32.0 million and $0.3 million, respectively, and lease and other charges related to closed Pollo Tropical restaurants of $0.1 million, net of recoveries. We will recognize lease and other charges related to the closed restaurants in the second quarter of 2017.

The 30 closed restaurants contributed approximately $3.8 million in restaurant-level operating losses to income from operations, including $1.2 million of depreciation expense for the three months ended April 2, 2017.

The fast-casual restaurant industry experienced a continued general slowdown in 2016 that continued into the first quarter of 2017, specifically in Florida and Texas. We believe the challenging market and industry conditions in Florida and Texas and, in the case of Pollo Tropical, sales cannibalization from new restaurants on existing restaurants contributed to a decline in comparable restaurant transactions and sales in the first quarter of 2017.

Executive ~~Summary-Consolidated~~Summary - Consolidated Operating Performance for the Three Months Ended April ~~3, 2016~~2, 2017

Our first quarter ~~2016~~2017 results and highlights include the following:

Net income (loss) decreased ~~$0.6~~$25.0 million to ~~$9.9~~$(15.1) million in the first quarter of ~~2016,~~2017, or ~~$0.37~~$(0.56) per diluted share, compared to net income of ~~$10.5~~$9.9 million, or ~~$0.39~~$0.37 per diluted share in the first quarter of ~~2015,~~2016, due primarily ~~due~~ to impairment charges, new restaurant performance, lower comparable restaurant sales and ~~advisory fees related to the proposed separation transaction discussed in our Annual Report on Form 10-K for the fiscal year ended January 3, 2016.~~higher operating expenses and general and administrative costs.

Total revenues ~~increased 7.8%~~decreased 0.6% in the first quarter of 2017 to $175.6 million compared to $176.7 million in the first quarter of 2016, ~~to $176.7 million compared to $163.9 million in the first quarter of 2015,~~ driven primarily by ~~an increase in the number of our company-owned restaurants and an increase~~a decrease in comparable restaurant sales. Comparable restaurant sales ~~of 1.7%~~decreased 4.5% for our Taco Cabana ~~restaurants. The growth~~restaurants resulting primarily from a decrease in comparable restaurant transactions of 4.0% and a decrease in average check of 0.5%. Comparable restaurant sales ~~resulted~~decreased 6.7% for our Pollo Tropical restaurants resulting primarily from a decrease in comparable restaurant transactions of 8.9% partially offset by an increase in average check of ~~2.5%, partially offset by a decrease in comparable guest traffic~~2.2%.

During the first quarter of ~~0.8% at~~2017, we opened three company-owned Pollo Tropical restaurants and one Taco ~~Cabana. An increase in comparable guest traffic of 0.1% was offset by a decrease in average check of 0.1% at Pollo Tropical.~~

Cabana restaurant. During the first quarter of 2016, we opened six ~~new~~ company-owned Pollo Tropical restaurants. ~~During the first quarter of 2015, we opened six new company-owned Pollo Tropical restaurants and closed three company-owned Taco Cabana restaurants.~~

Adjusted EBITDA increased $0.3 million in the first quarter of 2016 to $25.3 million compared to $25.0 million in the first quarter of 2015. The net impact of revenue growth in the first quarter of 2016 was largely offset by new restaurant performance and advisory fees related to the proposed separation transaction. Adjusted EBITDA is a non-GAAP financial measure of performance. For a discussion of our use of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net income, see "Management's Use of Non-GAAP Financial Measures".

•

Adjusted EBITDA decreased $6.0 million in the first quarter of 2017 to $19.3 million compared to $25.3 million in the first quarter of 2016, driven by lower profitability as a result of new restaurant performance, lower comparable restaurant sales, higher operating expenses and general and administrative costs. Adjusted EBITDA is a non-GAAP financial measure of performance. For a discussion of our use of Adjusted EBITDA and a reconciliation from net income to Adjusted EBITDA, see "Management's Use of Non-GAAP Financial Measures".

Results of Operations

The following table summarizes the changes in the number and mix of Pollo Tropical and Taco Cabana company-owned and franchised restaurants.



	Pollo Tropical					Taco Cabana
	Owned	Franchised		Total		Owned	Franchised	Total

January 1, 2017	177	35		212		166	7	173
New	3	2		5		1	—	1
Closed	—	(3	)	(3	)	—	—	—
April 2, 2017	180	34		214		167	7	174

January 3, 2016	155	35		190		162	6	168
New	6	1		7		—	—	—
Closed	—	—		—		—	—	—
April 3, 2016	161	36		197		162	6	168

Three Months Ended April 2, 2017 Compared to Three Months Ended April 3, 2016

The following table sets forth, for the three months ended April 2, 2017 and April 3, 2016, ~~and March 29, 2015,~~ selected consolidated operating results as a percentage of consolidated restaurant sales and selected segment operating results as a percentage of applicable segment restaurant ~~sales:~~sales.


