Taco Cabana, the San Antonio-based Tex-Mex chain with 142 locations across Texas, will be sold to a California-based restaurant franchise company for $85 million, pending a deal expected to close in the third quarter this year.

A spokesman for Taco Cabana’s owner, Addison-based Fiesta Restaurant Group, said the chain’s headquarters would stay in San Antonio.

Fiesta said in its announcement it will use the proceeds to pay loans and fees totaling nearly $80 million, as well as to accelerate development of its other chain brand, Pollo Tropical, which serves Caribbean-inspired food at locations throughout Florida.

Fiesta CEO Richard Stockinger said in a prepared statement the sale agreement was a “strategic decision” to allow the group’s leadership to “focus completely on accelerating Pollo growth,” where he said they see significant opportunities.

Purchasing the chain is YTC Enterprises LLC, an affiliate of Yadav Enterprises Inc., a Fremont, California-based company that operates close to 400 restaurant locations throughout Northern California, Texas, and 16 other states as a franchiser of brands such as Jack in the Box, TGI Friday, and Denny’s.

Stockinger said in the statement that Yadav’s CEO, Anil Yadav, would be an “effective steward of the Taco Cabana brand for the long-term.”

Taco Cabana’s revenue declined steadily in recent years before dropping precipitously during the pandemic. In 2020, the brand generated total revenues of $239.4 million, down 20 percent from the year before and more than 25% from 2015, when it generated revenues totaling $320.7 million.

In 2016, Fiesta announced plans to split its two brands into separate businesses, and to rename itself Pollo Tropical. The company scrapped those plans just months later, citing a challenging restaurant market and investor feedback. In 2017, the company closed 30 Pollo Tropical restaurants in Texas, Georgia, and Tennessee, including all its San Antonio locations.

Taco Cabana was founded in San Antonio in 1978 by hamburger and nightclub magnate Felix Stehling, sometimes credited as the inventor of San Antonio’s beanburger. The first restaurant, located at the corner of San Pedro and Hildebrand Avenue, primarily served Trinity University students flowing out of the bar he owned across the street.

The concept quickly grew across the city and state, with Stehling’s brothers taking a primary role in management.

In the early 1990s, the chain sued Two Pesos, another San Antonio-based chain that had it claimed was copying its style. In 1992, the Supreme Court upheld a $3.7 million judgement awarded in Taco Cabana’s favor. Taco Cabana ultimately bought Two Pesos’ assets in 1993 for $22 million.

In 2000, Syracruse, New York-based Carrols Restaurant group bought the chain for $154 million, by which time it had 154 locations throughout Texas and surrounding states. The chain switched hands again when Carrols launched Fiesta Restaurant Group as a spin-off in 2012.

Waylon Cunningham

Waylon Cunningham writes about business and technology. Contact him at waylon@sareport.org.