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Posts Loss as Restaurant Troubles Continue

November 6, 1996

SPARTANBURG, S.C. (AP) _ Flagstar Cos. Inc. posted a $16 million loss for the third quarter as a weak performance at its Quincy’s steak house chain offset improvement at its Hardee’s, Denny’s and El Pollo Loco restaurants.

Flagstar lost 38 cents per share in the July-September period in contrast to a profit of $10.7 million, or 25 cents per share, a year earlier. Revenue rose to $704 million from $677 million a year ago.

The 1995 figures reflected an extra $16 million in revenue from operations that have since been discontinued.

Flagstar is the largest franchisee of Hardee’s fast-food restaurants. It also owns the Denny’s, Quincy’s, El Pollo Loco, Coco’s and Carrows chains.

Hardee’s same-store sales were down 6.1 percent compared with the same quarter a year ago, but its operating income improved 56 percent.

Much of the improvement came from better operating efficiency and cost control, said James B. Adamson, Flagstar’s chairman and chief executive.

Quincy’s same-store sales were down 17.5 percent from a year earlier, and its operating income sank to $800,000 from $6.7 million a year ago. A new management team there is trying to control costs while improving operations and marketing, Adamson said.

Denny’s showed slight same-store sales growth, with improved profit margins, Adamson said. A price increase at the chain in September should help future results, he said.

For the first nine months, Flagstar lost $67.9 million, or $1.60 per share, on revenues of $1.9 billion. That compares with a loss of $41 million, or 97 cents per share, on $2 billion in revenues for the first nine months of 1995.

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