SYRACUSE — Carrols Restaurant Group, Inc. (NASDAQ: TAST) — the largest Burger King franchisee in the U.S. — reported net income of $3.5 million, or 6 cents a share, in the third quarter that ended Sept. 27. The figures are an improvement from a net loss of $6.8 million, or 15 cents a share, during […]
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SYRACUSE — Carrols Restaurant Group, Inc. (NASDAQ: TAST) — the largest Burger King franchisee in the U.S. — reported net income of $3.5 million, or 6 cents a share, in the third quarter that ended Sept. 27.
The figures are an improvement from a net loss of $6.8 million, or 15 cents a share, during the same quarter in 2019, the company said in its Nov. 5 earnings report.
Net income in this year’s third quarter included $2.9 million of impairment and other lease charges. The net loss in the third quarter of 2019 included $500,000 of impairment charges and other lease charges.
Carrols generated total restaurant sales of $407 million in the third quarter, an increase of 2.2 percent from $398.4 million in the prior-year quarter.
Comparable restaurant sales for the company’s Burger King restaurants increased 0.8 percent. Comparable restaurant sales for the company’s Popeyes restaurants, a much smaller part of its business, jumped 5.5 percent.
Adjusted EBITDA increased to
$34.1 million from $25.7 million in the year-ago quarter. EBITDA is short for earnings before interest, taxes, depreciation, and amortization. Adjusted restaurant-level EBITDA increased to $52.8 million from $43 million in the prior-year quarter, Carrols said.
Syracuse–based Carrols Restaurant Group is one of the largest restaurant franchisees in the U.S. and currently operates about 1,088 restaurants. It has 1,023 Burger King restaurants and 65 Popeyes restaurants. Carrols has operated Burger King restaurants since 1976.
CEO comments
“The sequential quarterly improvement in comparable restaurant sales of 720 basis points at our Burger King restaurants is demonstrative of Carrols’ resiliency in the face of the unprecedented current environment. We believe our business model is well-suited to meet the needs of customers seeking great value and convenience and we have been able to serve them effectively and efficiently through our drive-thru, at-the-counter for take-out, and delivery channels,” Daniel Accordino, chairman and CEO of Carrols Restaurant Group, said in the report. “Over the past two months, we have seen modest softening in comparable sales at our Burger King restaurants driven primarily, we believe, by a strain on consumer spending due to a weakening ‘Main Street’ economy. Despite this year’s challenges, we have been extremely adept in managing food costs, optimizing labor hours despite higher wage rates, and controlling other restaurant-level and corporate-overhead expenses. Third-quarter results reflect the strength of our positioning and operational acuity as we once again delivered improved restaurant-level profitability and increased adjusted EBITDA compared to the prior year period.”
The Carrols CEO noted that “more importantly, looking further into the future,” the company is poised to re-engage in “strong but balanced” organic and non-organic growth strategies beginning later in 2021 while “keeping our leverage in check.”
“In terms of organic growth, we are in the process of negotiating a restructuring of our Burger King area development agreement with our franchisor. The remodel and new restaurant build commitments that required elevated levels of capital spending on our part under the current agreement are expected to be significantly reduced under the new agreement. Also, we anticipate that we would give up our right-of-first-refusal provision which we believe has diminished value in the current QSR [quick service restaurant] business environment,” said Accordino. “Under this new arrangement, we believe we will have added flexibility to grow our business as we believe best optimizes our profit growth potential while generating consistent and enhanced free cash flow. It is important to note that while we believe such new agreement will be entered into, it is still being negotiated and there is no assurance that such new agreement will be entered into on such terms or at all.”
Accordino went on to say that although Carrols is still “firming up specific new” construction and remodel plans for 2021 and beyond, the company is “committed to executing on our message last quarter” of spending $40 million to $50 million annually in capital expenditures over the next three years.
