Lower beef costs helped Burger King franchisee Carrols Restaurant Group Inc. realize a more profitable fourth quarter, the company said Thursday.
The Syracuse, N.Y.-based operator of more than 700 Burger King restaurants said that its same-store sales increased 5.1 percent in the quarter ended Jan. 3. The company’s sales, meanwhile, increased 18.7 percent in the quarter, to $229.1 million, from $192.9 million the previous year.
At the same time, its beef costs — a primary commodity — fell 28 percent. That led to much higher profitability. Adjusted EBITDA, or earnings before interest, taxes, depreciation and amortization, more than doubled, to $23.7 million, from $10.1 million in the same period a year ago.
EBITDA margin increased nearly six percentage points, to 16.1 percent of restaurant sales.
“We successfully leveraged sales gains with considerable improvements in overall profitability,” Carrols CEO Dan Accordino said during the company’s earnings call Thursday morning.
Carrols is Burger King’s largest franchisee. The company acquired 55 restaurants over the past year, and is slated to buy more. It closed on the acquisition of 12 locations in Central Pennsylvania last week, executives said.
Carrols has the right of first refusal, which gives it the ability to purchase any franchisee location put up for sale along the East Coast, so it promises to continue adding locations in the coming years.
The company then improves operations and profitability at those restaurants. Average weekly sales of restaurants acquired over the past two years, for instance, increased nearly 10 percent, to $22,346, in the fourth quarter.
EBITDA margins for those restaurants, meanwhile, have surged, from 5.5 percent in the fourth quarter of 2014 to 13.2 percent last quarter.
“Our acquisition focused growth strategy gives us the ability to improve overall restaurant margins,” Accordino said. “Acquisitions continue to be an important element of our strategic growth plan and we intend to continue pursuing these opportunities.”
The operator is also aggressively remodeling locations. More than 60 percent of its restaurants were remodeled under Burger King’s new image by the end of 2015.
Carrols’ same-store sales performance in the fourth quarter outpaced the performance of the brand overall. Burger King’s same-store sales increased 2.8 percent in the fourth quarter.
Accordino said that the chain’s marketing efforts have been able to balance value offerings while featuring premium products.
And, he noted, Burger King is working harder to boost its breakfast business.
“Breakfast has been our fastest-growing daypart for the past couple of quarters,” he said. “Burger King has increased its focus nationally on our breakfast products.”
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