Industry News | November 13, 2000
AFC Posts a 23% Increase in Net Income
Net income from continuing operations for the quarter increased by 23 percent to $7.35 million, versus $5.98 million for the third quarter in 1999. Higher systemwide sales, growth in franchising related revenues, and lower restaurant related operating costs coupled with lower interest expense contributed to the earnings growth for the quarter.
System-wide sales at AFC's more than 3,540 restaurants, bakeries and cafes and Seattle Coffee Company's wholesale operations were $558.5 million compared with system-wide sales of $499.3 million during the third quarter of 1999. This 11.8 percent increase was primarily due to new franchisee unit growth, domestic comparable sales growth and wholesale revenue growth. The overall increase was offset by comparable sales decreases in some of our international markets, primarily in southeast Asia.
AFC franchisees opened 75 units during the quarter and year-to-date have opened 242 units. Also, there were 2,299 commitments for the development of additional units outstanding at the end of the quarter.
AFC's third quarter revenues rose slightly to $162.9 million as compared to $161.6 million for the third quarter of 1999. Company-operated restaurant sales for the quarter decreased 0.2 percent as part of our continuing strategy to selectively sell company-operated units to existing and new franchisees. The revenue reduction which resulted from the sale of company-operated units was offset by increases in comparable sales and franchise royalties and development fees.
Operating EBITDA** in the third quarter increased 10.2 percent to $30.4 million versus the prior year's $27.6 million. Lower revenues related to fewer company operated units was offset by reduced operating costs, lower costs of sales and the higher profit flow through from franchise related revenues.
For the quarter, AFC's two chicken brands had positive domestic comparable sales as compared to the third quarter of 1999. Popeyes Chicken and Biscuits recorded a 3.1 percent increase and Church's Chicken posted a 0.7 percent increase. Comparable sales at Seattle Coffee Company's domestic retail cafes—Seattle's Best Coffee and Torrefazione Italia, decreased 0.4 percent for the quarter compared to the third quarter of 1999, while wholesale coffee revenues grew by 8.7 percent. At Cinnabon, domestic bakery comparable sales were 7.7 percent higher than the preceding year's period.
"We are delighted by the continued positive results of AFC and are on track to meet our long term growth targets'' said Frank Belatti, chairman and CEO of AFC Enterprises. "Earnings from continuing operations are up 23 percent versus last year, system-sales are up double digits, EBITDA margins have improved, and our debt was recently upgraded by Moody's. In addition, our core brands, Church's and Popeyes, continue to record system-wide comparable sales increases in an extremely competitive industry, and Cinnabon and Seattle's Best Coffee are experiencing growth in key aspects of their businesses.''
AFC is one of the world's largest operators and franchisors of restaurants, bakeries and cafes with more than 3,500 restaurants in 27 countries worldwide. AFC had system-wide sales of $2.1 billion in 1999 and can be found on the world wide web at www.afc-online.com.
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