Industry News | October 22, 2002

Back Yard Burgers Reports Record Results for the Third Quarter and Year to Date 2002

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Back Yard Burgers, Inc. (Nasdaq SmallCap:BYBI) today announced results for the third quarter and first nine months of 2002.

Total revenues for the 13-week period ended September 28, 2002, were $8,776,000, a third-quarter record for the company and an increase of 10.8% over total revenues for the 13-week period ended September 29, 2001. The increase is primarily the result of the addition of four company-operated restaurants since the year-earlier period.

Net income for the 13-week period ended September 28, 2002, was $386,000, or $0.08 per diluted share, a third-quarter record for the company and an increase of 40.4% over net income for the 13-week period ended September 29, 2001. The increase is primarily due to the revenue growth described above as well as improved margins at company-operated restaurants. The company has reported increases of 40.0% or more in net income over the same quarter in the prior year for 11 consecutive quarters.

Same-store sales for the third quarter of 2002 decreased from the comparable period in 2001: -1.5% for company-operated restaurants and -2.6% for franchised restaurants. Year-to-date same-store sales for 2002 increased 1.2% over the comparable period in 2001 for company-operated restaurants and decreased 0.4% for franchised restaurants.

Unit activity for the quarter included one company-operated store opening and five franchised store openings. There were no openings of co-branded restaurants with YUM! Brands, Inc. during the quarter.

The company also reported record year-to-date revenues and net income through the 39 weeks ended September 28, 2002. Total revenues for the 39-week period ended September 28, 2002, totaled $26,151,000, compared with $23,399,000 in the prior-year period, and net income for the 39-week period ended September 28, 2002, was $1,150,000, or $0.23 per diluted share, compared with $796,000, or $0.17 per diluted share in the prior-year period.

On January 2, 2002, the company entered the Development Agreement with YUM! Brands, Inc. Under the terms of the Development Agreement, Back Yard Burgers granted YUM! the right to use the Back Yard Burgers trademarks in the United States in connection with the establishment and operation of up to ten Back Yard Burgers outlets as part of multi-brand units with Taco Bell, Pizza Hut and/or KFC operations.

Based upon multi-brand testing to date, the company and YUM! have concluded that the Back Yard Burgers brand is better suited for YUM!'s QSR environment rather than their casual dining. Therefore, based on the QSR positioning of Taco Bell and the casual dining positioning of Pizza Hut, the company expects that its future development efforts and testing with YUM! will occur with Taco Bell rather than Pizza Hut. The company also anticipates that the Back Yard Burgers brand at two existing co-branded restaurants with Pizza Hut will be removed. There has been no determination of whether there will be co-branded outlets with KFC at this time.

Commenting on the multi-brand testing update, Back Yard Burgers Chairman and CEO, Lattimore M. Michael stated, "We have been pleased with results of the Taco Bell/Back Yard Burgers co-branded test outlets to this point. Based on guest expectations related to service and delivery systems, we are in agreement with YUM! management that our brand is a better fit in the QSR environment of Taco Bell as opposed to Pizza Hut's casual dining positioning. As for future development plans under the agreement, the company still anticipates that the first 10 co-branded outlets with YUM! will be constructed and opened by the end of 2003."

As of September 28, 2002, the company's restaurant system comprised 112 units, including 40 company-operated stores and 72 franchised stores (of which four were co-branded restaurants under the agreement with Yum! Brands, Inc.). Expansion plans for the remainder of 2002 include two company-operated stores and five franchised stores (including two co-branded restaurants under the agreement with Yum! Brands, Inc.).

Back Yard Burgers operates and franchises quick-service restaurants in Memphis, Little Rock, Nashville and other markets across 17 states.