	Three Months Ended												Three Months Ended
	April 3, 2016		March 29, 2015		April 3, 2016		March 29, 2015		April 3, 2016		March 29, 2015		April 2, 2017		April 3, 2016		April 2, 2017		April 3, 2016		April 2, 2017		April 3, 2016
	Pollo Tropical				Taco Cabana				Consolidated				Pollo Tropical				Taco Cabana				Consolidated
Restaurant sales:
Pollo Tropical									56.2	%	53.3	%									56.8	%	56.2	%
Taco Cabana									43.8	%	46.7	%									43.2	%	43.8	%
Consolidated restaurant sales									100.0	%	100.0	%									100.0	%	100.0	%
Costs and expenses:
Cost of sales	32.0	%	32.8	%	29.1	%	29.6	%	30.7	%	31.4	%	30.2	%	32.0	%	27.8	%	29.1	%	29.1	%	30.7	%
Restaurant wages and related expenses	23.1	%	21.6	%	28.8	%	28.7	%	25.6	%	24.9	%	24.2	%	23.1	%	31.8	%	28.8	%	27.5	%	25.6	%
Restaurant rent expense	4.7	%	4.2	%	5.6	%	5.7	%	5.1	%	4.9	%	5.4	%	4.7	%	5.9	%	5.6	%	5.6	%	5.1	%
Other restaurant operating expenses	12.7	%	11.6	%	12.7	%	12.8	%	12.7	%	12.2	%	13.5	%	12.7	%	14.1	%	12.7	%	13.8	%	12.7	%
Advertising expense	3.8	%	2.7	%	4.2	%	4.2	%	4.0	%	3.4	%	4.4	%	3.8	%	4.2	%	4.2	%	4.3	%	4.0	%
Pre-opening costs	1.1	%	1.0	%	0.1	%	0.1	%	0.7	%	0.6	%	0.3	%	1.1	%	0.1	%	0.1	%	0.2	%	0.7	%

~~The following table summarizes the changes in the number and mix of Pollo Tropical and Taco Cabana company-owned and franchised restaurants:~~

Pollo Tropical Taco Cabana
Owned Franchised Total Owned Franchised Total

January 3, 2016 155
35
190
162
6
168
   New 6
1
7
—
—
—
   Closed —
—
—
—
—
—
April 3, 2016 161
36
197
162
6
168

December 28, 2014 124
37
161
167
7
174
   New 6
—
6
—
—
—
   Closed —
—
—
(3 ) —
(3 )
March 29, 2015 130
37
167
164
7
171

Consolidated Revenues. Revenues include restaurant sales ~~which consist~~and franchise royalty revenues and fees. Restaurant sales consists of food and beverage sales, net of discounts, at our company-owned ~~restaurants, and franchise~~restaurants. Franchise royalty revenues and fees ~~which~~ represent ongoing royalty payments that are determined based on a percentage of franchisee sales, franchise fees associated with new restaurant openings, and development fees associated with the opening of new franchised restaurants in a given market. Restaurant sales are influenced by new restaurant openings, closures of restaurants and changes in comparable restaurant sales.

Total revenues ~~increased 7.8%~~decreased 0.6% to $175.6 million in the first quarter of 2017 from $176.7 million in the first quarter of ~~2016 from $163.9~~2016. Restaurant sales decreased 0.5% to $175.0 million in the first quarter of ~~2015. Restaurant sales increased 7.9% to~~2017 from $175.9 million in the first quarter of ~~2016 from $163.1 million in the first quarter of 2015.~~2016.

The following table presents the primary drivers of the increase or decrease in restaurant sales for both Pollo Tropical and Taco Cabana for the first quarter of ~~2016~~2017 compared to the first quarter of ~~2015~~2016 (in millions):.


Pollo Tropical:
Increase in comparable restaurant sales	$	—
Decrease in comparable restaurant sales				$	(6.0	)
Incremental sales related to new restaurants, net of closed restaurants	12.0			6.4
Total increase	$	12.0		$	0.4

Taco Cabana:
Increase in comparable restaurant sales	$	1.2
Decrease in sales related to closed restaurants, net of new restaurants	(0.3		)
Total increase	$	0.9
Decrease in comparable restaurant sales				$	(3.4	)
Incremental sales related to new restaurants, net of closed restaurants				2.0
Total decrease				$	(1.4	)

Comparable restaurant sales for Pollo Tropical restaurants ~~were flat~~decreased 6.7% in the first quarter of ~~2016.~~2017. Comparable restaurant sales for Taco Cabana restaurants ~~increased 1.7%~~decreased 4.5% in the first quarter of ~~2016.~~2017. Restaurants are included in comparable restaurant sales after they have been open for 18 months. Increases or decreases in comparable restaurant sales result primarily from an increase or decrease in ~~guest traffic~~comparable restaurant transactions and ~~an increase~~ in average check. The increase in average check is primarily driven by menu price increases. For Pollo Tropical, ~~average check decreased due to sales mix and higher discounting,~~a decrease in comparable restaurant transactions of 8.9% was partially offset by menu price increases that drove an increase in restaurant sales of ~~0.7%~~2.0% in the first quarter of ~~2016~~2017 as compared to the first quarter of ~~2015.~~2016. For Taco Cabana, a decrease in comparable restaurant transactions of 4.0% and a decrease in average check driven by unfavorable sales mix was partially offset by menu price increases ~~drove an increase in~~that positively impacted restaurant sales ~~of 2.7%~~by 2.2% in the first quarter of ~~2016~~2017 as compared to the first quarter of ~~2015, partially offset by a change in sales mix.~~2016. As a result of new restaurant openings, ~~planned~~expected sales cannibalization of existing restaurants negatively impacted comparable restaurant sales for Pollo Tropical by ~~2.0%~~0.7% in the first quarter of ~~2016.~~2017. Comparable restaurant sales ~~were also~~for both brands continue to be negatively impacted by the general fast-casual industrywide slowdown in restaurant sales ~~industrywide.~~in Florida and Texas.

