Costs associated with the integration of 278 new Burger King units earlier this year dampened third-quarter results for Carrols Restaurant Group Inc., but the quick-service brand’s largest franchisee said menu improvements are taking hold at legacy restaurants.
Daniel Accordino, Carrols chief executive, said the same-store sales within the company’s roughly 300-unit legacy restaurant base grew 6.2 percent during the quarter, including a 3.6-percent increase in traffic and an average check increase of 2.6 percent.
Over the past few years, franchisor Burger King Worldwide Inc. has been working on upgrading the chain’s menu and marketing to broaden the brand’s audience. Accordino said those efforts are paying off. Carrols legacy restaurants are seeing an expanding mix of customer demographics — even seeing more women 50 and older.
In addition, Burger King’s more-premium summer menu of barbecue-themed items was well received and provided a good balance with value-based promotions, he noted.
“We believe the Burger King strategy of innovation and targeted promotions is proving very effective in attracting new customers, increasing traffic and raising our average check,” said Accordino. “Higher customer traffic and higher average check is exactly what we hoped to see.”
Restaurant sales for the quarter increased 87 percent to $169.5 million, including $75.1 million from the new batch of Burger King units.
The average weekly sales for legacy restaurants grew by 6.8 percent to $24,833 during the quarter. Average weekly sales for the newly acquired restaurants were $20,804.
Remodeling efforts have also boosted momentum, the company said. In the third quarter, Carrols completed about 30 upgrades to the new design, with plans for 80 more remodels before the end of the year.
The remodels have resulted in a sales lift of about 8 percent to 10 percent on average. Next year, about 150 units are on deck to be remodeled.
The improved sales trends have also continued into the fourth quarter, Accordino noted. At legacy restaurants, same-store sales rose around 9 percent for October, with the newly acquired stores narrowing the gap with an increase of about 3.7 percent.
Still, integrating the large batch of new restaurants — which Accordino said had a lot of room for improvement — has proven costly for Carrols.
For the quarter ended Sept. 30, the company reported a net loss of $6.7 million, or 29 cents per share, compared with net income of $3.4 million, or 2 cents per share, in the year-earlier quarter, largely as a result of charges related to the acquisition in May, as well as costs related to litigation and tax expenses.
The company spent about $1.8 million during the quarter “overinvesting” in labor improvements, management recruitment and training at the new stores, some of which were not staffed enough to be open during normal operating hours, Accordino said. Carrols also invested about $1.1 million in repairs throughout the new stores, largely because of deferred maintenance.
But Accordino said those costs are “mostly behind us as of late October.”
Carrols also upgraded its outlook for the year, saying same-store sales would increase between 6 percent and 7 percent. The previous projection was between 4 percent and 6 percent.
At the end of the quarter, Syracuse, N.Y.-based Carrols owned and operated 572 Burger King locations.