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Carrols Restaurant Group, Inc. (NASDAQ:TAST)

Q2 2011 Earnings Call

August 8, 2011 4:30 pm ET

Executives

Paul R. Flanders – Vice President, Chief Financial Officer and Treasurer

Alan Vituli – Chairman and Chief Executive Officer

Daniel T. Accordino – President and Chief Operating Officer

Analysts

Bryan Hunt – Wells Fargo Securities

Reza Vahabzadeh – Barclays Capital

Jake Bartlett – Susquehanna Financial Group

Bryan Elliott – Raymond James

Operator

Welcome to the Carrols Restaurant Group’s Second Quarter 2011 Earnings Conference Call. As a remainder today’s call is being recorded. At this time all participants are in a listen-only mode. Following the presentation we will conduct question-and-answer session, instructions will be provided that time for you to queue up for questions.

I would now like to turn the call over to Mr. Paul Flanders, Carrols, Chief Financial Officer for opening remarks. Please go ahead.

Paul R. Flanders

Good afternoon, everyone. By now you should have access to the announcement released earlier today, which you can also we found on our website at www.carrols.com under the investor relations section.

Before we begin our formal remarks I want to remind everyone that our discussion today may include forward-looking statements. These forward-looking statements may include comments regarding our strategies, intentions or plans including, without limitation, our spinoff transaction of Fiesta Restaurant Group. 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 a more detailed discussion of the risks that could impact our business and our financial results.

On the call with me today is Alan Vituli, our Chairman and CEO, and Dan Accordino, our President and Chief Operating Officer. After Alan and Dan provide an update on the business in the second quarter I’ll walk through the financial results and then provide some commentary regarding our 2011 projections. We will then be happy to address any questions that you might have.

With that, I'll turn the call over to Alan.

Alan Vituli

Thanks, Paul, and good afternoon everyone. Before I open up I would like to thank all of you on the line coming certainly given the straight of the cash in the equity markets, Carrols earnings call is not going to be your highest priority but both Dan and Paul cover our second quarter performance, I would like to bring you up to date on several important steps we’ve taken in connection with our plan tax-free spinoff of Fiesta Restaurant Group the indirect wholly-owned subsidiary which operates our Pollo Tropical and Taco Cabana businesses.

As we have previously announced, we’re planning to spinoff the asset to our shareholders, thus creating a separate publicly traded company of it. We believe that this will offer Carrols and Fiesta to be ability to up pursue their own business plan in growth strategies based upon opportunities available to them breaking into two separate business entities of this potential group improving value at each of those entities.

First we’ve recently named industry veteran Tim Taft as Fiesta Restaurants Group new Chief Executive Officer that will be effective on August 15. Tim will succeed me as CEO of Fiesta while I will remain as Chairman of the Board for Fiesta. Tim is a proven leader in the restaurant industry and brings a broad range of experience and skills to Fiesta. His background is a successful marketed brand builder and operator in the restaurant industry will provide a great blend of practical knowledge, customer orientation and team building to our growing Pollo Tropical and Taco Cabana restaurant brands.

We certainly look forward to Tim joining the Carrols team as we have to see how. Dan Accordino will remain President and Chief Operating Officer for Carrols and at the time to the spinoff we expect that he will appointed as CEO of Carrols Restaurant Group. Dan has a deep understanding of our Burger King operations and the overall Burger King system. He is very well suited for this expanded role. He is a strong leader, a great operator and highly respected member of the Carrols’ team.

Secondly I would like to tell you, at last Friday, we completed the refinancing of our existing debt. We entered into new and independent financing agreements for both Fiesta Restaurant Group and the Carrols Subsidiary that operates our Burger King restaurants. Proceeds from these financings were or will be used to repay our existing indebtedness as Paul will discuss in further detail. In terms of the Fiesta Restaurant Group, it sold $200 million of 8 and 7A senior secured secondly notes due in 2016 and entered into an undrawn $25 million secured revolving credit facility.

Carrols LLC entered into an $85 million secured credit facility including a term loan borrowing of $65 million and an undrawn $20 million of revolving credit facility. The leadership changes and the refinancing were critical steps toward completing the spin-off of our Pollo Tropical and Taco Cabana businesses. We continue to work on a number of the other details pertaining to the spin-off and will provide additional updates on our progresses as we move more closely to the end of the year.

With that said, I’ll turn it over to Dan to give you an overview of our second quarter results. Dan?

