Carrols Restaurant Group Inc. is closing 20 to 25 restaurants, 15 of which were shuttered in the first quarter, as the locations’ leases expire, executives said during a conference call Tuesday.
However, Carrols same-store sales appear to be surging. The Syracuse, N.Y.-based Burger King franchisee reported a same-store sales increase of 8.4 percent during the first quarter ended March 29.
Same-store sales were even stronger in April, rising about 11.5 percent during the month, Carrols chief financial officer Paul Flanders said.
“On a two-year basis, our trends have actually continued to accelerate as we’ve gone a little further into the year here,” Flanders said.
The vast majority of restaurants being closed were at the end of their lease and at the end of their franchise agreement, Carrols CEO Dan Accordino said during the call. Many were part of a group of 278 restaurants that Carrols bought from Burger King in 2012, during the operator’s refranchising push.
The restaurants weren’t losing cash, Accordino added, but they didn’t generate enough sales that the company wanted to remodel and keep the locations.
“They are restaurants that we otherwise would not have wanted to remodel and extend,” Accordino said.
Carrols is Burger King’s largest franchisee, and one of the biggest franchisees of any kind in the U.S. The company has 659 locations in the eastern U.S., accounting for about 9 percent of Burger King’s U.S. system.
Carrols’ April sales increase likely bodes well for Burger King’s sales thus far in the second quarter. Burger King’s sales have been strong in recent months due to its marketing and product introductions. But its unit count has been slightly declining as operators shutter unprofitable locations with low unit volumes.
Accordino said easier comparisons helped Carrols’ sales in the first quarter to a degree — same-store sales declined 2.5 percent in the same period a year ago. Better weather for most of the quarter, particularly in January, was a big reason. But he also noted Burger King’s marketing and promotional tactics.
“Burger King’s marketing and menu strategy continues to focus on balancing value offerings and premium products that provide variety and new tastes while minimizing operational complexity by leveraging existing menu platforms,” he said.
Accordino also said the company’s sales improvement has come across all dayparts, and involved both value and premium items.
The company has been working for years to improve profits at the company-owned restaurants it acquired in 2012. Those efforts appear to be working. Average weekly sales at those restaurants increased 12 percent in the quarter. By comparison, legacy restaurants’ average weekly sales increased 7.5 percent.
Margins have improved, too. A year ago, the acquired restaurants had an average cash flow margin of just 5.7 percent, compared with 11.1 percent at legacy locations. In the first quarter of this year, margins improved to 9.3 percent, compared with 11.5 percent at legacy locations.
Those margin improvements will likely keep Carrols looking for other restaurants to buy. The company is on an acquisition spree, and has the right to buy any Burger King that is put up for sale in 20 states in the eastern U.S.
“We intend to acquire additional Burger King restaurants, given our expected returns on such investment,” Accordino said.
Contact Jonathan Maze at [email protected].
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