DIN » Topics » Company Restaurant Operations

These excerpts taken from the DIN 10-K filed Feb 26, 2009.

Company Restaurant Operations

 
  2008   2007   Variance  
 
  (In thousands)
 

Company Restaurant Sales

                   
 

Applebee's

  $ 1,088,101   $ 108,784   $ 979,317  
 

IHOP

    15,127     17,121     (1,994 )
               

Total company restaurant sales

    1,103,228     125,905     977,323  
               

Cost of company restaurant sales

                   
 

Applebee's

    961,019     97,838     (863,181 )
 

IHOP

    17,178     19,610     2,432  
               

Total cost of company restaurant sales

    978,197     117,448     (860,749 )
               

Company Restaurant Segment Profit (Loss)

                   
 

Applebee's

    127,082     10,946     116,136  
 

IHOP

    (2,051 )   (2,489 )   438  
               

Total company restaurant segment profit

  $ 125,031   $ 8,457   $ 116,574  
               

        Total company restaurant sales increased in 2008 by $977.3 million as compared to 2007. The increase in total company restaurant sales was due to the Applebee's acquisition which contributed $979.3 million of the increase. The company restaurant expenses increased by $860.8 million as compared to 2007. This increase was due to Applebee's, which contributed $863.2 million of the increase (see "Pro Forma Comparison of the fiscal years ended December 31, 2008, 2007 and 2006—Applebee's").

        IHOP company restaurant operations, which are essentially research and development restaurants and restaurants reacquired from franchisees that are operated on a temporary basis, were relatively unchanged from the prior year. IHOP company restaurant sales and cost of sales were lower in 2008 as compared to 2007 due to two fewer effective restaurants, resulting in a slightly lower segment loss.

Company Restaurant Operations

 
  2007   2006   Increase  

Revenues

                   
 

Applebee's

  $ 108,784   $   $ 108,784  
 

IHOP

    17,121     13,585     3,536  
               
 

Total Company Restaurant Sales

  $ 125,905   $ 13,585   $ 112,320  
               

        Total company restaurant sales in 2007 increased by $112.3 million as compared to 2006. The increase in total company restaurant sales was due almost exclusively to the Applebee's acquisition which contributed $108.8 million of the increase. The company restaurant expenses increased by $101.8 million, or 652.7%, as compared to 2006. This increase was due almost exclusively to Applebee's, which contributed $97.8 million, or 627.0%, of the increase.

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        Company restaurant operations loss, which is income less expenses, for IHOP company restaurants was $2.5 million in 2007, or 23.5% higher than the loss of $2.0 million in 2006. This is primarily due to lower sales per restaurant as well as higher salary and benefits costs.

Company Restaurant Operations

        Applebee's company restaurant sales for the full fiscal year in 2008 decreased 6.1% from pro forma $1,158.5 million in 2007 to $1,088.1 million in 2008. This decrease was due primarily to the decrease in effective restaurants of 5.3% from 513 restaurants in 2007 to 486 restaurants in 2008 due to the franchising of company stores during 2008 and a decrease in company same-store sales of 1.3% in 2008 as compared to 2007. The decrease in same-store sales is driven mainly by decline in guest traffic partially offset by an increase in average guest check. The Company believes that the decrease experienced in comparable guest traffic is reflective of the current economic conditions impacting consumers. The increase in average guest check is due to menu price increases and a favorable mix shift.

        Applebee's company restaurant operations profit for 2008 increased by $7.7 million from $119.4 million in 2007 to $127.1 million in 2008. The components of company restaurant expenses, as a percentage of company restaurant sales, were as follows:

 
  2008   2007   Variance  
 
   
  (Pro forma)    
 

Food and beverage

    26.9 %   26.9 %   0.0 %

Labor

    34.8     34.9     0.1  

Direct and occupancy

    26.7     27.8     1.1  

Pre-opening expense

    0.0     0.2     0.2  
               

Total Cost of Company Restaurant Sales(a)

    88.3 %   89.7 %   1.4 %
               

(a)
Percentages may not add due to rounding.

        Total food and beverage costs as a percent of company restaurant sales were flat in 2008 as compared to 2007. Food usage was impacted by increased commodity costs but offset by price increases and food cost improvement initiatives.