Daniel T. Accordino

Thanks, Alan. Our strong second quarter results reflect our continued success in gaining new customers and increasing traffic at our Pollo Tropical and Taco Cabana restaurants through innovative menus, effective promotions and our brand elevation initiatives. Both Pollo and Taco posted strong top line growth resulting in a 9.2% increase in total revenues for Fiesta Restaurant Group in the second quarter.

Although Burger King sales were soft in the quarter, we are beginning to see signs of stabilizing trends for that business and believe that the brand will continue to demonstrate improvement in both sales and profitability as the year progresses. As our results indicate, we positively leveraged our sales increases on an overall basis. However, commodity inflation has been persistent and did have some negative impact during the quarter.

We have recently taken selective price increases to help mitigate these cost increase and their impact on margins and profitability. Our brands historically benefited from high value scores from our customers and from their initial reaction, we believe that our customer will observe these modest price increases with minimal effect on customer frequency.

With that said, I’ll now discuss our three brands in greater detail. Pollo Tropical’s comparable restaurant sales increased to solid 10.7% marking the seventh consecutive quarter of positive comparable unit for Pollo Tropical. Segment EBITDA improved to $9.6 million from $8.1 million last year and segment EBITDA margin expanded by 80 basis points to 18.2%. Pollo’s strong sales continued to reflect traction from a number of our new product introductions over the past year as well as effective promotional activity. In terms of promotions, we featured our $4.99 combos, trim quesadilla and our TropiChop’s. As a limited time offer, we also promoted a Chicken Avocado Club Wrap combo and in June, both our beverage line with the introduction of the fresh fruit, Mango Iced Tea.

In terms of development, we hope to build on our success in Jacksonville with the opening of the second unit next month in that market and are also on track to open our first unit in the Atlanta market next week.

Internationally, our franchisees continue to build the development pipeline of restaurants and we’ll be opening several new restaurants over the next few months. During the second quarter, our Venezuelan franchisee opened their first restaurant.

At Taco Cabana, we continue to experience positive momentum as reflected by a comparable restaurant sales increase of 4.5%. We also opened two restaurants during the quarter with new units in the Dallas and Houston markets.

Key product promotion for the quarter included our fresh handmade street Tacos featuring well marinated stake and grilled drilled chicken Tacos topped with creamy chipotle sauce.

We continue to expand our social media strategy and in June, launched an integrated marketing program that tightly (inaudible) the actress, comedian, Anjelah Johnson and her fan based into both our TV advertising and social media efforts.

We look forward to further capitalizing on Johnson’s social media and Internet following to create more buzz and brand loyalty at Taco Cabana, as this marketing campaign continues through the end of the year.

Taco Cabana segment EBITDA increased to $7 million from $6.9 million in the second quarter last year, however, segment EBITDA margin with 50 basis points lower as commodity pressures offset the favorable sales leveraging that we achieved on all other operating expenses.

As I indicated, we have recently taken some price increases and for Taco Cabana anticipate the effective of these to be about 3.6% for the second half of 2011.

Lastly, I’ll address Burger King. For the quarter, comparable restaurant sales were down 3.6% against the negative 1.4% comparison from the same period last year. Segment EBITDA declined to $5.1 million from $5.5 million in the second quarter last year due to the decline in sales. As we move further away from the deep discounting of the past couple of years, we had experienced some stabilization in our margin.

During the second quarter, the brand continued its focus on the stacker products featuring a single, double and triple stacker priced between $1 and $3. In addition, Burger King kicked off this summer with its Whopper promotion featuring a limited time offer of a free 20 ounce soft drink for the purchase of a Whopper sandwich; it also introduced new checking tenders and reintroduced the Angry Whopper beginning in June.

As I said, we’re beginning to see signs of stabilizing trends for our Burger King business and believe that the brand will continue to show some improvements and sales trends and profitability as the year progresses.

With that, I’ll turn it over to Paul to review our second quarter financial results.

Paul R. Flanders

Thanks, Dan. For the second quarter, total revenues increased 2.6% to $209.8 million compared to $204.5 million in the prior year with revenues from the Fiesta Restaurant Group increasing to $121.2 million or an increase of 9.2% over the second quarter of 2010.

