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Meritage Hospitality swings to 3Q profit

GRAND RAPIDS Mich. Meritage Hospitality Group Inc., a Wendy’s and O’Charley’s franchisee, swung to a profit in its latest quarter from a year-ago loss, driven by a double-digit jump in sales from the purchase of 20 Wendy’s restaurants.

For the quarter ended Aug. 30, Meritage’s net income totaled $502,195, compared with a net loss of $3,654 in the same quarter a year ago.

Latest-quarter revenue rose 33.8 percent to $20.4 million, and reflected $5.6 million from the acquired Wendy’s locations, which were bought in April.

Same-store sales for both brands remained negative, however, falling 1.8 percent at Wendy’s and 9.5 percent at O’Charley’s. The company cited the economic conditions in Michigan and Florida — two states with some of the highest levels of unemployment nationwide — as factors for its drop in sales trends.

Still, Meritage management cited Wendy’s new products, including the June debut of boneless chicken wings, as the right steps toward an improved performance.

“Meritage continued its financial improvement in the third quarter of 2009 driven by cost containment, store growth, easing commodity costs, and a successful new Wendy’s product launch,” Meritage chief executive Robert E. Schermer, Jr., said in a statement. “We continue to experience improved margins and profit flow-through from our Wendy’s operations.”

Third quarter labor, food and general and administrative expenses all were cut as a percentage of sales, the company noted.

The April purchase of the 20 Wendy’s in the Jacksonville, Fla. area brought the company’s total number of Wendy’s restaurants to 69 units. The company purchased the business, equipment and leasehold interest of each location. It also entered into 20 new leases and assumed the responsibility for facility upgrades of $1.6 million to be completed over 36 months.

The company operates four O’Charley’s locations.

Contact Bret Thorn at [email protected].

TAGS: Finance News
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