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Edited Transcript of TAST earnings conference call or presentation 6-Nov-18 1:30pm GMT

Q3 2018 Carrols Restaurant Group Inc Earnings Call

Syracuse Nov 9, 2018 (Thomson StreetEvents) -- Edited Transcript of Carrols Restaurant Group Inc earnings conference call or presentation Tuesday, November 6, 2018 at 1:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Daniel T. Accordino

Carrols Restaurant Group, Inc. - President, CEO & Chairman of the Board

* Paul R. Flanders

Carrols Restaurant Group, Inc. - VP, CFO, & Treasurer

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Conference Call Participants

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* Brian Michael Vaccaro

Raymond James & Associates, Inc., Research Division - VP

* Bryan Cecil Hunt

Wells Fargo Securities, LLC, Research Division - MD & Senior Analyst

* Frederick Charles Wightman

Citigroup Inc, Research Division - Senior Associate

* Jake Rowland Bartlett

SunTrust Robinson Humphrey, Inc., Research Division - Analyst

* Jeremy Scott Hamblin

Dougherty & Company LLC, Research Division - VP and Senior Research Analyst of Consumer & Retail

* William Everett Slabaugh

Stephens Inc., Research Division - MD

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Presentation

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Operator [1]

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Welcome to the Carrols Restaurant Group Third Quarter 2018 Earnings Conference Call. (Operator Instructions)

I would like to remind everyone that this conference call is being recorded today, Tuesday, November 6, 2018, at 8:30 a.m. Eastern time and will be available for replay.

I will now turn this conference over to Paul Flanders, Chief Financial Officer. Please go ahead, sir.

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Paul R. Flanders, Carrols Restaurant Group, Inc. - VP, CFO, & Treasurer [2]

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Good morning. By now you should have access to our earnings announcement released earlier this morning, which is available on our website at www.carrols.com under the Investor Relations section.

Before we begin our remarks, I would like to remind everyone that our discussion will include forward-looking statements, which may consist of comments regarding our strategies, intentions, guidance or plans. These statements are not guarantees of future performance and therefore undue reliance should not be placed on them. We also refer you to our filings with the SEC for more details, especially the risks that could impact our business and results.

During today's call, we will discuss certain non-GAAP measures, which we believe can be useful in evaluating performance. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with generally accepted accounting principles. A reconciliation of the comparable GAAP measures is available with our earnings release.

With that, I will now turn the call over to the President and CEO of Carrols Restaurant Group, Dan Accordino.

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Daniel T. Accordino, Carrols Restaurant Group, Inc. - President, CEO & Chairman of the Board [3]

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Thanks, Paul, and good morning, everyone. As you've likely seen by now, we reported solid results this morning for the third quarter of 2018. We consider our 1.6% increase in comparable restaurant sales during the third quarter respectable in view of the approximate 0.5% negative impact from Hurricane Florence, as well as the formidable 7.5% comparison from the prior year.

Total sales increased 4.1% to $296.9 million, reflecting sales contributions from our comp base, the restaurants we have acquired and new locations that we have opened over the past year.

Q3 product promotions included value offerings such as the $3.49 King's Meal Deal, the $1.69 Chicken Nuggets and a $0.79 Sausage Biscuit. These were balanced with premium items that included the 2 for $6 Mix & Match promotion, the Brewhouse King and the Sourdough Sandwiches.

In October, we launched our new Crispy Chicken Tenders, which are included as an option for our 2 for $6 Mix & Match as well as our new 2 for $10 meal deal. And lastly, we have recently heightened our value proposition with the promotion of a 10-piece Chicken Nugget for $1. These offers have firmed customer traffic trends early in the fourth quarter.

Turning to third quarter profitability, restaurant level EBITDA growth of over 10% from the prior year quarter exceeded our restaurant sales growth and expanded margins as we benefited from a 10.2% reduction in beef costs.

Adjusted EBITDA was $26.3 million, an increase 8.7% over the prior year quarter, while adjusted net income of $4 million grew 15%. We've also been active on the acquisition front, recently adding 43 restaurants across 5 states to our portfolio through a series of 3 transactions. Recall that we had guided to acquiring 37 restaurants in our last conference call, so we were pleased to have come in a little higher than that.