Pollo Tropical revenues increased 12.5% to $52.6 million with comparable restaurant sales up a solid 10.7% against a positive 6.3% comparison from the prior year. Customer traffic for Pollo increased 8.9% and average check increased 1.8% inclusive of 1.2% of effective pricing. Taco Cabana revenues increased 6.9% to $68.6 million with comparable restaurant sales up 4.5% against a negative 0.1% comparison from the prior year.

Customer traffic for Taco increased 1.2% and the average check increased 3.1% inclusive of 2.5% of effective pricing. Finally, Burger King revenues decreased 5.2% to $88.6 million with comparable restaurant sales down 3.6%. Customer traffic for our Burger King restaurants decreased 9.6% and the average check increased 6% including 5.5% of effective pricing.

For the quarter, net income was $5.5 million or $0.25 per diluted share compared to net income of $2.4 million or $0.11 per diluted share in the second quarter of 2010. Adjusting for non recurring items in both periods, which I will separately discuss in a minute, earnings per share were $0.27 per diluted share in the second quarter of 2011 compared to $0.22 last year.

Overall, cost of sales were 31.6% total sales and increased 76 basis points compared to the second quarter of 2010. While reduced discounting activity at Burger King improved margins for their brand, commodity increases the pressured margins in both Pollo and Taco. Pollo Tropical and Taco Cabana cost of sales increased 76 and 263 basis points respectively.

Consistent with the first quarter, check in cost are running about 7.5% higher Pollo Tropical this year. The Taco Cabana piece of cheese costs are driving the largest increases more recently.

At Burger King overall cost of sales were actually 75 basis points lower from last year’s second quarter despite a 14.6% increase in ground (inaudible) over the same period. This improvement reflected favorable mix changes as the brand has moved farther away from the deep value strategy that has been in place into some extent price increases and lower usage.

Restaurant labor cost decreased 43 basis points in the quarter to 28.8% as we leverage labor cost in all three brands.

Restaurant operating expenses, which exclude rent and advertising were 13.9%, sales were 39 basis points lower compared to the second quarter of 2010.

The advertising expense was $7.5 million for the quarter about $300,000 and 23 basis points lower compared to the prior year due to our lower advertising contribution to Burger King, which was based on sales.

General and administrative expenses were about $1.1 million higher in absolute dollars compared to the second quarter of 2010 and 44 basis points higher as a percentage of total revenues. These increases included a $400,000 increase in bonus, about $200,000 of spinoff related expenses and a $300,000 increase in stock compensation expense.

Non-recurring items negatively impacted earnings per share by approximately $0.02 per diluted share for the quarter. Impairment and other lease charges were $1 million in the second quarter of 2011 consisting primarily of lease charges related to the closing of the Taco Cabana restaurant late in the quarter and increases to lease reserves for previously closed Pollo and Taco Cabana restaurants.

Other non-recurring items include 342,000 gains in the sale of a closed Burger King property and a $200,000 of G&A expenses related to the plant spinoff at Fiesta.

In addition, available income tax adjustment is about $240,000 increased net income by $0.01 per diluted share, a second quarter of 2010 included impairment and other lease charges of $3.6 million.

Income from operation was increased $12 million during the quarter from $8.4 million at the second quarter of last year as a percentage of total revenues increased 4.1% to 5.7%.

Interest expense decreased 4.6% for the quarter from $4.7 million last year.

Capital expenditures in the second quarter of 2011 were $12.2 million, including new store CapEx of $4.6 million and remodeling of $3.4 million. During the quarter, we opened two new Taco Cabana units and one new Burger King.

At the end of the second quarter total outstanding debt was $258.2 million, which was $5.3 million lower than its beginning of the year. As Alan already mentioned, we completed the refinancing of our existing debt in August 5 as our Burger King and Fiesta subsidiaries each entered into new financing arrangements. The proceeds from these financings were or will be used to repay all existing indebtedness of Carrols Corporation.

Proceeds from the borrowings were used to repay approximately $80.2 million outstanding on your Carrols senior credit facility to repurchase a $118.4 million of the 9% senior subordinated notes tendered pursuant to a cash tender offer which was not yet complete, to pay accrued interest and to pay related fees and expenses. In addition, the $46.6 million of 9% senior subordinated notes not yet tendered will be repurchased upon completion of the cash tender offer or redeemed subsequent to its expiration along with payment for interest and fees related to the tender.

Excess cash from the financing is expected to be approximately $10 million to $11 million.