~~Restaurants~~According to data reported by TDn2K’s Black Box Intelligence, in the first quarter of 2017 comparable restaurant transactions in the fast casual segment declined 680 bps and 650 bps in Florida and Texas, respectively. Pollo Tropical comparable restaurant transactions in Florida were approximately 100 basis points lower than fast casual restaurant peers and Taco Cabana comparable restaurant transactions in Texas were 250 basis points higher than fast casual restaurant peers. Sales cannibalization negatively impacted Pollo Tropical comparable restaurant transactions in Florida by approximately 0.7%.

In addition, restaurants in newer markets ~~that have not reached media efficiency~~ generally have lower sales than restaurants in mature ~~media-efficient~~ markets. As a result, Pollo Tropical revenues ~~are growing~~have grown at a slower rate than the average number of restaurants.

Franchise revenues remained relatively stable and decreased by ~~less than~~ $0.1 million to $0.6 million in the first quarter of 2017 from $0.7 million in the first quarter of ~~2016 from $0.8 million in the first quarter of 2015.~~2016.

Operating costs and expenses. Operating costs and expenses include cost of sales, restaurant wages and related expenses, other restaurant expenses and advertising expenses. Cost of sales consists of food, paper and beverage costs including packaging costs, less rebates and purchase discounts. Cost of sales is generally influenced by changes in commodity costs, the sales mix of items sold and the effectiveness of our restaurant-level controls to manage food and paper costs. Key commodities, including chicken and beef, are generally purchased under contracts for future periods of up to one year.

Restaurant wages and related expenses include all restaurant management and hourly productive labor costs, employer payroll taxes, restaurant-level bonuses and related benefits. Payroll and related taxes and benefits are subject to inflation, including minimum wage increases and increased costs for health insurance, workers' compensation insurance and state unemployment insurance.

Other restaurant operating expenses include all other restaurant-level operating costs, the major components of which are utilities, repairs and maintenance, general liability insurance, real estate taxes, sanitation, supplies and credit card fees.

Advertising expense includes all promotional expenses including television, radio, billboards and other sponsorships and promotional activities.

Pre-opening costs include costs incurred prior to opening a restaurant, including restaurant employee wages and related expenses, travel expenditures, recruiting, training, promotional costs associated with the restaurant opening and rent, including

any non-cash rent expense recognized during the construction period. Pre-opening costs are generally incurred beginning four to six months prior to a restaurant opening.

The following tables present the primary drivers of the changes in the components of restaurant operating margins for Pollo Tropical and Taco Cabana for the first quarter of ~~2016~~2017 compared to the first quarter of ~~2015.~~2016. All percentages are stated as a percentage of applicable segment restaurant sales.



Pollo Tropical:
Cost of sales:
Lower commodity costs	(~~2.1~~0.8	)%
~~Higher~~Menu price increases	(0.8	)%
Improved operating efficiencies	(0.4	)%
Lower promotions and discounts	(0.2	)%
Sales mix	0.3	%
~~Operating inefficiencies~~	~~0.8~~	%
Other	~~0.2~~0.1	%
Net decrease in cost of sales as a percentage of restaurant sales	(~~0.8~~1.8	)%

Restaurant wages and related expenses:
Higher labor costs for new restaurants⁽¹⁾	0.5	%
Higher labor costs for comparable restaurants⁽¹⁾	0.4	%
Higher ~~labor~~workers compensation costs ~~and impact of lower sales volumes for new restaurants~~ ⁽¹⁾	~~1.1~~0.1	%
Higher ~~medical benefit~~incentive bonus costs⁽²⁾	~~0.3~~0.2	%
Lower ~~incentive bonus~~medical benefit costs⁽¹⁾	(0.2	)%
Other	(0.1	)%
Net increase in restaurant wages and related costs as a percentage of restaurant sales	~~1.5~~1.1	%

Other operating expenses:
Higher ~~repairs and maintenance~~utility costs⁽¹⁾	~~0.5~~0.3	%
Higher insurance costs⁽¹⁾	0.2	%
Higher real estate taxes generally related to new restaurants⁽¹⁾	0.2	%
~~Lower insurance costs~~Other	~~(0.4~~	)%
~~Higher real estate taxes related to new restaurants~~	~~0.5~~	%
~~Other~~ ~~(2)~~	~~0.5~~0.1	%
Net increase in other restaurant operating expenses as a percentage of restaurant sales	~~1.1~~0.8	%

Advertising expense:
~~Increase~~Unused pre-production costs and increase in advertising	~~1.1~~0.6	%
Net increase in advertising expense as a percentage of restaurant sales	~~1.1~~0.6	%

Pre-opening costs:
~~Timing~~Decrease in the number of restaurant openings	~~0.1~~(0.8	)%
Net ~~increase~~decrease in pre-opening costs as a percentage of restaurant sales	~~0.1~~(0.8	)%

⁽¹⁾ Includes ~~additional restaurant managers in training that will be deployed~~the impact of lower sales on fixed and semi-fixed costs.