        Total labor costs as a percent of company restaurant sales decreased by 0.1% in 2008 as compared to 2007. The decrease in 2008 was due primarily to reductions in hourly labor costs as a percentage of sales due to an increased guest check offset by higher management incentive compensation driven by a more costly bonus program in place during the first fiscal quarter of 2008.

        Direct and occupancy costs decreased by 1.1% in 2008 as compared to 2007 due primarily to favorable depreciation expense, which resulted from purchase price allocations related to Applebee's acquisition and the reclassification of restaurants into assets held for sale, partially offset by an increase

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in rent expense and smallwares associated with purchase accounting and unfavorable utility expense. Pre-opening expense decreased by 0.2% in 2008 as compared to 2007 due to opening one company restaurant in early 2008 as compared to 14 in 2007. We do not currently plan to open any domestic company-operated restaurants in the foreseeable future.

Company Restaurant Operations

        Pro forma Applebee's company restaurant sales for the full fiscal year in 2007 decreased 0.9% from $1,168.7 million in 2006 to $1,158.5 million in 2007. This decrease was due primarily to the impact of the extra week in 2006 as compared to 2007 and a decline in guest traffic of approximately 4%. This decrease was partially offset by an increase in guest check of approximately 2% as well as an increase in the effective number of company restaurants of approximately 1%. Company same-store sales decreased by 2.2% in 2007 as compared to 2006.

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        Pro forma company restaurant operation profit for Applebee's company restaurants decreased by $27.8 million from $147.2 million in 2006 to $119.4 million in 2007. The components of company restaurant expenses, as a percentage of company restaurant sales, were as follows:

 
  2007   2006   Variance  
 
  (Pro forma)   (Predecessor
Applebee's)
   
 

Food and beverage

    26.9 %   26.7 %   0.2 %

Labor

    34.9     33.6     1.3  

Direct and occupancy

    27.8     26.8     1.0  

Pre-opening expense

    0.2     0.4     (0.2 )
               

Total Cost of Company Restaurant Sales(a)

    89.7 %   87.4 %   2.3 %
               

(a)
Percentages may not add due to rounding.

        Total food and beverage costs increased by 0.2% in 2007 as compared to 2006. This increase was due primarily to the unfavorable impact of a shift in menu mix and higher food costs related to Applebee's menu promotions which was partially offset by menu price increases of approximately 2.7%

        Total labor costs increased by 1.3% in 2007 as compared to 2006. The increase in 2007 was due primarily to higher restaurant management salaries and hourly wage rates including the impact of state minimum wage rate increases as well as higher management incentive compensation.

        Direct and occupancy costs increased by 1.0% in 2007 as compared to 2006 due primarily to lower sales volumes at company restaurants which resulted in unfavorable year-over-year comparisons for depreciation and rent, as a percentage of sales, due to their relatively fixed nature as well as higher repairs and maintenance and credit card usage expense. This increase was partially offset by lower kitchen and dining supplies expense.

        Pre-opening expense decreased by 0.2% in 2007 as compared to 2006 due to the number of company restaurant openings.

This excerpt taken from the DIN 10-Q filed May 5, 2008.

Company Restaurant Operations

        Applebee's company restaurant sales for the three months ended March 31, 2008 increased 3.2% from $298.6 million in the first quarter of 2007 to $308.0 million in the first quarter of 2008. The increase in 2008 was favorably impacted by an increase in same stores sales of 2.1% and an increase in the effective number of restaurants. The increase in same store sales reflected a 5.0% increase in average guest check, of which 3.1% related to menu pricing increases and 1.9% to a favorable mix shift, partially offset by declines in guest traffic.

        Company restaurant operating profit for Applebee's company restaurants decreased by $2.3 million from $38.2 million in the first quarter of 2007 to $35.9 million in the first quarter of 2008. The components of company restaurant expenses, as a percentage of company restaurant sales, were as follows:

 
  Three Months Ended March 31,
   
 
 
  2008
  2007
  Variance
 
 
   
  (Predecessor Applebee's)

   
 
Food and beverage   27.1 % 26.5 % (0.6 )%
Labor   35.2 % 33.9 % (1.3 )%
Direct and occupancy   26.0 % 26.6 % 0.6 %
Pre-opening expense   0.1 % 0.3 % 0.2 %
   
 
 
 
Total Cost of Company Restaurant Sales*   88.3 % 87.2 % (1.1 )%
   
 
 
 

      *
      Percentages may not add due to rounding.

