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Carrols Restaurant Group might consider another concept

The big Burger King franchisee said a second brand is “going to be on our radar.”
Photograph: Shutterstock

Since spinning off Pollo Tropical and Taco Cabana in 2012, Carrols Restaurant Group has done quite well operating just a single brand: Burger King.

But the company could consider a second concept in the near future as it looks to generate more growth.

Speaking to investors at the ICR Conference earlier this week, Carrols CFO Paul Flanders said the day is coming when the company will have to consider another concept.

“We’re starting to think, ‘When does another brand make sense,’” Flanders said. “There’s an advantage to diversification and opportunities to grow. It’s something that’s going to be on our radar.”

The comment is notable given Carrols’ history. The company was founded in 1960 when Herbert Slotnick was given the rights to operate Carrols Drive-In Restaurants in New York state. The company grew to more than 150 locations by the mid-1970s.

In 1975, Carrols agreed to become a Burger King franchisee and converted its locations to the brand over the next five years.

In 1998 the company bought the Florida chain Pollo Tropical and then bought the Texas concept Taco Cabana two years later. It spun those two brands off in 2012 as Fiesta Restaurant Group and began focusing instead on Burger King, backed by the ability to buy any Burger King unit up for sale in a 20-state area, and with the Miami-based franchisor as a major investor.

Burger King is still Carrols’ largest shareholder, owning 20% of the company.

Since then, Carrols has done quite well operating Burger King locations. In 2012 the company operated 298 locations in 17 states. Today, Carrols operates 850 in 17 states.,

Revenues, meanwhile, have doubled from $539.6 million to $1.1 billion.

When Carrols acquired Burger King’s “right of first refusal” from the brand, it received approval from the brand to operate 1,000 locations—a number Carrols expects to reach in the next two to three years.

At that point, Flanders said, “We renegotiate with Burger King.”

Yet the larger franchisees grow, the more difficult it is for them to maintain their growth rate, which often puts pressure on the largest companies to make larger and larger acquisitions.

NPC International, which had long been Pizza Hut’s largest franchisee, ultimately agreed to join the Wendy’s system in 2013 and has since become that brand’s largest operator.

The country’s largest franchisee, Flynn Restaurant Group, made a massive deal for a fourth brand last month with the acquisition of 368 Arby’s locations from US Beef Corp. Most large franchisees own more than one brand.

And some branch out into franchising. Just this week, Burger King, Arby’s and Popeyes operator Sun Holdings, which operates more than 800 locations, acquired the Taco Bueno brand out of bankruptcy.

 

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