As it’s been our policy, we are not providing specific earnings per share guidance for 2011. However, we are providing the following information, which doesn't include any impact Fiesta Restaurant Group’s planned spin off.

Given sales trends, we expect sales at our Pollo Tropical and Taco Cabana to be better than our last guidance. We now expect an increase of approximately 7% to 9% for Pollo, compared to 68% announced previously and an increase of Taco Cabana of approximately 3% to 5% compared to 2% to 3% announced previously.

Burger King comparable sales are expected to improve in the second half of the year and to be approximately 1% to 3% negative for the full year.

Given the ongoing commodity pressures we now expect our commodity cost increase 5% to 6% from Pollo Tropical, 8% to 9% for Taco Cabana, and 5% to 6% for Burger King.

In terms of new restaurants, for 2011 we’ve planned to open 5 to 7 Hispanic Brand restaurants, one new Burger King, relocate one Burger King. We’ve also closed one Pollo Tropical and one Taco Cabana in the first half of the year and we just recently closed one Pollo unit in July. We will close a total of five Burger King Restaurants this year excluding the ones we located in the first quarter; three of these will close in the first half of the year.

Total capital expenditures are now estimated to be in the $45 million to $50 million range. Interest expense of the anticipated increase is approximately $2 million to $2.5 million in the second half of the year due to the refinancing. And lastly, our annual effect of effective tax rate is now estimated to be 28 and 30%.

With regard to more recent sales trend we continue to see pass this momentum from Fiesta Restaurant Group, Pollo traffic comparable restaurants males remain strong, they’re practically 7.1% and Taco Caben comparable restaurant sales increased approximately 4.8%. Burger King looking comparable restaurant sales were down by 1.32% in July reflecting some from the earlier transits. (Inaudible) we’ll now open the linee LIVOR 1.2% in July reflecting some improvement from the early years that we now open the land for posting.

Question-and-Answer Session

Operator

Thank you. We will now begin the question-and-answer session. (Operator Instructions) Our first question comes from the line of Bryan Hunt with Wells Fargo Securities. Please go ahead.

Bryan Hunt – Wells Fargo Securities

Good afternoon.

Alan Vituli

Hi Bryan.

Bryan Hunt – Wells Fargo Securities

Also just wondering if you could provide maybe a little bit more color on monthly sales just given how volatile sales have been for the industry overall for the quarter?

Unidentified Company Representative

Sure. For Pollo they’ve been pretty steady throughout the quarter 10.6% to 10.7% across all three months. Taco Cabanas are a little stronger in April just given the shift in the holidays earlier in the year. They’ve been relatively consistent throughout the quarter April is the biggest month, June was about 4.6%, which is indicative of where we are running in July and make sense. And lastly Burger King has steadily improved throughout the second quarter; we are about 5.7% negative. In April, which I think we mentioned in last call, and that steadily improved to 1% negative in June as well as July.

Bryan Hunt – Wells Fargo Securities

Okay, great. And then in your perspectives for your bond deal. I think there was some mention of sale leaseback that company that was working on. Can you talk about your CapEx numbers in terms of growth CapEx as well as potential net CapEx (inaudible) sales leaseback activity?

Unidentified Company Representative

Yeah. No, this was numbers (inaudible) CapEx to be between $45 million and $50 million. Sale leasebacks I think earlier in this year we said, we were targeting about $10 million for sale leasebacks. I think the thought process right now because we did; we paid down some debt here prior to refinancing. So we actually raised some cash and part of that – those transaction, so I think our thought probably to slow those down in the back half of the year.

Bryan Hunt – Wells Fargo Securities

Okay.

Unidentified Company Representative

It is essentially building up a little bit of an inventory first up to sale lease back prospectively.

Bryan Hunt – Wells Fargo Securities

And how many stores, would you own at the end of the year, given your what do you anticipate in terms of sale leaseback?

Paul R. Flanders

I don’t have the exact number here Bryan. I mean, I think our owned properties as you know are not a big number to begin with but they are in the probably 25, 30 range. And I think the anticipated sales leaseback between now and the end of the year probably going to be one or two more able to guess.

Bryan Hunt – Wells Fargo Securities

Okay. And then lastly, looking at inflation can you give us an idea of I mean it looks like that you raise your inflation estimates for the year for Taco and Pollo, I believe a little bit. Could you just talk about are you seeing increased inflation in the most recent quarter? What caused you to raise your estimates?

