Cara shopping for new restaurants

• having scooped up some of the biggest restaurant chains in the country during the past three years, is on the lookout for more.

“Our balance sheet is much stronger and we are well-positioned to pursue strategic acquisitions,” company chief executive Bill Gregson said Friday on a conference call.

Cara, operator of 1,237 restaurants across the country under banners such as Swiss Chalet, Harvey’s, Milestones and New York Fries, reported a 39-per-cent jump in overall system sales to $641 million in the quarter thanks to its acquisition of the St. Hubert chain last September. That was up from $461 million in the same period a year ago.

However, same-restaurant sales, a figure indicative of overall industry performance that strips out the extra sales from new restaurants, fell 2.8 per cent for the period ended Dec. 25, and were down 1.6 per cent for the year.

“We obviously aren’t pleased with our same-restaurant sales results,” Gregson told investors. The company plans to grow its samerestaurant sales in 2017, he said, by making ongoing investments in digital marketing and technology, expanding e-commerce, renovating more restaurants and adding innovative menu items. “We have got lots of work to do, but we have had lots of work to do in the past and we did it.”

Net earnings were $19.7 million, or 32 cents per share, compared with earnings of $58.3 million ($1.11) in the fourth quarter of last year. Cara’s shares closed Friday up 2.81 per cent

The news comes amid a period of sustained pressure in the industry for sit-down casual dining restaurants.

Market research firm NPD Group predicts overall restaurant customer traffic will remain weak this year, following a flat 2016.

Quick-service restaurants such as Tim Hortons and McDonald’s will see a oneper-cent rise in customer visits, according to NPD, and full-service restaurants are expected to see a decline of two per cent in traffic.

Before the 2008 recession full-service restaurants had more than 50 per cent of the market, but under pressure from quick-service rivals, their market share has been sliding since then, now accounting for 42 per cent.

Cara has been scaling up in response, aiming to acquire strong brands while lowering its overall cost base. Since Cara merged with rival Prime Restaurants in 2013, it has closed underperforming restaurants and acquired new chains, most recently the 99-unit Original Joe’s Franchise Group in November.

“We have completely transformed our business in three years,” Gregson said, noting Cara’s restaurant count is up 48 per cent from 2013 and revenue has climbed to $2.04 billion from $1.37 billion.

The firm has also deleveraged its balance sheet, helped by its 2015 IPO, reducing its debt to EBITDA multiple to 2.1 times debt to EBITDA at the end of 2016 from 6.2 times debt to EBITDA in 2013. That will allow Cara to pursue more strategic acquisitions, said Gregson.

The company is also growing its food manufacturing business. Cara sells products such St. Hubert pot pies and Swiss Chalet Dipping Sauce mix at grocery retailers across the country, and “will be adding more products throughout the year to grocery,” Gregson said.