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Financing

Restaurant earnings roundup: BK’s largest franchisee, J. Alexander’s, Chuy’s, Fatburger

Smaller-cap operators have found the pandemic to be a mixed challenge.
Photograph: Shutterstock

Recent financial updates from several smaller-cap restaurant companies illustrate how differently brands have fared during the COVID-19 pandemic. Here’s a sampling.

Carrols Restaurant Group:  The franchisee of Burger King and Popeyes Lousiana Kitchen said comparable-store sales rose at its units of both brands in July, with gains of 2.1% and 13.9%, respectively. Profits have also moved into positive territory, with net income for the second quarter hitting $7.8 million, compared with a net loss of $3.7 million in the year-ago period. Revenues were essentially flat, at $368.4 million. Still, the company said it will continue to forego acquisitions near term and will remain extremely selective in developing new locations of both brands.

Nathan's Famous:  The hot dog specialist fared much better in supermarkets than it did in the foodservice channel  during the quarter ended June. 28. Sales from company-operated restaurants totaled $1.9 million for the fiscal first quarter, compared with $4.1 million for the year-ago period. Royalties from licensing the company's name for retail products amounted to $10.5 million, up from $1.8 million or 20.6% year over year. The sale of Nathan's-branded products to other foodservice operators fell $1.9 million, to $272,000, an 87.7% freefall. The company attributed both the good and bad news to the effects of social distancing during the COVID pandemic: Consumers increased their at-home dining and ventured to restaurants of amusement centers far less often.

J. Alexander’s Holdings: The parent of three small casual-dining chains said sales for its namesake core brand and Redlands Grill concept climbed back to within 25.8% of pre-pandemic levels during July. The third group in its fold, Stoney River Steakhouse and Grill, posted a 25.2% decline in same-store sales. As for most full-service operators, off-premise business has soared, accounting for 20% of total revenues across the three brands. Comps had been down 81% at J. Alexander’s and Redlands  and 78.3% at Stoney River in April, the height of the crisis.  The parent company said it closed one restaurant during the second quarter and intends to sell that property. The remaining 46 restaurants are offering some sort of service. Overall, the company lost $11.4 million in the second quarter, compared with a year-ago pre-tax profit of $2.2 million.

Chuy’s Holdings: Same-store sales for the operator of the Chuy’s casual Mexican chain slipped as dining rooms were re-closed and capacity caps were rolled back, with comps worsening from -21.6% in June to  -26.3% in July.  Nine of its stores off a base of 101 units remain closed, though CEO Steve Hislop says he’ll personally inspect each of them to determine whether it stays shut awhile longer or refires its grills. The company finished the second quarter with a net income of $4.5 million, compared with $6.2 million in the year-ago quarter.  

Fat Brands: The small but growth-minded operator opened four brick-and-mortar restaurants, all Fatburger/Buffalo’s Express combo units,  during the second quarter, with plans to add 18 more to the 15 that had opened year-to-date by the end of July. It also reminded investors that it has access to capital for adding to its portfolio, which currently extends to eight brands that have franchised 375 restaurants in total. Same-store sales were down 24.6% for Q2.

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