⁽²⁾Includes the impact of a one-time revised bonus plan designed to ~~new restaurants as they open.~~

~~(2) Includes higher credit card, sanitation and various other costs.~~promote retention.



Taco Cabana:
Cost of sales:
~~Menu price increases~~Lower commodity costs	(~~0.8~~1.3	)%
~~Sales mix~~Menu price increases	(~~0.3~~0.6	)%
~~Operating inefficiencies~~Higher promotions and discounts	~~0.4~~0.8	%
Other	(0.2	)%
Net decrease in cost of sales as a percentage of restaurant sales	(~~0.5~~1.3	)%

Restaurant wages and related expenses:
Higher labor costs ~~for comparable restaurants~~⁽¹⁾	~~0.6~~2.2	%
~~Impact of closing lower sales volume restaurants, net of new restaurants~~ Higher medical costs⁽¹⁾	~~(0.2~~	)%
~~Higher workers' compensation claim costs~~	~~0.4~~0.3	%
~~Lower medical benefit~~ Higher incentive bonus costs⁽²⁾	~~(0.6~~0.5	)%
~~Other~~	~~(0.1~~	)%
Net increase in restaurant wages and related costs as a percentage of restaurant sales	~~0.1~~3.0	%

Other operating expenses:
Higher repairs and maintenance costs⁽¹⁾	~~0.3~~0.2	%
~~Lower utilities~~ Higher operating supplies⁽¹⁾	~~(0.5~~0.2	)%
Higher real estate taxes⁽¹⁾	0.4	%
Other⁽¹⁾	~~0.1~~0.6	%
Net ~~decrease~~increase in other restaurant operating expenses as a percentage of restaurant sales	~~(0.1~~1.4	)%

Advertising expense:
Net change in advertising expense as a percentage of restaurant sales	—	%

Pre-opening costs:
Net change in pre-opening costs as a percentage of restaurant sales	—	%

⁽¹⁾ Includes the impact of lower sales on fixed and semi-fixed costs.

⁽²⁾Includes the impact of a one-time revised bonus plan designed to promote retention.

Consolidated Restaurant Rent Expense. Restaurant rent expense includes base rent and contingent rent on our leases characterized as operating leases, reduced by amortization of gains on sale-leaseback transactions. Restaurant rent expense, as a percentage of total restaurant sales, increased to 5.6% in the first quarter of 2017 from 5.1% in the first quarter of 2016 ~~from 4.9% in the first quarter of 2015~~ primarily as a result of new restaurants ~~which~~that generally have higher rent ~~partially offset by~~and lower sales, and the impact of ~~higher~~lower comparable restaurant sales.

Consolidated General and Administrative Expenses. General and administrative expenses are comprised primarily of (1) salaries and expenses associated with the development and support of our company and brands and the management oversight of the operation of our restaurants; and (2) legal, auditing and other professional fees and stock-based compensation expense.

General and administrative expenses were $16.0 million in the first quarter of 2017 and $13.8 million in the first quarter of 2016, ~~and the first quarter of 2015,~~ and as a percentage of total revenues, general and administrative expenses ~~decreased~~increased to 9.1% in the first quarter of 2017 compared to 7.8% in the first quarter of 2016, ~~compared~~due primarily to ~~8.4%~~the costs described below, higher incentive-based compensation costs and higher medical costs. The increase in incentive-based compensation costs was due primarily to retention-related bonus costs in the first quarter of 2017 and favorable adjustments related to 2015 ~~due primarily~~bonuses in the first quarter of 2016. General and administrative expenses in the first quarter of 2017 included a $0.8 million charge for terminated capital project costs, $0.8 million of financial and legal advisory and other fees related to ~~higher current year sales~~the Company’s CEO and ~~lower incentive based compensation costs. In addition, general~~board member searches, shareholder activism and related matters and a $0.3 million write-off of site development costs related to locations that we decided not to develop, partially offset by the benefit of $0.5 million related to litigation matters. General and administrative expenses in the first quarter of 2016 ~~include~~included $0.7 million inof financial and legal advisory fees and $0.1 million for the write-off of site costs related to ~~the proposed separation transaction discussed in our Annual Report on Form 10-K for the fiscal year ended January 3, 2016,~~locations that we decided not to develop, partially offset by ~~a $0.4~~the benefit of $0.3 million ~~reduction in legal settlement costs.~~related to litigation matters.

Adjusted EBITDA. Adjusted EBITDA, which is one of the measures of segment profit or loss used by our chief operating decision maker for purposes of allocating resources to our segments and assessing their performance, 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 and other income and expense. Adjusted EBITDA may not necessarily be ~~necessarily~~ comparable to other similarly titled captions of other companies due to differences in methods of calculation. Adjusted EBITDA for each of our segments includes an allocation of general and administrative expenses associated with administrative support for executive management, information systems and certain accounting, legal, supply chain, human resources, development, and other administrative functions.