        Total food and beverage costs increased by 0.6% for the three months ended March 31, 2008 compared to the same period in 2007 due primarily to higher food costs related to Applebee's menu promotions and the unfavorable impact of a shift in menu mix, partially offset by the impact of menu price increases of approximately 3% as well as improved food cost management at the company-operated restaurants.

        Total labor costs increased by 1.3% for the three months ended March 31, 2008 compared to the same period in 2007 due to higher management incentive compensation and higher restaurant management salaries and hourly wage rates, including the impact of state minimum wage rate increases, partially offset by the impact of higher sales volumes on labor costs as a percentage of company restaurant sales.

        Direct and occupancy costs decreased by 0.6% for the three months ended March 31, 2008 compared to the same period in 2007 due primarily to favorable year-over-year comparisons for depreciation expense which resulted from the purchase price allocation related to the Applebee's acquisition as well as lower depreciation expense due to the reclassification of approximately 40 restaurants to assets held for sale, partially offset by an increase in amortization expense related to intangible assets.

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        Pre-opening expense decreased by 0.2% for the three months ended March 31, 2008 compared to the same period in 2007 due to a decline in the number of company restaurant openings.

This excerpt taken from the DIN 10-K filed Feb 28, 2008.

Company Restaurant Operations

        Pro forma Applebee's company restaurant sales for the full fiscal year in 2007 decreased 0.9% from $1,168.7 million in 2006 to $1,158.5 million in 2007. This decrease was due primarily to the impact of the extra week in 2006 as compared to 2007 and a decline in guest traffic of approximately 4%. This decrease was partially offset by an increase in guest check of approximately 2% as well as an increase in the effective number of company restaurants of approximately 1%. Company same-store sales decreased by 2.2% in 2007 as compared to 2006.

        Pro forma company restaurant operation profit for Applebee's company restaurants decreased by $27.8 million from $147.2 million in 2006 to $119.4 million in 2007. The components of company restaurant expenses, as a percentage of company restaurant sales, were as follows:

 
  2007
  2006
  Variance
 
 
  (Pro forma)
  (Predecessor
Applebee's)

   
 
Food and beverage   26.9 % 26.7 % 0.2 %
Labor   34.9   33.6   1.3  
Direct and occupancy   27.8   26.8   1.0  
Pre-opening expense   0.2   0.4   (0.2 )
   
 
 
 
Total Cost of Company Restaurant Sales   89.7 % 87.4 % 2.3 %
   
 
 
 

Percentages may not add due to rounding.

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        Total food and beverage costs increased by 0.2% in 2007 as compared to 2006. This increase was due primarily to the unfavorable impact of a shift in menu mix and higher food costs related to Applebee's menu promotions which was partially offset by menu price increases of approximately 2.7%.

        Total labor costs increased by 1.3% in 2007 as compared to 2006. The increase in 2007 was due primarily to higher restaurant management salaries and hourly wage rates including the impact of state minimum wage rate increases as well as higher management incentive compensation.

        Direct and occupancy costs increased by 1.0% in 2007 as compared to 2006 due primarily to lower sales volumes at company restaurants which resulted in unfavorable year-over-year comparisons for depreciation and rent, as a percentage of sales, due to their relatively fixed nature as well as higher repairs and maintenance and credit card usage expense. This increase was partially offset by lower kitchen and dining supplies expense.

        Pre-opening expense decreased by 0.2% in 2007 as compared to 2006 due to the number of company restaurant openings.

This excerpt taken from the DIN 10-Q filed Oct 25, 2007.

Company Restaurant Operations

        Company restaurant operations is comprised of our dedicated research and development company-operations market in Cincinnati, Ohio. In addition, from time to time, restaurants developed by the Company under the Old Business Model are returned by franchisees to the Company and operated by the Company.

        Company restaurant sales are retail sales at company-operated restaurants. Company restaurant expenses are operating expenses at company-operated restaurants and include food, labor and benefits, utilities, rent and other restaurant operating costs. Key factors which can be used in evaluating and understanding our company operations segment include:

    Company restaurant retail sales;

    Labor and benefits costs;

    Food costs; and

    Changes in the number of effective company-operated restaurants.

