Discounts, commodity costs hit Carrols' BK division

Pollo Tropical and Taco Cabana continue to gain momentum

Carrols Restaurant Group Inc., one of Burger King’s largest franchisees, said aggressive discounting and higher commodity costs impacted its BK division during the third quarter, weighing down the company’s overall profitability.

However, stronger performances from Carrols’ two Hispanic brands, Pollo Tropical and Taco Cabana, helped offset the decline somewhat, officials said.

The Syracuse, N.Y.-based multibrand company said comparable-store sales for its 306 Burger King locations fell 3.2 percent in the third quarter ended Oct. 3. Revenues for Carrols’ BK units declined 4 percent to $90.4 million, compared to $94.1 million in the same period a year ago.

The company said it shuttered eight BK locations and relocated two others since the beginning of the quarter.

Commenting on the performance of the Burger King stores, Carrols’ chairman and chief executive Alan Vituli said, “Comparable-restaurant sales remained under pressure at our Burger Kings and profitability was further impacted by aggressive value-oriented promotions and higher commodity costs.”

The company reported net income of $4.6 million, or 21 cents per diluted share, compared with net income of $5.6 million, or 26 cents per diluted share in the third quarter of 2009. Carrols’ total revenues were $201.6 million for the third quarter, up 0.2 percent from the same year-ago quarter.

Comparable-restaurant sales at the company’s 90 Pollo Tropical units rose 8.8 percent, while third-quarter revenues increased 8.1 percent to $47.6 million, compared with $44.0 million in last year’s period.

In addition, comparable-restaurant sales for the 156 Taco Cabana restaurants rose 1.0 percent, while revenues were $63.7 million, up 1.1 percent from the same year-earlier period.

“Comparable-restaurant sales increased at both our Hispanic brands from continued momentum in customer traffic,” Vituli said. “Pollo Tropical’s sales trends were exceptionally strong as the brand continues to expand market share through its distinct products, effective marketing and promotions. The combination of higher sales and margins substantially increased Pollo Tropical’s contribution to profitability.”

Combined revenues for both Hispanic brands were $111.3 million for the quarter, up 4 percent from the year earlier.

Contact Paul Frumkin at [email protected]