We also opened 2 new restaurants in the third quarter, bringing our new unit growth through the first 3 quarters to 6 restaurants. Our 2018 restaurant openings, along with the 11 new restaurants opened last year, are making a positive contribution to sales, adjusted EBITDA and adjusted EBITDA margins.

Similarly, the 64 restaurants acquired in 2017 have favorably contributed to our results from operating improvements made since they were first acquired.

To conclude, we had solid results in the third quarter and are pleased to be continuing to grow our base of Burger King Restaurants through acquisitions and new openings.

Paul will now go into greater detail with our financial review.

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Paul R. Flanders, Carrols Restaurant Group, Inc. - VP, CFO, & Treasurer [4]

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Thanks, Dan. Restaurant sales for the third quarter increased 4.1% over the prior year period to $296.9 million. Comparable restaurant sales increased 1.6%, including a 2.1% increase in the average check, partially offset by a 0.5% decrease in customer traffic. The increase in average check included 2.1% of menu pricing. Adjusted EBITDA increased 8.7% to $26.3 million and restaurant level EBITDA increased 10.2% to $41.6 million compared to the third quarter of last year. Adjusted EBITDA margin increased 38 basis points to 8.9%. Our restaurant sales and restaurant level EBITDA margin improved 78 basis points to 14% of restaurant sales.

The improvement in margins was due mostly to the favorable changes impacting cost of sales, which offset some deleveraging and restaurant operating expenses. As a percentage of restaurant sales, cost of sales decreased 105 basis points compared to the prior year period, reflecting menu pricing and lower commodity cost, namely lower ground beef prices offset by higher promotional discounting. Ground beef prices averaged $1.98 per pound in the quarter or approximately 10.2% lower than the third quarter of 2017, and were more than 4% lower sequentially than the second quarter this year.

Restaurant labor expense was flat at 32.1% of restaurant sales compared to the prior year quarter as a 5% higher hourly wage rate was offset somewhat by pricing and by lower workers' compensation, medical and incentive costs. As a percentage of restaurant sales, other restaurant operating expenses increased 28 basis points while general and administrative expenses increased 71 basis points due to higher incentive compensation based on financial performance and higher acquisition-related costs compared to the prior year.

Net income in the third quarter of 2018 was $3.6 million or $0.08 per diluted share compared to $2.8 million or $0.06 per diluted share in the prior year period. Net income included $164,000 in impairment and other lease charges, $0.8 million in acquisition costs and $0.4 million gained from insurance proceeds from a fire.

For the same period last year, net income included $1 million of impairment and other lease charges, $0.5 million of acquisition expenses and a $0.4 million gain from insurance.

Excluding these items, adjusted net income was $4.0 million or $0.09 per diluted share compared to adjusted net income of $3.5 million or $0.08 per diluted share in the prior year period. For a reconciliation of net income under GAAP to adjusted net income, which is a non-GAAP measure is provided in the supplemental tables included with today's release.

Total capital expenditures, excluding acquisitions, were $21.8 million in the third quarter and $54.2 million through the first 3 quarters of the year. At the end of the quarter, our cash balances were $19.6 million and total outstanding debt was $280.6 million.

And with that, let me review our updated guidance for 2018. We now expect total restaurant sales of $1.17 billion to $1.18 billion, including an estimated 3.2% to 3.8% growth in comparable restaurant sales. This is based on an increase of 0% to 2% in the fourth quarter as we lay out 8.9% growth from the prior year period. Our previous estimates for sales of $1.16 billion to $1.18 billion with the 3% to 4% increase in comparable sales.

Commodity costs are now expected to be down approximately 1%, including a decrease in beef cost of 3% to 4%. Previously, commodities were expected to be flat with a 1% to 2% decrease in beef costs. General and administrative expenses are still expected to be $58 million to $60 million, excluding stock compensation expense and any acquisition-related costs. Adjusted EBITDA is still expected to be $100 million to $105 million. Our effective income tax rate is still estimated to be 0% to 5%. And capital expenditures, including acquisitions, are now expected to be $80 million to $85 million, including $22 million to $25 million for construction of 12 to 13 new restaurants and remaining costs from our 2017 construction late last year.