        Company restaurant operations loss, which is company restaurant sales less company restaurant expenses, was $0.6 million in the third quarter of 2007, which was the same as the loss in the third quarter of 2006. Company restaurant operations loss was $1.8 million in the first nine months of 2007, or 41.6% more than the loss of $1.3 million in the first nine months of 2006. Company restaurant operations loss in the third quarter and first nine months of 2007 was due primarily to lower levels of sales at some recently opened locations in our Cincinnati market. At the end of the third quarter of 2007, we operated 11 restaurants, ten of which are located in our dedicated Company market.

This excerpt taken from the DIN 10-Q filed Aug 9, 2007.

Company Restaurant Operations

Company restaurant operations is comprised of our dedicated research and development company-operations market in Cincinnati, Ohio. In addition, from time to time, restaurants developed by the Company under the Old Business Model are returned by franchisees to the Company and operated by the Company.

Company restaurant sales are retail sales at company-operated restaurants. Company restaurant expenses are operating expenses at company-operated restaurants and include food, labor and benefits, utilities, rent and other restaurant operating costs. Key factors which can be used in evaluating and understanding our company operations segment include:

·       Company restaurant retail sales;

·       Labor and benefits costs;

·       Food costs; and

·       Changes in the number of effective company-operated restaurants.

Company restaurant operations loss, which is company restaurant sales less company restaurant expenses, was $0.7 million in the second quarter of 2007 compared to the loss of $0.3 million in the second quarter of 2006. Company restaurant operations loss was $1.3 million in the first six months of 2007, or 73.4% more than the loss of $0.7 million in the first six months of 2006. Company restaurant operations loss in the second quarter and first six months of 2007 was due primarily to lower levels of sales at some recently opened locations in our Cincinnati market. At the end of the second quarter of 2007, we operated 13 restaurants, ten of which are located in our dedicated Company market of Cincinnati, Ohio. The other three company operated restaurants, located in Indianapolis, Indiana, were taken back from a franchisee and we expect to refranchise them within the third quarter of 2007.

This excerpt taken from the DIN 10-Q filed May 9, 2007.

Company Restaurant Operations

Company restaurant operations is comprised of our dedicated research and development company-operations market in Cincinnati, Ohio. In addition, from time to time, restaurants developed by the Company under the Old Business Model are returned by franchisees to the Company and operated by the Company.

Company restaurant sales are retail sales at company-operated restaurants. Company restaurant expenses are operating expenses at company-operated restaurants and include food, labor and benefits, utilities, rent and other restaurant operating costs. Key factors which can be used in evaluating and understanding our company operations segment include:

·                    Company restaurant retail sales;

·                    Labor and benefits costs;

·                    Food costs; and

·                    Changes in the number of effective company-operated restaurants.

Company restaurant operations loss, which is company restaurant sales less company restaurant expenses, was $0.6 million in the first quarter of 2007 or 49.5% more than the loss of $0.4 million in the first quarter of 2006. Company restaurant operations loss in the first quarter of 2007 was due primarily to lower levels of sales at some recently opened locations in our Cincinnati market. At the end of the first quarter of 2007, we operated 13 restaurants, ten of which are located in our dedicated Company market of Cincinnati, Ohio.

This excerpt taken from the DIN 10-K filed Mar 1, 2007.

Company Restaurant Operations

Company restaurant operations is comprised of two separate categories: restaurants in our dedicated company-operations market of Cincinnati, Ohio, and restaurants returned to the Company by franchisees under our Old Business Model, where the Company developed and financed restaurants.

Company restaurant sales are retail sales at company-operated restaurants. Company restaurant expenses are operating expenses at company-operated restaurants and include food, labor and benefits,

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utilities, rent and other restaurant operating costs. Key factors which can be used in evaluating and understanding our company operations segment include:

·       Change in effective company-operated restaurants;

·       Labor and benefits costs; and

·       Food costs.

Company restaurant operations loss, which is company restaurant sales less company restaurant expenses, was $1.1 million in 2005 or 63.9% lower than the loss of $3.1 million in 2004. The improvement in company operations loss in 2005 was driven primarily by the decrease in effective company-operated restaurants. Effective company-operated restaurants decreased by 75.9% in 2005 compared to 2004. This was due to the refranchising and closure of company-operated restaurants as a result of our strategic repositioning in 2004.

This excerpt taken from the DIN 10-Q filed Nov 9, 2006.

Company Restaurant Operations

Company restaurant operations is comprised of our dedicated company-operations market in Cincinnati, Ohio. In addition, from time to time, restaurants developed by the Company under the Old Business Model are returned by franchisees to the Company and operated by the Company.

