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Checkers' profit jumps 54%, cites marketing, training and technologyBy Susan Spielberg Tampa, FLA. - Checkers Drive-In Restaurants Inc., which reported a 54 percent jump in second quarter net income on a 7.7 percent rise in revenues, said marketing initiatives, employee training and technology had driven the company's improved results.
Checkers earned $4.1 million, or 32 cents per diluted share, for the quarter ended June 16, compared with $2.7 million, or 19 cents a share, in the year earlier second quarter. Systemwide same store sales climbed 6.4 percent for the quarter. The company, in particular, hailed its new timers, which measure how much time is spent on customer service. "We continue to implement and benefit from the timers of the drive thru and other store level technology used to quicken service times and improve customer and employee experiences," Keith Sirois, president and chief executive of the company, said in a recent conference call with investors. "We focused on proven marketing and brand initiatives that reinforced our position and allowed us to measurably understand our customers' preferences," he said. "Finally, we continue to invest in retention and recruitment through our training and compensation programs." David Koehler, Checker's chief financial analyst, explained the significance of timers as a tool to improve service speed. "This year we have been focused on increasing customer throughput," he said. "One way we have accomplished this was [by installing] drive thru timers in 100 percent of our corporate owned restaurants," he said. "For instance, during the first quarter, we took an average of two minutes and six seconds to serve a customer. By the end of the second quarter, we averaged one minute and 34 seconds per car an 18 percent decrease in wait time." The company said that about 45 percent of its franchised stores have timers installed. The cost of installing a time system is about $2,500. Same store sales during the second quarter climbed 11.9 percent at company owned stores and increased 4 percent at franchised units. The growth in franchised same store sales was the largest since the company's 1999 merger of the Checkers and Rally's brands. Average franchise annual sales for the rolling four quarters, which ended June 16, was $695,000 for company owned restaurants, while franchised units averaged $688,000. Of the 242 company owned restaurants at the end of the second quarter, 194 performed above that average and 48 below. On the franchise side 224 units were above average, and 294 were below. The company, which also credits its marketing program for its improved sales, employed extensive marketing techniques to change its image from a seller of discount hamburgers and related products to a place that connects with the lifestyles of people on the go. Its "You Gotta Eat" campaign takes a retail branding approach instead of a product approach. Prices, however, still are low. Chief executive Sirois points out that the company's check average is below that of Wendy's, McDonald's and Burger King. "We ... use a two tier marketing strategy where we promote a price point of 99 cents, let's say," he asserted. "Then we focus our people on executing higher priced items at the menu board. That's been quite successful." He added that the check average for the second quarter was $4.84, compared with $4.76 in the year ago period. According to Sirois, Checkers also has improved the retention of its employees. He told investors that the turnover run rate on an annualized basis is 24 percent for general managers, 38 percent for assistant managers and 125 percent for crew members. He contrasted that with the turnover last year, when the rate was close to 50 percent for general managers, "in the 70s" for assistant managers and "in the middle hundreds" for the crew. Checkers plans to open ail additional eight to 12 stores during the remainder of the year, including three company owned units and between five and eight franchises. The company said the cost of developing a store runs between $750,000 and $800,000. "When we look at an average revenue of about $800,000, our first year EBITDA, [earnings before interest, taxes, depreciation and amortization] will be about $160,000 to $200,000, and [return on investment] will be 21 percent to 27 percent," Sirois said. |