Previously, capital expenditures were estimated to be $78 million to $87 million. Expenditures for the acquisition of the 44 restaurants acquired through October are expected to total $39 million to $41 million. We now expect to complete $8 million to $10 million of sale/leasebacks. This was previously estimated at $10 million to $15 million and last week -- lastly, we now expect to close 10 to 15 restaurants in 2018, previously 15 to 20 closures, of which 9 restaurants had been closed at the end of the third quarter.

And that concludes our prepared remarks. And with that, operator, let's go ahead and open the line for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question will come from Jeremy Hamblin, Dougherty & Company.

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Jeremy Scott Hamblin, Dougherty & Company LLC, Research Division - VP and Senior Research Analyst of Consumer & Retail [2]

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And wanted to get into your labor cost. I know one of the goals that you had focused on this year was reducing turnover rates, both for the hourly employees but also at the manager ranks, as a way to combat the kind of wage inflation. Can you give us an update on where that initiative stands? Have you been able to make some progress? I know it was a little bit slower in the first half of the year, but any comments you can provide on that?

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Daniel T. Accordino, Carrols Restaurant Group, Inc. - President, CEO & Chairman of the Board [3]

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Jeremy, this is Dan. Our team member turnover has decreased from where it was last year, as well as our management turnover. Both metrics are -- have improved over where they were last year. Our wage rates are primarily driven by the competitive nature of the market. So yes, we have accomplished our objective in terms of turnover, but we still -- there is still a lot of wage pressure.

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Jeremy Scott Hamblin, Dougherty & Company LLC, Research Division - VP and Senior Research Analyst of Consumer & Retail [4]

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And is there additional opportunity on turnover, given the tightness that you see in markets? Or as I look forward to the rest of this year and into '19, should we still be assuming that there is going to be a fair amount of drag simply because of the tightness in wage rates as well as the tightness of the labor markets themselves?

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Daniel T. Accordino, Carrols Restaurant Group, Inc. - President, CEO & Chairman of the Board [5]

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I would expect that our turnover will continue to improve, but I also would acknowledge the fact that wage rates will continue to be under pressure given where the labor market is right now.

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Jeremy Scott Hamblin, Dougherty & Company LLC, Research Division - VP and Senior Research Analyst of Consumer & Retail [6]

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Okay, great. And then just coming back to the one item here, restaurant -- other restaurant operating expenses, which delever about 30 basis points year-over-year. I think I missed just the call out on the reason for that. But can you provide some more details on how we should be thinking about that particular line item going forward?

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Daniel T. Accordino, Carrols Restaurant Group, Inc. - President, CEO & Chairman of the Board [7]

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Yes. I think there was just a -- there is not really anything in particular to call out. We just had number of items across the board, which were -- we had a little deleveraging and because of the 1.6% comp, which is relatively softer than where we have been running. I think the utilities were up a little bit, and I think the other call out maybe was a -- some of our insurance claims were a little bit skewed favorable last year, more so than -- and there's increases this year.

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Jeremy Scott Hamblin, Dougherty & Company LLC, Research Division - VP and Senior Research Analyst of Consumer & Retail [8]

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Okay. So given the guidance level for Q4, is that a line item we should assume is going to delever a little bit in Q4 as well?

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Paul R. Flanders, Carrols Restaurant Group, Inc. - VP, CFO, & Treasurer [9]

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No, that's not how we're viewing it. I think it's some anomalies from the third quarter of last year that was causing that more than anything.

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Jeremy Scott Hamblin, Dougherty & Company LLC, Research Division - VP and Senior Research Analyst of Consumer & Retail [10]

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Okay. And then beef prices looks like they've come down a little bit. Where are those trending at this point in time?