Adjusted EBITDA is a non-GAAP financial measure of performance. For a discussion of our use of Adjusted EBITDA and a reconciliation offrom net income to Adjusted EBITDA, ~~to net income,~~ see the heading entitled "Management's Use of Non-GAAP Financial Measures".

Adjusted EBITDA for Pollo Tropical decreased to $13.8 million in the first quarter of 2017 from $15.7 million in the first quarter of 2016 ~~from $16.0 million in the first quarter of 2015~~ primarily as a result of lower profitability at new restaurants, the impact of lower comparable restaurant sales and higher ~~advertising~~operating expenses and ~~other costs, partially offset by the increase in revenues.~~general and administrative costs. Adjusted EBITDA for Taco Cabana ~~increased~~decreased to $5.5 million in the first quarter of 2017 from $10.2 million in the first quarter of 2016 ~~from $9.0~~primarily as a result of the impact of lower comparable restaurant sales, and higher operating expenses and general and administrative costs. Consolidated Adjusted EBITDA decreased to $19.3 million in the first quarter of ~~2015 primarily due to~~2017 from $25.3 million in the ~~net impact~~first quarter of ~~the increase in revenues.~~2016.

Depreciation and Amortization. Depreciation and amortization expense increased to $9.2 million in the first quarter of 2017 from $8.3 million in the first quarter of 2016 ~~from $6.8 million in the first quarter of 2015~~ due primarily to increased depreciation ~~relating~~related to new restaurant openings.

Impairment and Other Lease Charges. As discussed under Recent Events Affecting our Results of Operations, on April 24, 2017, we announced a strategic renewal plan to drive long-term value that includes the closure of 30 Pollo Tropical restaurants outside our core Florida markets. We closed all Pollo Tropical locations in Dallas-Fort Worth and Austin, Texas, and Nashville, Tennessee. we will continue to operate 19 Pollo Tropical restaurants outside of Florida, including 13 in Atlanta and six in south Texas. Up to five closed restaurants in Texas may be rebranded as Taco Cabana restaurants.

In the first quarter of 2017, we recognized impairment charges with respect to the 30 restaurants that we subsequently closed in the second quarter of 2017, seven of which were impaired in 2016, as well as an additional impairment charge related to previously closed restaurants primarily as a result of the decision not to convert a location to a Taco Cabana restaurant. We also recognized an impairment charge with respect to three Taco Cabana restaurants that it continues to operate. Impairment and other lease charges ~~were $0.1 million in~~for the ~~first quarter of 2015~~

~~and~~three months ended April 2, 2017 consisted of impairment charges for Pollo Tropical and Taco Cabana ~~locations that have closed.~~restaurants of $32.0 million and $0.3 million, respectively, and lease and other charges related to closed Pollo Tropical restaurants of $0.1 million, net of recoveries. We will recognize lease and other charges related to the closed restaurants in the second quarter of 2017.

Each quarter we assess the potential impairment of any long-lived assets that have experienced a triggering event, including restaurants for which the related trailing twelve month cash flows are below a certain threshold. ~~After reviewing~~We determine if there is impairment at the ~~specific~~restaurant level by comparing undiscounted future cash flows from the related long-lived assets to their respective carrying values. In determining future cash flows, significant estimates are made by us with respect to future operating results of each restaurant over its remaining lease term, including sales trends, labor rates, commodity costs and ~~management’s plans~~other operating cost assumptions. If assets are determined to be impaired, the impairment charge is measured by calculating the amount by which the asset carrying amount exceeds its fair value. This process of assessing fair values requires the use of estimates and assumptions, including our ability to sell or reuse the related assets and market conditions, which are subject to a high degree of judgment. If these assumptions change in the future, we may be required to record impairment charges for these assets and these charges could be material.

Many new restaurants in Pollo Tropical’s emerging markets have opened at lower sales volumes and have not yet achieved the sales volumes required to generate positive cash flows. Pollo Tropical's emerging markets have included Atlanta, Nashville and Texas. Subsequent to the ~~restaurants for which an impairment review was performed, we determined that no impairment was currently necessary. However, for six~~restaurant closures discussed above, Pollo ~~Tropical restaurants~~Tropical’s emerging markets include Atlanta and ~~one Taco Cabana restaurant, the projected cash flows were not substantially in excess of their~~south Texas. The combined carrying values of ~~$10.2~~the operating restaurants in Atlanta and south Texas are $21.2 million and ~~$1.3~~$12.5 million, ~~respectively.~~respectively, as of April 2, 2017.

We have initiated operational and transactional growth plans to drive improved performance in the Atlanta and south Texas markets and will continue to evaluate their long-term viability. Our estimates of future cash flows assume these plans will succeed and sales will reach the levels required to generate cash flows that exceed the carrying value of the restaurants. Our cash flow projections include, among other things, significant sales growth as the result of the introduction of broadcast media, dedicated sales positions to build our catering business, increased frequency with the launch of our loyalty program, third party delivery and local store marketing. If these assumptions change in the future or the performance of these restaurants does not improve as projected, an impairment charge could be recognized in future periods, and such charge could be material.