Paul R. Flanders

That was the commodity cost to break.

Bryan Hunt – Wells Fargo Securities

Yeah.

Paul R. Flanders

Much of that at Taco has been the significant increases we’ve seen in terms of beef cost, inaudible) particularly which has increased pretty dramatically here as we’ve rolled over contract in the second quarter and that’s what primarily driven the increase, teases up a little bit but most have been driven by these.

Bryan Hunt – Wells Fargo Securities

All right. And then lastly with regards to your request. Are you all going to provide given that we’ve done this financing now that, are you all going to provide segment information for Fiesta going forward?

Alan Vituli

Yes.

Bryan Hunt – Wells Fargo Securities

Okay and would that include today’s or the quarter you just reported?

Alan Vituli

Paul would you want to just touch on – when you ask that Bryan, you’re saying retroactively.

Bryan Hunt – Wells Fargo Securities

Really regarding that the core you just reported are you going to provide you know standalone information for Fiesta.

Daniel T. Accordino

We are going to do a couple of things, one is we are going to as we know we have been ventured for the notes, we are going to report Fiesta numbers consistent with you know the requirements there even before the brands are registered. The other thing we’ve done in our press release you sort of have to dig it out, one of the footnotes, but as we know we’ve historically allocated all the corporate overhead against Burger King operations we attempted, not attempted, we’ve broken out the cost of those expenses which will be attributable to both Pollo and Taco. So you can, I think in our view of what those EBITDA numbers would be if you allocated to SG&A.

Bryan Hunt – Wells Fargo Securities

Very good. Thank you very much.

Operator

Thank you. (Operator Instructions) Our next question comes from the line of Reza Vahabzadeh with Barclays Capital. Please go ahead.

Reza Vahabzadeh – Barclays Capital

Good afternoon.

Alan Vituli

Hi.

Reza Vahabzadeh – Barclays Capital

Just on terms of CapEx going forward Paul any thought on CapEx in 2012?

Paul R. Flanders

We have not really provided guidance on 2012. Yes, I will tell you that the 1000 new units development of the Hispanic Brand with this year since we’ve said we’d open five to seven, [traction] would be to accelerate that to maybe 12 to 15 years.

Alan Vituli

And would be it in Fiesta.

Reza Vahabzadeh – Barclays Capital

In Fiesta, and you’re not doing any new units update, Burger King unit anyways, this year or next year?

Paul R. Flanders

We’ve opened two units.

Reza Vahabzadeh – Barclays Capital

Got it.

Paul R. Flanders

One was the relocation on existing unit; we can’t treat that as a new unit.

Reza Vahabzadeh – Barclays Capital

Right.

Paul R. Flanders

And the other one was a effectively an acquisition where we assumed to lease of a closed Burger King and we’re very closer to that franchising restaurant.

Reza Vahabzadeh – Barclays Capital

Right.

Alan Vituli

You have to recognize that, part of reason for this bifurcation is to essentially lead Burger King in a position where it can be a opportunistic buyer of Burger Kings. and so you may, will find us in terms of the Burger King platform simply making acquisitions, good ones come along from time-to-time.

Reza Vahabzadeh – Barclays Capital

Got it. So Paul, as far as CapEx, you’ve got five to seven new stores this year on the Fiesta side, next year 12 to 15. So I mean in order of magnitude would CapEx on the Fiesta side be twice as much as this year?

Paul R. Flanders

No, I think, it’s there much from $15 million or more.

Reza Vahabzadeh – Barclays Capital

$15 million more?

Paul R. Flanders

And the cost end is 15 more.

Reza Vahabzadeh – Barclays Capital

Okay. And as far as markets that you would be targeting, are we still generally targeting core markets with the sprinkling outside or are we going to be more adventurous?

Alan Vituli

No, I mean we’re essentially as Paul indicated, as Dan indicated, we’re opening in the Atlanta market on the 15th Oct, first unit and with reasonable likelihood of the second unit in that market. We do see about one third of the, with respect to Pollo, about one-third of the expansion coming from core markets and two-thirds of its expansions coming in new markets with places like Jacksonville and Atlanta being defined as new markets. Taco will continue to fill in and the both the Houston and Dallas markets and there is a potential likelihood that Taco may find it’s way out of (inaudible) in 2012.