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Paul R. Flanders, Carrols Restaurant Group, Inc. - VP, CFO, & Treasurer [11]

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We averaged about $1.98 in the third quarter, so it was a little bit better than we anticipated. And I would say, just generally, in the fourth quarter, those have been around the $1.90 level, up -- or lower. So a little bit lower. Obviously, lower than what we anticipated earlier in the year.

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Operator [12]

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Our next question will come from Jake Bartlett, SunTrust.

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Jake Rowland Bartlett, SunTrust Robinson Humphrey, Inc., Research Division - Analyst [13]

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Looking at the promotional environment, the value reach at promotional environment, it seems to be getting -- it seems like it got more competitive in the third quarter. Then so far in the fourth quarter, even more so. Just trying to gauge what you think the trend is going to be there? And does it -- is it something that concerns you that we're kind of moving back towards really, really very heavy level of discounting?

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Daniel T. Accordino, Carrols Restaurant Group, Inc. - President, CEO & Chairman of the Board [14]

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Yes, this is Dan. It has gotten more intense, there is no question about that. And I would expect that,, as we look at 2019, there will be a balance between discounting and full margin products, but I would expect that the level of promotional activity will still be high.

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Jake Rowland Bartlett, SunTrust Robinson Humphrey, Inc., Research Division - Analyst [15]

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Okay. And just as you kind of think about, I mean, what you hear from other franchisees or -- I guess, we're all trying to gauge what makes this environment change? What kind of swings it back to a more balanced approach? What do you think is going to drive that? Is it demand getting better? Or is it potentially pushback from other franchisees that have less scale that they need you to kind of accommodate this kind of environment?

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Daniel T. Accordino, Carrols Restaurant Group, Inc. - President, CEO & Chairman of the Board [16]

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No. I think it's a function of the environment. It's going to -- I don't know whether franchisees are comfortable with this or not if the -- if your major competitors are going to continue to be very aggressive with promotional activity, then I would expect that the Burger King brand will be equally as competitive.

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Jake Rowland Bartlett, SunTrust Robinson Humphrey, Inc., Research Division - Analyst [17]

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Got it. Yes, that makes sense. And then switching to guidance. You maintained the EBITDA guidance. We have a little more deflation in food cost, you raised your same store sales up -- or your total revenue up a little bit. So what was the drag? Is it because of the increased promotional activity that we are going to see a drag on the margins? Also, maybe the answer is the stock option expense. Maybe if you can touch on both those 2 things, that would be great.

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Paul R. Flanders, Carrols Restaurant Group, Inc. - VP, CFO, & Treasurer [18]

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No, the stock option expense is not included in -- that is excluded from EBITDA. But no, I would say that it's a -- we're lapping some big comp sales numbers. And I think we're -- October has started out pretty well. As Dan said, the promotional activity has elevated somewhat, and so I think we're a little cautious about what the impact of that might be on margins as we proceed through the quarter, but at least by October, the traffic and sales have both firmed up as a consequence of the higher promotional levels. And so we're cautiously optimistic about sales trends, and we're cautious about margins. I think it's simply said.

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Jake Rowland Bartlett, SunTrust Robinson Humphrey, Inc., Research Division - Analyst [19]

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Got it. And then lastly, for acquisitions, you typically the fourth quarter, I believe, historically, has been fairly active for you. Anything you can share about what your -- how involved you are right now with further acquisitions? Maybe whether we should expect a handful more in the fourth quarter here?

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Daniel T. Accordino, Carrols Restaurant Group, Inc. - President, CEO & Chairman of the Board [20]

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I think -- this is Dan. I would think that there may be another handful in the fourth quarter and if it doesn't happen at the end of the fourth quarter, it would be the very beginning of the first quarter.

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Operator [21]

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Our next question will come from Bryan Hunt, Wells Fargo Securities.

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Bryan Cecil Hunt, Wells Fargo Securities, LLC, Research Division - MD & Senior Analyst [22]

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I was wondering, if you could remind me how many of your current stores are in the 20/20 design, including the condition of the recently-acquired base?

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Daniel T. Accordino, Carrols Restaurant Group, Inc. - President, CEO & Chairman of the Board [23]

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The -- we've got probably 80% of our stores at this point, or I would say close to 700 have been remodeled in the last few years.