Three operating Pollo Tropical restaurants open more than twelve months in markets outside of Florida with a combined carrying value of $4.9 million had projected cash flows that exceed the restaurant's carrying value by a small margin. In addition, six operating Pollo Tropical restaurants opened during 2016 in markets outside of Florida with a combined carrying value of $11.0 million have initial sales volumes lower than expected, but do not have significant operating history to form a good basis for future projections. The nine restaurants contributed approximately $0.9 million in restaurant-level operating losses to income from

operations, including $0.4 million in depreciation expense for the three months ended April 2, 2017. In addition, one Taco Cabana restaurant with a carrying value of $1.0 million had projected cash flows that exceed the restaurant’s carrying value by a small margin. For these restaurants, if expected performance improvements described above are not realized, an impairment charge may be recognized in future periods, and such charge could be material.

Other Expense (Income) ~~Expense.~~, Net. Other expense of $0.1 million in the first quarter of 2017 primarily consisted of costs for the removal of signs and equipment related to closed Pollo Tropical restaurants. Other income of $0.2 million in the first quarter of 2016 primarily consisted of ~~additional~~expected business interruption insurance proceeds ~~related~~for a Pollo Tropical location that was temporarily closed due to a location that closed in 2015 as a result of an eminent domain proceeding. Other income in the first quarter of 2015 primarily consisted of a previously deferred gain from a sale-leaseback transaction that was recognized upon termination of the lease as a result of an eminent domain proceeding.fire.

Interest Expense. Interest expense ~~increased to~~was $0.6 million in the first quarter of ~~2016 from $0.4 million in~~2017 and 2016.

Provision for (Benefit from) Income Taxes. The effective tax rate was 36.5% for the first quarter ~~2015.~~

~~Provision~~of 2017 and the first quarter of 2016. The benefit from income taxes for ~~Income Taxes.~~the first quarter of 2017 was derived using an estimated annual effective tax rate, excluding the discrete impact of a tax benefit deficiency from the vesting of restricted shares and the tax benefit resulting from impairment and other lease charges of $0.1 million and $11.8 million, respectively, of 35.6%. The provision for income taxes for the first quarter of 2016 was derived using an estimated effective annual income tax rate of 36.5% ~~for~~. As discussed in Note 1, tax benefit deficiencies and excess tax benefits created upon the ~~first quarter~~vesting of ~~2016 and 38.3% for~~restricted shares are now recorded as a discrete item within the ~~first quarter of 2015. There were no discrete tax adjustments in the first quarter of 2016 or 2015. The effective annual~~ income tax ~~rate decreased in the first quarter of 2016 compared~~provision. These amounts were previously recorded as an adjustment to ~~the first quarter of 2015 due primarily to the reinstatement of Work Opportunity Tax Credits.~~Additional paid-in capital.

Net ~~Income.~~Income (Loss). As a result of the foregoing, we had a net loss of $15.1 million in the first quarter of 2017 compared to net income of $9.9 million in the first quarter of ~~2016 compared to net income of $10.5 million in the first quarter of 2015.~~2016.

Liquidity and Capital Resources

We do not have significant receivables or inventory and receive trade credit based upon negotiated terms in purchasing food products and other supplies. We are able to operate with a substantial working capital deficit because:

restaurant operations are primarily conducted on a cash basis;

rapid turnover results in a limited investment in inventories; and

cash from sales is usually received before related liabilities for food, supplies and payroll become due.

Capital expenditures and payments related to our lease obligations represent significant liquidity requirements for us. We believe cash generated from our operations, availability of borrowings under our senior credit facility and proceeds from any sale-leaseback transactions which we may choose to do will provide sufficient cash availability to cover our anticipated working capital needs, capital expenditures and debt service requirements for the next twelve months.

Operating Activities. Net cash provided by operating activities in the first three months of 2017 and 2016 ~~and 2015~~ was ~~$18.0~~$12.2 million and ~~$12.8~~$18.0 million, respectively. The ~~increase~~decrease in net cash provided by operating activities in the first three months of ~~2016~~2017 was primarily driven by the decrease in Adjusted EBITDA and increase in deferred income taxes, partially offset by the timing of payments.

Investing Activities. Net cash used in investing activities in the first three months of 2017 and 2016 ~~and 2015~~ was ~~$19.2~~$11.7 million and ~~$19.3~~$19.2 million, respectively. Capital expenditures are the largest component of our investing activities and include: (1) new restaurant development, which may include the purchase of real estate; (2) restaurant remodeling/reimaging, which includes the renovation or rebuilding of the interior and exterior of our existing restaurants; (3) other restaurant capital expenditures, which include capital

maintenance expenditures for the ongoing reinvestment and enhancement of our restaurants; and (4) corporate and restaurant information systems.

The following table sets forth our capital expenditures for the periods presented (in thousands):.


