Last week, Carrols Restaurant Group
Besides being the largest Burger King
Pollo Tropical's specialty is fresh grilled chicken, usually marinated in a tropical sauce, and cooked in open display on large grills. The chain got its start in 1988 in Miami and has since grown to 73 locations. All but one are based in Florida.
Taco Cabana, on the other hand, has a menu of Tex-Mex, as well as traditional Mexican-style food. Again, it is an open-display format and most of the menu items are made fresh daily at each restaurant.
The chain was started in the late 1970s, in Texas, and has now 141 locations. Of these, 135 are in Texas.
Both chains have considerable dinner traffic, which translates into a high average sales transactions ($8.72 at Pollo Tropical and $7.08 at Taco Cabana). As a result, the annual sales per restaurant is particularly strong, with Pollo Tropical at $2.1 million and Taco Cabana at $1.6 million.
OK, but doesn't having the Burger King franchise business dilute the growth? True, it's in a mature industry with major competitors, such as McDonald's
Moreover, Carrols has spent several decades building a large infrastructure for the Burger King business, which is now being leveraged on the Taco Cabana and Pollo Tropical brands. That is, there are economies of scale in terms of management resources, information systems, training, R&D, and marketing expenditures.
In terms of the financials, Carrols has been growing at a healthy rate. For the first nine months of 2006, revenues were $562 million, which was up from $532 million in the same period a year ago. So far in 2006, the company has generated net income of $9.7 million.
More importantly, there is much room for growth. The population growth in Florida and Texas is higher than the national average. It's a good formula: favorable demographics, a smart restaurant format, and economies of scale. In other words, it's a platform for long-term growth.
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Fool contributor Tom Taulli does not own shares mentioned in this article. He is currently ranked 429 out of 17,109 in CAPS.