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Bryan Cecil Hunt, Wells Fargo Securities, LLC, Research Division - MD & Senior Analyst [24]

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Okay. And Burger King announced their new Garden Grill design concept, and they're seeing nice lifts and expecting franchisees to move to this store format moving forward. I was wondering, one, do you have any of the Garden Grill designs in your system today? And based on what you've seen at layering in the double drive-thrus, automation touchscreens, et cetera. What's the CapEx spend to remodel a store from a 20/20 to a Garden Grill?

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Daniel T. Accordino, Carrols Restaurant Group, Inc. - President, CEO & Chairman of the Board [25]

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It depends on -- this is Dan. It depends upon which of the elements you put in. If it's simply an interior delta between a 20/20 and a Garden Grill, the incremental cost is probably $20,000 or $30,000. The double drive-thru is a function of -- if you don't have one today and you add it, then you'd have to expand the drive-thru area and add another digital menu board. So that cost could be another $40,000 or $50,000.

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Bryan Cecil Hunt, Wells Fargo Securities, LLC, Research Division - MD & Senior Analyst [26]

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So, I mean, is there a range, I mean, for you to move from 20/20 to the Garden Grill is going to run from $20,000 on the low end and on the high end closer to a $100,000?

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Daniel T. Accordino, Carrols Restaurant Group, Inc. - President, CEO & Chairman of the Board [27]

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Yes. But again, where -- we don't have to move from the 20/20 to the Garden Grill for several years. This mandate is a function of when your franchise comes up for renewal, or in some cases, at the 10-year level. So we just remodeled most of these restaurants. So we will do this as we think appropriate, if we think there is a good reason for the sales lift. But other than that, though, we really don't have too many restaurants that are affected by this mandate.

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Bryan Cecil Hunt, Wells Fargo Securities, LLC, Research Division - MD & Senior Analyst [28]

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It was a concern, so thank you for covering that. This new chicken promotion, I guess, $1 for 10 Chicken Nuggets or as I've seen advertised 100 for $10. What types of -- I haven't done that yet, but I imagine my 22-year-old son has. When you look at that promotion, how is this helping sales? I mean, is it an add-on? Or are you seeing people come in and order this stand-alone? How is this affecting tickets?

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Daniel T. Accordino, Carrols Restaurant Group, Inc. - President, CEO & Chairman of the Board [29]

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It's primarily an ancillary. If you do come in and order a 10-piece, it's going as an add-on. If you're around a college town like your son, yes, we do have a fair number of orders for 50 of these things or 100 of these things. So it does happen, but it's primarily an ancillary.

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Bryan Cecil Hunt, Wells Fargo Securities, LLC, Research Division - MD & Senior Analyst [30]

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When I look at the stores you acquired, the 43 restaurants in Q3, can you talk about what are the AUVs and average profitability here? Is it kind of typical of your historical acquisitions and the lift you're expecting over the next year?

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Paul R. Flanders, Carrols Restaurant Group, Inc. - VP, CFO, & Treasurer [31]

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Yes. I would say it's a little bit of a mixed bag, to be honest. We got restaurants -- one of the deals they have, it was a little below $1.3 million average volumes and the other 2 were -- the smaller deals were $1 million, $5 million, $7 million average volumes. So there is -- it's a mixture. I would say that the multiples have been sort of consistent with what we've historically paid the larger transaction for the 31 stores, because of the number of those restaurants have already been remodeled, we paid a little bit more for those. But generally, when we look at the projections and our opportunities to improve margin, I think we would characterize them as typical to the deals we've done in the past.

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Bryan Cecil Hunt, Wells Fargo Securities, LLC, Research Division - MD & Senior Analyst [32]

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Great. And then my last question is, Burger King, I guess, launched a mobile app in Q3, over 2 million users had already signed up and delivery options continue to proliferate, can you talk about maybe how you are set up to handle this? Does it go through a different prep line to manage this process? And maybe what the penetration is in terms of mobile ordering and delivery options?