Company restaurant sales are retail sales at company-operated restaurants. Company restaurant expenses are operating expenses at company-operated restaurants and include food, labor and benefits, utilities, rent and other restaurant operating costs. Key factors which can be used in evaluating and understanding our company restaurant operations segment include:

·       Company restaurant retail sales;

·       Labor and benefits costs;

·       Food costs; and

·       Changes in the number of effective company-operated restaurants.

Company restaurant operations loss, which is company restaurant sales less company restaurant expenses, was $0.6 million in the third quarter of 2006 compared to a profit of $15,000 in the third quarter of 2005. Company restaurant operations loss was $1.3 million in the first nine months of 2006 or 64.2% more than the loss of $0.8 million in the first nine months of 2005. Company restaurant operations loss in the third quarter and first nine months of 2006 was due primarily to lower levels of sales at recently opened locations in our Cincinnati market. At the end of the third quarter of 2006, we operated nine restaurants, all of which are located in our dedicated Company market of Cincinnati.

This excerpt taken from the DIN 10-Q filed Aug 10, 2006.

Company Restaurant Operations

Company restaurant operations is comprised of two separate categories; restaurants in our dedicated company-operations market in Cincinnati, Ohio and restaurants returned to the Company by franchisees under our Old Business Model, where the Company developed and financed restaurants. These company-operated restaurants under the Old Business Model generally had a prime lease.

Company restaurant sales are retail sales at company-operated restaurants. Company restaurant expenses are operating expenses at company-operated restaurants and include food, labor and benefits, utilities, rent and other restaurant operating costs. Key factors which can be used in evaluating and understanding our company restaurant operations segment include:

·       Change in effective company-operated restaurants;

·       Labor and benefits costs; and

·       Food costs.

Company restaurant operations loss, which is company restaurant sales less company restaurant expenses, was $0.3 million in the second quarter of 2006 compared to a profit of $18,000 in the second quarter of 2005. Company restaurant operations loss in the second quarter of 2006 was primarily due to lower profitability at restaurants opened in late 2005. The lower profitability was primarily due to lower sales at these restaurants compared to sales at our other restaurants in the Cincinnati market. Company restaurant operations loss was $0.7 million in the first six months of 2006 or 9.0% less than the loss of $0.8 million in the first six months of 2005. The improvement in company restaurant operations loss in the first six months of 2006 was primarily a result of our refranchising activities. The loss associated with refranchised restaurants was $0.1 million in 2006 compared to $0.4 million in 2005.

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This excerpt taken from the DIN 10-Q filed May 11, 2006.

Company Restaurant Operations

Company restaurant operations is comprised of two separate categories: restaurants in our dedicated company-operations market in Cincinnati, Ohio, and restaurants returned to the Company by franchisees under our Old Business Model, where the Company developed and financed restaurants. In addition, these company-operated restaurants under the Old Business Model generally had a prime lease.

Company restaurant sales are retail sales at company-operated restaurants. Company restaurant expenses are operating expenses at company-operated restaurants and include food, labor and benefits, utilities, rent and other restaurant operating costs. Key factors which can be used in evaluating and understanding our company operations segment include:

·       Change in effective company-operated restaurants;

·       Labor and benefits costs; and

·       Food costs.

Company restaurant operations loss, which is company restaurant sales less company restaurant expenses, was $0.4 million in the first quarter of 2006 or 53.2% less than the loss of $0.8 million in the first quarter of 2005. The improvement in company operations loss in the first quarter of 2006 compared to the first quarter of 2005 was driven by the decrease in effective company-operated restaurants. Effective company-operated restaurants decreased by 12.5% in the first quarter of 2006 compared to the first quarter of 2005 as a result of our refranchising efforts in 2005. In addition, the first quarter of 2005 included $0.2 million in expenses for company-operated restaurants that were closed or refranchised in 2004.

This excerpt taken from the DIN 10-K filed Mar 15, 2006.
Company Restaurant Operations

Company restaurant sales are retail sales at company-operated restaurants. Company restaurant expenses are operating expenses at company-operated restaurants and include food, labor and benefits, utilities, rent and other real estate related costs. Key factors which can be used in evaluating and understanding our company operations segment include:

·       Same-store sales;

·       Labor and benefits costs;

·       Food costs; and

·       Change in effective company-operated restaurants.