	Pollo Tropical		Taco Cabana		Other		Consolidated		Pollo Tropical		Taco Cabana		Other		Consolidated
Three Months Ended April 2, 2017:
New restaurant development									$	6,719	$	1,852	$	—	$	8,571
Restaurant remodeling									212		5		—		217
Other restaurant capital expenditures⁽¹⁾									896		793		—		1,689
Corporate and restaurant information systems									836		46		315		1,197
Total capital expenditures									$	8,663	$	2,696	$	315	$	11,674
Number of new restaurant openings									3		1		—		4
Three Months Ended April 3, 2016:
New restaurant development	$	13,150	$	936	$	—	$	14,086	$	13,150	$	936	$	—	$	14,086
Restaurant remodeling	243		—		—		243		243		—		—		243
Other restaurant capital expenditures (1)	425		485		—		910		425		485		—		910
Corporate and restaurant information systems	281		213		1,058		1,552		281		213		1,058		1,552
Total capital expenditures	$	14,099	$	1,634	$	1,058	$	16,791	$	14,099	$	1,634	$	1,058	$	16,791
Number of new restaurant openings	6		—				6		6		—		—		6
Three Months Ended March 29, 2015:
New restaurant development	$	14,476	$	1,479	$	—	$	15,955
Restaurant remodeling	—		872		—		872
Other restaurant capital expenditures (1)	555		690		—		1,245
Corporate and restaurant information systems	11		10		1,164		1,185
Total capital expenditures	$	15,042	$	3,051	$	1,164	$	19,257
Number of new restaurant openings	6		—				6



Delaware	90-0712224
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
14800 Landmark Boulevard, Suite 500 Dallas, Texas	75254
(Address of principal executive office)	(Zip Code)



Large accelerated filer	ý	Accelerated filer	¨

Non-accelerated filer	¨(Do not check if smaller reporting company)

		Smaller reporting company	¨
~~(Do not check if smaller reporting company)~~
		Emerging growth company	¨



		Page
PART I FINANCIAL INFORMATION

Item 1	Interim Condensed Consolidated Financial Statements (Unaudited) - Fiesta Restaurant Group, Inc.:

	Condensed Consolidated Balance Sheets as of April ~~3, 2016~~2, 2017 and January ~~3, 2016~~	3

	~~Condensed Consolidated Statements of Operations for the Three Months Ended April 3, 2016 and March 29, 2015~~1, 2017	4

	Condensed Consolidated Statements of ~~Changes in Stockholders' Equity~~Operations for the Three Months Ended April 2, 2017 and April 3, 2016 ~~and March 29, 2015~~	5

	Condensed Consolidated Statements of ~~Cash Flows~~Changes in Stockholders' Equity for the Three Months Ended April 2, 2017 and April 3, 2016 ~~and March 29, 2015~~	6

	~~Notes to Unaudited~~ Condensed Consolidated ~~Financial~~ Statements of Cash Flows for the Three Months Ended April 2, 2017 and April 3, 2016	7

	Notes to Unaudited Condensed Consolidated Financial Statements	8

Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1315

Item 3	Quantitative and Qualitative Disclosures About Market Risk	2328

Item 4	Controls and Procedures	2328

PART II OTHER INFORMATION

Item 1	Legal Proceedings	2328

Item 1A	Risk Factors	2328

Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	2329

Item 3	Defaults Upon Senior Securities	2429

Item 4	Mine Safety Disclosures	2429

Item 5	Other Information	2429

Item 6	Exhibits	2530


	April 3, 2016		January 3, 2016		April 2, 2017		January 1, 2017
ASSETS
Current assets:
Cash	$	4,053	$	5,281	$	7,712	$	4,196
Trade receivables	9,483		9,217		9,207		8,771
Inventories	2,669		2,910		2,688		2,865
Prepaid rent	3,295		3,163		3,639		3,575
Income tax receivable	2,000		7,448		210		3,304
Prepaid expenses and other current assets	4,778		3,219		5,908		4,231
Total current assets	26,278		31,238		29,364		26,942
Property and equipment, net	262,838		248,992		241,705		270,920
Goodwill	123,484		123,484		123,484		123,484
Deferred income taxes	8,497		8,497		26,225		14,377
Deferred financing costs, net	841		918
Other assets	2,451		2,516		5,867		5,842
Total assets	$	424,389	$	415,645	$	426,645	$	441,565
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt	$	55	$	69	$	91	$	89
Accounts payable	19,778		12,405		14,481		16,165
Accrued payroll, related taxes and benefits	11,675		15,614		12,999		12,275
Accrued real estate taxes	3,007		6,121		3,537		6,924
Other liabilities	9,078		12,096		12,455		11,316
Total current liabilities	43,593		46,305		43,563		46,769
Long-term debt, net of current portion	72,513		72,612		74,399		71,423
Lease financing obligations	1,663		1,663		1,664		1,664
Deferred income—sale-leaseback of real estate	29,184		30,086		26,264		27,165
Other liabilities	22,591		20,997		30,967		30,369
Total liabilities	169,544		171,663		176,857		177,390
Commitments and contingencies
Stockholders' equity:
Common stock, par value $.01; authorized 100,000,000 shares, issued 26,908,420 and 26,829,220 shares, respectively, and outstanding 26,630,642 and 26,571,602 shares, respectively.	266		266
Common stock, par value $.01; authorized 100,000,000 shares, issued 27,063,800 and 26,884,992 shares, respectively, and outstanding 26,787,205 and 26,755,640 shares, respectively.					268		267
Additional paid-in capital	160,692		159,724		163,923		163,204
Retained earnings	93,887		83,992		85,597		100,704
Total stockholders' equity	254,845		243,982		249,788		264,175
Total liabilities and stockholders' equity	$	424,389	$	415,645	$	426,645	$	441,565