Reza Vahabzadeh – Barclays Capital

Right. Now when you bought Pollo, I think they had just come off our unsuccessful foray into Northern Florida markets and if I’m correct Southern Georgia markets and that foray was not too successful. Have you changed the formula as far as new market entry or operations to give you more confidence as far as your return on capital on those new stores?

Alan Vituli

The company that Pollo Tropical entered the Georia market and attempted to develop in the West Coast of Florida and also in the Chicago market, which the company was operating probably 15 to 20 restaurants at the time it was relatively new public offering and was trying to basically expand that phase. It couldn’t sustain itself, so its operations, its ability to choose real estate, the quality of its operations, the ability to adjust the menu to local case, the breadth of the menu, none of that was basically available to that Pollo that we are talking about that expanded in the mid-90s to those markets.

In our hands, we’ve developed huge infrastructure, we’ve changed the brand, we’ve changed the positioning of the brand. we got two very good marketing people, one at Pollo and one at Taco who joined us about 18 months ago. So the answer is both Pollo and Taco has the same name that have that name for a while, but the Pollo, that’s expanding and is considerably stronger and different than the Pollo that originally went into those markets.

Reza Vahabzadeh – Barclays Capital

Got it. And then fresh chicken price increase that you experienced for your Pollo. Is that just rollover of a much favorable contract, Paul?

Paul R. Flanders

I’m sorry, what?

Reza Vahabzadeh – Barclays Capital

The higher chicken prices that you experienced in Pollo, is that…?

Paul R. Flanders

No, they were higher in the quarter. As I said, they’ve been higher all year long consistent with the contract we did in place from beginning of the year versus about 7.5% increase year-over-year.

Reza Vahabzadeh – Barclays Capital

Right. So you just once have had a very attractive contract before.

Paul R. Flanders

The increases (inaudible)

Reza Vahabzadeh – Barclays Capital

Got it, thank you.

Operator

Thank you. Our next question comes from the line of Bryan Elliott with Raymond James. Please go ahead.

Bryan Elliott – Raymond James

Good afternoon, just a couple of quick ones first, where in it Atlanta are we opening next week and two, could you give us an update on whether the honeymoon period in Jacksonville is starting to level off and what the quarter looks like and refresh our memory on exactly when that store did actually open?

Alan Vituli

Dan you wanted to deal with it?

Daniel T. Accordino

Jacksonville is still holding at the $64,000, $65,000 a week sales level and it opened, do you have the exact date, Paul.

Paul R. Flanders

That was in November (inaudible)…

Daniel T. Accordino

..day before thanks giving actually. So its holding up nicely further and the second, Jacksonville Restaurant will open in September.

Bryan Elliott – Raymond James

Okay. The Atlanta (inaudible)

Paul R. Flanders

Atlanta Restaurant opens next week and it’s in Lawrenceville which is the kind of a North and Central part of the city.

Alan Vituli

Do you open that closely to new brands?

Bryan Elliott – Raymond James

Yes, we will try and not get stuck in traffic heading out there. Thank you.

Operator

Thank you our next question comes from the line of Jake Barlett with Susquehanna. Please go ahead.

Jake Bartlett – Susquehanna Financial Group

Yes, hi thanks for taking my call. I know a quick question on your pricing philosophy. I guess across all brands but more specifically towards Burger King. I think if I heard you correctly you are talking about 5.5% pricing in the second quarter if you could just talked about whether that’s kind of a catch from not taking much price in the past or just kind of how you are looking at pricing in the competitive environment going forward?

Alan Vituli

Fair amount of that is simply the way that the value menu is transition the Whopper year ago the Whopper Junior was on the value menu for a dollar and the double cheese Burger was down the value menu for a dollar and the double cheese burger was down the value for a dollar there was a BK double that was a dollar and all of those sandwichs now have gone off the dollar menu and the BK double is one entirely, The double cheese burger is now at $1.59 in the Whopper Junior is now at $1.39 so large degree the menu price increases the function of those items migrating from the dollar menu not specific increases to menu items.

Jake Bartlett – Susquehanna Financial Group

Okay, so I would I guess so thinking of that when effect in more kind of mix in that kind of but you are talking that actually effecting the price, the price component of average check.

Unidentified Company Representative

Sure,

Jake Bartlett – Susquehanna Financial Group

Okay

Unidentified Company Representative

We’re selling a fair a number of Whopper Junior’s and double cheese burgers but to their $0.39 and $0.59 more expensive then they where here 18 months ago.