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Daniel T. Accordino, Carrols Restaurant Group, Inc. - President, CEO & Chairman of the Board [33]

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Yes. Bryan, this is Dan again. We actually are not doing either mobile ordering or delivery yet, because we have a different software package than most of the Burger King operators. And we are still working with the technology folks from the third-party vendors so that we can have a fully-integrated system for both mobile ordering and delivery. But we will probably be engaged in mobile ordering and delivery by the first part of 2019.

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Operator [34]

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Our next question will come from Will Slabaugh, Stephens Inc.

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William Everett Slabaugh, Stephens Inc., Research Division - MD [35]

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As you mentioned, you're lapping over some even tougher comps in 4Q, but it sounds like you have some things to help offset that and had some at least encouraging commentary earlier regarding traffic. I know you gave us a range for 0 to 2 for the fourth quarter. Could you give us any indication if you're at the high or low end of that now? And your confidence around these new promotions to continue driving that traffic?

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Paul R. Flanders, Carrols Restaurant Group, Inc. - VP, CFO, & Treasurer [36]

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Well, I would say that we're above that and then I'll -- through October, we were above that range. But I don't want that to be reflective of our confidence. And we'll hit the targets. I think the comps get a little bit tougher as we go further into the year. I think, if you recall, we -- our comps were up 8.9% last year and on a monthly basis, they got increasingly difficult from October to December. So I think we're a little cautious. We still have those bigger numbers to lap and all we need is one or two storms in the Northeast to sort of knock us off. So hopefully, we're conservative at the end, but I -- it's where we are.

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William Everett Slabaugh, Stephens Inc., Research Division - MD [37]

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That's good to hear. And also was curious around what you've been seeing in day-part trends. I know you saw rather -- if you saw a different trend across any of the day-parts throughout the quarter that stood out? Or any that may have changed direction from prior quarters?

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Paul R. Flanders, Carrols Restaurant Group, Inc. - VP, CFO, & Treasurer [38]

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Yes. I don't think there is anything to call out. We were -- the third quarter, even though the comp was only 1 6, we were positive in every single day-part, so -- which has been the trend for some time. So I would just say that it was consistent.

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William Everett Slabaugh, Stephens Inc., Research Division - MD [39]

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Got it. And then last thing, just a follow-up on the 10 for $1 promotion that's going on now. Obviously, it was $1.49 earlier this year and in prior years and it dropped down. So I'm curious on the way it's acting this time versus the way it acted in the prior rounds of the $1.49 promotion. If you're seeing anything different at all there? Or if it's fairly similar?

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Daniel T. Accordino, Carrols Restaurant Group, Inc. - President, CEO & Chairman of the Board [40]

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I would -- this is Dan. I would say, it's similar. We, certainly, are selling a lot of nuggets at the $1 price point. But as I said earlier, I think there is a mix between it being an ancillary add-on and in some cases, you have people who are buying a significant number of these.

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Operator [41]

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Our next question will come from Greg Badishkanian from Citi.

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Frederick Charles Wightman, Citigroup Inc, Research Division - Senior Associate [42]

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This is actually Fred Wightman on for Greg. Just a quick question on price. I think you guys talked about taking a price increase back in April. It's just over 2% for this quarter. What is that expected to be into next quarter?

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Paul R. Flanders, Carrols Restaurant Group, Inc. - VP, CFO, & Treasurer [43]

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I think we give about 1.7% percent pricing in the fourth quarter.

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Frederick Charles Wightman, Citigroup Inc, Research Division - Senior Associate [44]

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1.7%. And then just the 2 -- quick question on the 2 guidance items that changed. I think you're expecting a little bit less from sale/leasebacks this year, also called out lower restaurant closures. Is -- are those just due to timing? Or is there something else that led to the change there?

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Paul R. Flanders, Carrols Restaurant Group, Inc. - VP, CFO, & Treasurer [45]

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No, that's all timing. The -- I would say our construction has slipped a little bit as we've gone through the year. So the -- there is some sale/leasebacks we'd probably would get done earlier that we won't get done at this point. And similarly, the closures are -- some of those are just in the timing.