Company restaurant operations loss, which is company restaurant sales less company restaurant expenses, was $3.1 million in 2004 or 54.3% lower than the loss of $6.9 million in 2003. The reduced loss was due to the changes in company restaurant sales and expenses discussed below.

Company restaurant sales decreased by $43.3 million or 57.8% in 2004 compared to the prior year. Company restaurant sales were impacted by the following:

·       Effective company-operated restaurants decreased by 59.7% due to the refranchising and closure of company-operated restaurants as a result of our strategic repositioning; and

·       Same-store sales of company-operated restaurants increased by 5.1%. This partially offset the decrease in effective company-operated restaurants.

Company restaurant expenses as a percentage of company restaurant sales were 109.9% in 2004 compared to 109.2% in 2003. This 0.7% increase in 2004 was primarily attributable to increases in food costs including increases in pork, poultry, milk, coffee, soybean oil and wheat.

This excerpt taken from the DIN 10-Q filed Nov 4, 2005.
Company Restaurant Operations

Company restaurant operations is comprised of two separate categories; restaurants in our dedicated Company-operations market of Cincinnati, Ohio and restaurants remaining from our Old Business Model,

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where the Company developed and financed restaurants. All the restaurants remaining from our Old Business Model were refranchised in the third quarter of 2005.

Company restaurant sales are retail sales at Company-operated restaurants. Company restaurant expenses are operating expenses at Company-operated restaurants and include food, labor and benefits, utilities, rent and other restaurant operating costs. Key factors which can be used in evaluating and understanding our Company operations segment include:

·       Change in effective Company-operated restaurants;

·       Labor and benefits costs; and

·       Food costs.

Company restaurant operations profit/(loss) is Company restaurant sales less Company restaurant expenses. Company restaurant operations had a profit in the third quarter of 2005 of $15,000 compared to a loss of $0.5 million in the third quarter of 2004. Company restaurant operations loss was $0.8 million in the first nine months of 2005 or 69.1% less than the loss of $2.6 million in the first nine months of 2004. The improvement in Company operations profit/(loss) in the third quarter and first nine months of 2005 was driven primarily by the decrease in effective Company-operated restaurants. Effective Company-operated restaurants decreased by 74.1% and 75.8% in the third quarter and first nine months of 2005, respectively. This was due to the refranchising and closure of Company-operated restaurants as a result of our strategic repositioning. In addition, Company-operations profit in the second and third quarters of 2005 were impacted by improved labor and food cost management in our dedicated Company-operations market in Cincinnati, Ohio.

This excerpt taken from the DIN 10-Q filed Aug 5, 2005.
Company Restaurant Operations

Company restaurant operations is comprised of two separate categories; restaurants in our dedicated Company-operations market in Cincinnati, Ohio and restaurants remaining from our Old Business Model, where the Company developed and financed restaurants. Of the restaurants remaining from our Old Business Model, four are being held for sale as a part of a larger Multi-Store Development Agreement for the state of Alabama. The four Alabama restaurants and the remaining three other non-Cincinnati restaurants will be refranchised in the third quarter of 2005.

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Company restaurant sales are retail sales at Company-operated restaurants. Company restaurant expenses are operating expenses at Company-operated restaurants and include food, labor and benefits, utilities, rent and other restaurant operating costs. Key factors which can be used in evaluating and understanding our Company operations segment include:

·       Change in effective Company-operated restaurants;

·       Labor and benefits costs; and

·       Food costs.

Company restaurant operations profit/(loss) is Company restaurant sales less Company restaurant expenses. Company restaurant operations had a profit in the second quarter of 2005 of $18,000 compared to a loss of $0.6 million in the second quarter of 2004. Company restaurant operations loss was $0.8 million in the first six months of 2005 or 60.5% less than the loss of $2.0 million in the first six months of 2004. The improvement in Company operations profit/(loss) in the second quarter and first six months of 2005 was driven primarily by the decrease in effective Company-operated restaurants. In addition, Company-operations profit in the second quarter of 2005 was impacted by improved labor and food cost management in our dedicated Company-operations market in Cincinnati, Ohio, as well as a reversal of a first quarter bonus accrual. Effective Company-operated restaurants decreased by 71.9% and 75.7% in the second quarter and first six months of 2005, respectively. This was due to the refranchising and closure of Company-operated restaurants as a result of our strategic repositioning.

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