	Number of			Additional					Total			Number of Common Stock Shares	Common Stock		Additional Paid-In Capital			Retained Earnings			Total Stockholders' Equity
	Common	Common		Paid-In			Retained		Stockholders'
	Stock Shares	Stock		Capital			Earnings		Equity
Balance at December 28, 2014	26,358,448	$	264	$	153,867		$	45,456	$	199,587
Stock-based compensation	—	—		941			—		941
Vesting of restricted shares and related tax benefit	116,239	1		887			—		888
Net income	—	—		—			10,501		10,501
Balance at March 29,2015	26,474,687	$	265	$	155,695		$	55,957	$	211,917

Balance at January 3, 2016	26,571,602	$	266	$	159,724		$	83,992	$	243,982		26,571,602	$	266	$	159,724		$	83,992		$	243,982
Stock-based compensation	—	—		1,011			—		1,011			—	—		1,011			—			1,011
Vesting of restricted shares and related tax benefit (deficiency)	59,040	—		(43		)	—		(43		)
Vesting of restricted shares												59,040	—		—			—			��
Tax deficiency from stock-based compensation															(43		)				(43		)
Net income	—	—		—			9,895		9,895			—	—		—			9,895			9,895
Balance at April 3, 2016	26,630,642	$	266	$	160,692		$	93,887	$	254,845		26,630,642	$	266	$	160,692		$	93,887		$	254,845

Balance at January 1, 2017												26,755,640	$	267	$	163,204		$	100,704		$	264,175
Stock-based compensation												—	—		646			—			646
Vesting of restricted shares												31,565	1		—			—			1
Cumulative effect of adopting a new accounting standard (Note 1)															73			(47		)	26
Net loss												—	—		—			(15,060		)	(15,060		)
Balance at April 2, 2017												26,787,205	$	268	$	163,923		$	85,597		$	249,788



ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934



	Three Months Ended April 3, 2016			Year Ended January 3, 2016
Balance, beginning of period	$	1,832		$	1,251
Provisions for restaurant closures	—			554
Additional lease charges, net of (recoveries)	—			258
Payments, net	(166		)	(358		)
Other adjustments	108			127
Balance, end of period	$	1,774		$	1,832



	Non-Vested Shares				Restricted Stock Units
			Weighted				Weighted
			Average				Average
			Grant Date				Grant Date
	Shares		Price		Units		Price
Outstanding at January 3, 2016	257,618		$	30.69	42,840		$	56.46
Granted	83,778		35.25		39,453		35.25
Vested/Released	(58,918	)	33.00		(122	)	51.45
Forfeited	(4,700	)	37.62		(1,093	)	47.02
Outstanding at April 3, 2016	277,778		$	31.46	81,078		$	46.27


	Three Months Ended						Three Months Ended
(Dollars in thousands)	April 3, 2016			March 29, 2015			April 2, 2017			April 3, 2016

Net income (loss)							$	(15,060	)	$	9,895

Add:
Depreciation and amortization							9,186			8,336
Impairment and other lease charges							32,414			12
Interest expense							584			558
Provision for (benefit from) income taxes							(8,642		)	5,688
Stock-based compensation expense							646			1,011
Other expense (income), net							144			(248		)

Adjusted EBITDA:
Pollo Tropical	$	15,748		$	16,011		$	13,811		$	15,748
Taco Cabana	10,205			8,957			5,461			10,205
Fiesta	(701		)	—			—			(701		)
Consolidated	25,252			24,968			$	19,272		$	25,252
Less:
Depreciation and amortization	8,336			6,847
Impairment and other lease charges	12			94
Interest expense	558			438
Provision for income taxes	5,688			6,519
Stock-based compensation expense	1,011			941
Other (income) expense	(248		)	(372		)
Net income	$	9,895		$	10,501




Exhibit No.

31.1		Chief Executive Officer’s Certificate Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Fiesta Restaurant Group, Inc.

31.2		Chief Financial Officer’s Certificate Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Fiesta Restaurant Group, Inc.

32.1		Chief Executive Officer’s Certificate Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for Fiesta Restaurant Group, Inc.

32.2		Chief Financial Officer’s Certificate Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for Fiesta Restaurant Group, Inc.

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		XBRL Taxonomy Extension Label Linkbase Document

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document



	FIESTA RESTAURANT GROUP, INC.

Date: May ~~9, 2016~~8, 2017	/S/ T~~IMOTHY~~ ~~P. TAFT~~RICHARD C. STOCKINGER
	(Signature)
	~~Timothy P. Taft~~Richard C. Stockinger Chief Executive Officer

Date: May ~~9, 2016~~8, 2017	/S/ LYNN S. SCHWEINFURTH
	(Signature)
	Lynn S. Schweinfurth Senior Vice President, Chief Financial Officer and Treasurer

Date: May ~~9, 2016~~8, 2017	/S/ CHERI L. KINDER
	(Signature)
	Cheri L. Kinder Vice President, Corporate Controller