Jake Bartlett – Susquehanna Financial Group

Got it make sense. And then in terms of your competitive environment and say in the last thing, it sounds like things have gotten a little better here in July as you move on I guess it’s kind of your back half guidance as closer to flat, you are getting confidence in that because you are seeing an improvement in trends, you talk about what July was is there anything that is happening competitively that you think is driving that less discounting or anything that you can point to.

Alan Vituli

No I think it is more about what Burger King is doing as opposed to the competitive environment of the new management team which has now been there for almost a year, it has taken a while for them to get their footing in terms of marketing strategy, new advertising agency and marketing calendar, new products and we have a lot more confidence in the things that the tactics and the marketing strategy that are taking place during the balance of this year than what we had a year ago.

Jake Bartlett – Susquehanna Financial Group

Okay. Thank you very much.

Operator

Thank you. And our next question is a follow up from the line of Bryan Elliott with Raymond James. Please go ahead.

Bryan Elliott – Raymond James

Thanks. Just clarifying or I want to drill down a little bit and make sure I heard a couple of sales comments right. So I think you gave us the monthly sales question you gave us sort of July has been like June for all three brands did I hear that right?

Unidentified Company Representative

No July was comparable to June for Burger King and Taco, Pollo is up about 7.1% in July.

Bryan Elliott – Raymond James

Okay.

Unidentified Company Representative

We are rolling against some pretty hefty numbers from the year before.

Bryan Elliott – Raymond James

Okay. I guess the basis of the question is and if you could maybe even look into the most recent sales data that you have given all the turmoil and the news they are certainly in expectations that consumers are going to possibly focus to get checks from the government maybe we are concerned with the checks were it is going to show up in early August and things like that. Have you seen any indication in your sales trends you have anecdotally that suggest there has been any consumer behavior change at your restaurants as a result of that significant news over the last couple of three weeks?

Unidentified Company Representative

The user is somewhat different between two brands that make up Fiesta and the Burger Kings profile. I would say with respect to the Fiesta brands we really haven’t seen changes or noticed changes in terms of the consumers propensity to eat out or take food home from Pollo and Taco. Then you wanted to just deal with whether you see any consumer changes in the Burger King trend?

Unidentified Company Representative

We have a portfolio of restaurants that are pretty strong at the first of the month, because that’s when they get their checks and there was August, first of August was just strong as any other first of the month that we’ve had. So we haven’t seen any behavior as a result of concern about whether or not the checks are going to show up.

Bryan Elliott – Raymond James

Great, thanks.

Operator

Thank you. And our next question is a follow up from the line of Reza Vahabzadeh with Barclays Capital. Please go ahead.

Reza Vahabzadeh – Barclays Capital

Yeah. And then if you can just bring us up to date as far as the competitive environment for Taco and Burger King in particular if the discounts and competitive offers have remained as intense as before or there has been any kind of moderation?

Unidentified Company Representative

Dan, you want to take that?

Daniel T. Accordino

I think in terms of Taco I think it is market specific, I don’t think that it’s more aggressive than it has been. And in terms of Burger King no it’s primary you still have the same weekly inserts that you get from the major competitors for promotional discounts and that sort of thing, but I don’t think it’s any more aggressive than it has been.

Reza Vahabzadeh – Barclays Capital

Right. And as given the response by competition to the higher prices for the – to discounted sandwiches of last year?

Daniel T. Accordino

Our double cheese burger units are less than they were, but we’re also selling stackers for $1 and $2 and $3, single, double and triple stackers and some of that volume is migrated to stackers and the Whopper junior volume has held relatively close to what it was a year ago even though the price increased $0.39.

Reza Vahabzadeh – Barclays Capital

Got it. Thank you.

Operator

Thank you. And there are no further questions in the queue. I’d like to turn the conference back to Vituli for any closing remarks at this time.

Alan Vituli

Well, as I said earlier, we thank you for being on – with us on such a dynamic day in the equity markets. we’re certainly moving long as quickly as we can with respect to what we’ve referred to is the bifurcation spin-off of the Pollo and Taco brands to our shareholders thus creating two companies we’ve built our management teams and we’ll talk to, we’ll come three months from now and tell you where we are with that. Again, thank you for being on with us.

Operator

Thank you. Ladies and gentlemen, that concludes the Carrols Restaurant Group second quarter 2011 earnings conference call. We thank you for your participation. You may now disconnect.

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