Business of the week: Carrols Corporation

CNY Business Journal (1996+), Sep 03, 1999 by J, Casey

SYRACUSE-Increasing competition from McDonald's in the 1970s convinced officials at Carrots Corporation that their restaurants needed a stronger brand image-one that only a nationally recognized name could provide. At the time, the company operated 121 Carrols-branded quick-service restaurants stretching from Maine to Virginia. After carefully studying the market, Carrots management decided to replace the Carrots brand with Burger King franchises.

"In January of 1976, we converted our first restaurant from Carrots to Burger King," says Daniel Accordino, president and chief operating officer of Carrots Corp.

The financial results of the first conversion convinced the company that it was on the right path. Weekly sales at the test location increased from $8,800 to $28,000.

Since that first conversion, Carrols has grown into one of the nation's largest operators of Burger King restaurants. Today, Carrots has 346 Burger King locations in 13 states.

Until recently, Carrots held the crown as the largest Burger King franchisee, but that title now rests with Illinois-based AmeriKing, Inc. AmeriKing operates 354 Burger King restaurants.

The Carrots' name is the result of an agreement founder Herb Slotnick made when he acquired, the New York franchise rights to a defunct restaurant chain in the early 1960s. As a condition of the sale, the seller insisted the restaurants be named after his daughter, Carrot.

Restaurants are Carrots' only business, but that hasn't always been the case. The company's former Cinema National division once boasted the most movie screens in the Northeast. Carrols also operated a fooddistributing company from 1974 to 1990. Accordino says the company sold those businesses to finance restaurant acquisitions.

"We thought we could get a better return on our investment by buying more Burger King restaurants," he explains.

From 1993 to 1997, Carrots increased the number of its restaurants by more than 70 percent. In 1997, the company added 103 Burger Kings. Most growth, says Accordirio, comes through the acquisition of existing restaurants rather than new construction.

In July 1998, Carrots bought the Floridabased Pollo Tropical restaurant chain for $97 million. Pollo Tropical owns 37 quickservice restaurants in Florida and franchises 20 more outside the continental U.S. Carrols' growth has fueled an increase in employment at the company's Syracuse headquarters. The office has grown from 67 employees to 117 over the past two years.

Accordino says the business has grown increasingly competitive during his more than 25 years with the company. Over the past few years, several new competitors have challenged Burger King's and McDonald's supremacy in the quick-serve market. Accordino also views growing restaurant chains such as Applebee's and T.G.I. Friday's as Carrols' competition.

"There are more seats than there are people to fill those seats," he says.

But, while the industry is highly competitive, each pronouncement dig growth possibilities have ended is met by the introduction of innovations such as drivethrough service and breakfast. Approximately 11 percent of a Burger King's sales are during breakfast.

Even with innovations, some chains aren't able to compete. "There's a constant shakeout," says Accordino.

One company's loss can be Carrols' gain. The location of a failed restaurant can be the site of a successful Burger King restaurant. Accordino says the company does extensive research into each potential location prior to opening a new restaurant.

Like many of Carrols' corporate managers, Accordino started out working in one of the company's restaurants. That experience, he says, helps the company to quickly assimilate acquired restaurants, because managers know what it's like to work in the trenches. In today's tight labor market, a connection with the employees can be a competitive advantage.

"The key to this business is to slow down your employee turnover," he says.