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Operator [46]

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Our next question will come from Brian Vaccaro, Raymond James.

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Brian Michael Vaccaro, Raymond James & Associates, Inc., Research Division - VP [47]

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Just a couple of quick ones for me. Circling back on delivery. It sounds like that's rolling in early '19. Is it reasonable to assume most, if not all units, will be offering delivery by mid '19? And just curious on your general thoughts on the sales opportunity that's there and also how you're thinking about it from a margin perspective?

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Paul R. Flanders, Carrols Restaurant Group, Inc. - VP, CFO, & Treasurer [48]

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Brian, I don't know enough about it yet to -- I've been seeing some data from Burger King, but it's been all over the board in terms of whether it's a very urban market or a rural market. And because our restaurants are in totally different areas, I'm not certain yet to what we could expect from delivery. So I would not be prepared to give you an assessment.

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Brian Michael Vaccaro, Raymond James & Associates, Inc., Research Division - VP [49]

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Okay, fair enough. On the margin front, following to circle back on the labor line. You called out, I think, lower workers -- so in the third quarter, you called out lower workers' comp and some other items that offset the wage inflation. Could you quantify those? But then also, is that because those were lapping unusually low trends last year in the third quarter? Or was this year unusually low on some of those items?

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Paul R. Flanders, Carrols Restaurant Group, Inc. - VP, CFO, & Treasurer [50]

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I don't have it quantified today. We may provide some additional color in the 10-Q, but no, I don't recall there being anomalies last year in the numbers. It's just, I think, that so many things change quarter-to-quarter from a timing perspective and just happened to be that this -- in this third quarter the -- both workers' comp and bonuses were a little bit lower at the store levels.

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Brian Michael Vaccaro, Raymond James & Associates, Inc., Research Division - VP [51]

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Okay. And I guess, as you think about what's embedded in your guidance on the labor line, at least on the surface, it appears that you'd expect more sort of a normal trend, if you will, sort of that mid-ish single-digit cost per operating week trend to sort of resume into the fourth quarter?

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Paul R. Flanders, Carrols Restaurant Group, Inc. - VP, CFO, & Treasurer [52]

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Yes. That's clearly the underlying trends for wage rates, clearly.

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Brian Michael Vaccaro, Raymond James & Associates, Inc., Research Division - VP [53]

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Okay, okay. And also in the food cost line, I understand the decline in ground beef that you called out, obviously, but could you help us ballpark the impact of discounts and promos to that line in the third quarter? And how we should think about that dynamic into the fourth quarter?

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Paul R. Flanders, Carrols Restaurant Group, Inc. - VP, CFO, & Treasurer [54]

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Yes. I think -- I mean, on a year-over-year basis, I would characterize the higher promotional activities is probably -- just trying to get to the right numbers here -- is probably 60, 70 basis points year-over-year. So it's not impact consequential.

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Brian Michael Vaccaro, Raymond James & Associates, Inc., Research Division - VP [55]

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Yes, yes. Okay, that's helpful. And then just last one, what were the sale/leasebacks proceeds year-to-date? Or what they were in the third quarter? What that would be here in the third quarter?

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Paul R. Flanders, Carrols Restaurant Group, Inc. - VP, CFO, & Treasurer [56]

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Third quarter, I think it was about $1.6 million, I think, in the fourth quarter. Plus, we had a sale/leaseback that was from the second quarter that was qualified from a -- but it has not made a sale/leaseback accounting in the second quarter, but it qualified in the third quarter. So about million -- couple of million dollars generally.

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Operator [57]

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Ladies and gentleman, at this time, we have no further questions in the queue. So I'd like to turn it back it over to management for any closing remarks.

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Paul R. Flanders, Carrols Restaurant Group, Inc. - VP, CFO, & Treasurer [58]

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All right. We don't have anything further to add today, but we appreciate your time and we will look forward to updating you again after the fourth quarter. Have a good day.

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Operator [59]

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Thank you very much. Ladies and gentlemen, at this time, this now concludes today's conference. You may disconnect your phone lines and have a great rest of the week. Thank you.