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December 2006 |
Volume 7, Issue 12, Part 1 |
 As an 11-year old New Jersey boy's E. coli bacterial infection prompted the first of what are expected to be numerous lawsuits against Taco Bell Corp., federal and state investigators began testing all non-meat products used at branches of the Yum! brands Inc.-owned chain in several states. The foods being scrutinized reportedly include cheese, lettuce, tomatoes, cilantro and yellow onions. Authorities in Suffolk County, NY reportedly found traces of the potentially lethal E. coli 0157:H7 strain in packaged green onions taken from a Taco Bell there.
The U.S. Centers for Disease Control and Prevention in Atlanta said health departments in New York, New Jersey, Pennsylvania, Delaware, South Carolina and Utah reported a total of 58 cases of the severe illness occurring between Nov 20. and Dec 2. The agency said that it expects that additional illnesses will be reported in coming days. On the basis of inconclusive tests it had conducted, Taco Bell has removed all green onions from its 5,800 and closed some implicated branches in several states. (Nation's Restaurant News, 12/8/2006)
BK Franchisee Sets IPO Price
 Underwriters for Carrols Holdings Corp., the largest franchisee of Burger King restaurants, has set the terms of its pending initial public offering at 15 million common shares with an estimated, per-share price range of $14 - $16. The Syracuse, N.Y.-based company, which operates 328 Burger King restaurants, had filed in late September for an IPO of up to $210 million in common stock but didn't provide details of the offering terms at the time.
According to the government filing, Carrols Holdings is selling about 5.67 million shares while some stockholders are selling about 9.33 million shares. Carrols, whose September filing came four months after Burger King launched its own IPO, estimates it will receive new proceeds of $76 million from the offering, assuming a price of $15 a share, the midpoint of its price range. The company said it intends to use all of the net proceeds from the offering to repay about $76 million in debt. (Asbury Park Press, 11/26/06)
Several restaurant operators, bothered by what they call an excessive amount of attention to same-store sales results, are ending the practice of reporting the metric on a monthly basis. Recently, Papa John's International Inc. and Yum! Brands Inc. have announced that they soon would begin reporting same store sales on a quarterly basis. In releasing the figures, which are considered to be barometers of the brand's health, less frequently, company officials have said they hope to encourage longer-term views of their business strategies.
While publicly held restaurant companies are not required to release monthly same-store sales results, the move to quarterly schedules by some of the industry's largest entities could persuade other companies to follow suit, ultimately resulting in less information available for investors and observers. Other restaurant companies, like publicly traded Domino's Pizza Inc. and privately held Bruegger's Enterprises Inc, have reported only quarterly same-store sales results for some time. (Nation's Restaurant News, 11/27/2006)
 Choice Hotels International signed contracts for five new Cambria Suites, the company's all-suites brand, during the third quarter this year. The new Cambria Suites hotels are slated for Baton Rouge, La.; Birmingham, Ala.; East Greenwich, RI; Kansas City, Kan.; and Omaha, Neb. As of Sept 30, Silver Spring-based Choice had franchise agreements in place for 33 Cambria Suites across the country. The first Cambria Suites property is scheduled to open in Boise, Idaho, in January 2007. Other hotels under construction include Akron/Canton, Ohio; Savannah, Ga.; and Green Bay, Wis.
Cambria Suites boasts a design that is more intimate and less institutional than traditional hotel décor and rooms that are 25 percent larger than standard hotel rooms. The hotels offer the latest in technology, from a large-screen plasma television in the lobby to flat-panel TVs and CD/DVD players in guestrooms. Choice (NYSE:CHH) franchises more than 5,300 hotels, representing more than 430,000 rooms, in the United States and more than 40 countries and territories. (Washington Business Journal, 11/27/2006)
 With a store redesign, an enhanced menu and ordering system and a steady track record of improving same-store sales, New World Restaurant Group is ready to start franchising its flagship brand, Einstein Bros. Bagels, especially now that the chain has begun to be profitable. New World currently operates or franchises 604 bagel stores in 34 states. The company's recent posting of a third-quarter profit was the first such report since it bought Einstein Bros. out of Chapter 11 bankruptcy five years ago. The chain now has 430 outlets, including 83 licensed branches. New World also owns about 76 Noah's Bagels and is franchisor of the 100-plus-unit Manhattan Bagels and four-unit Chesapeake Bagel Bakery brands.
Stable revenue streams, lower depreciation and amortization expenses, and reduced interest on debt payments have helped improve the company’s financial performance. The company is set up to continue its positive results, making it an ideal time to begin franchising its largest brand, Einstein Bros. Franchising will focus on the Southeast, where Einstein Bros. already has recognition through its licensed units at colleges and hospitals but where there are few company-owned units. Additionally, new Einstein Bros. outlets will take on the look of two prototype stores that opened this year in Atlanta and Chicago. Those units have greater seating capacity and new menu boards with clearer distinctions between breakfast, lunch and all-day items.
(Nation’s Restaurant News, 12/4/2006)
 The parent of Red Lobster and Olive Garden has opened a new concept in Ohio called the Rocky River Grillhouse. According to the new restaurant's website, the weeks-old, lodger-themed outlet features fire-grilled entrees like grilled tenderloin filet with a portobello wine sauce and salmon topped with tropical salsa. It also offers cocktails made with all-fresh ingredients. The potential prototype is the only Rocky River Grillhouse currently operated by Orlando-based Darden, whose holdings also include Bahama Breeze, Smokey Bones and Seasons 52. It currently operates 1,430 casual-dining restaurants within its five chains. Darden has said it expects to expand by 40 restaurants during its current fiscal year, which ends in June, but has not said under which brands those restaurants would operate. (Nation's Restaurant News, 12/1/2006)
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