SOURCE: Meritage Hospitality Group Inc.

October 10, 2007 08:48 ET

Meritage Releases Third Quarter Results; Reports Third Quarter Profit

GRAND RAPIDS, MI--(Marketwire - October 10, 2007) - Meritage Hospitality Group Inc. (PINKSHEETS: MHGU), one of the nation's premier franchise hospitality companies and only publicly traded Wendy's and O'Charley's restaurant franchisee, today announced net sales for the third fiscal quarter ended August 26, 2007, were $15.4 million, compared to $15.3 million during the same period last year. Meritage reported a net profit of $93,000 for the quarter, compared to a net loss of $547,000 for the same period last year. Consolidated EBITDA (earnings before interest, taxes, depreciation and amortization) for the period was $1.14 million compared to $1.11 million in the same period of fiscal 2006.

Sales for the nine month period ended August 26, 2007, were $43.9 million compared to $43.3 million during the same period last year. Meritage reported a net loss for the nine month period of $1.1 million, compared to a net loss of $2.5 million for the same period last year. Consolidated EBITDA for the nine months was $1.81 million compared to adjusted consolidated EBITDA of $1.44 million in the same period of 2006.

Robert E. Schermer, Jr., Meritage's Chief Executive Officer, stated, "Our third quarter profit was largely due to numerous initiatives that Meritage undertook in the past year to improve efficiencies and reduce costs. Unfortunately, very little of the margin improvements that we had planned and hoped for from the Wendy's franchise system have materialized. But we continue to believe that the Wendy's franchise system will be a strong brand in the future and provide opportunities in the long term."

The Company continues to evaluate plans to engage in the development of oceanfront property on the Island of Eleuthera, Bahamas. This includes a participation interest in an upscale leisure and mixed-use resort opportunity that would include a marina, golf course, oceanfront lots and high-end hotels operated by international luxury hotel operators. Such developments are subject to various conditions including obtaining governmental permits and considering the economic feasibility of the developments. If the developments proceed, Meritage would plan to focus on real estate sales and marketing, as well as development services.

Meritage is one of the nation's premier franchise operators, currently operating 53 restaurants in two brands: Wendy's in the quick service restaurant segment and O'Charley's in the casual dining segment.


Certain statements contained in this news release that are not historical facts constitute forward-looking statements which may be identified by words such as "estimates," "anticipates," "projects," "plans," "expects," "believes," "should," and similar expressions, and by the context in which they are used. Such statements are based only upon current expectations of the Company. Any forward-looking statement speaks only as of the date made. Reliance should not be placed on forward-looking statements because they involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements to differ materially from those expressed or implied. Meritage undertakes no obligation to update any forward-looking statements to reflect events or circumstances after the date on which they are made.

Statements concerning expected financial performance, business strategies and action which Meritage intends to pursue to achieve its strategic objectives, constitute forward-looking information. Implementation of these strategies and achievement of such financial performance are subject to numerous conditions, uncertainties and risk factors, which could cause actual performance to differ materially from the forward-looking statements. These include, without limitation: competition; changes in the national or local economy; changes in consumer tastes and eating habits; concerns about the nutritional quality of our restaurant menu items; concerns about consumption of beef or other menu items due to diseases including E. coli, hepatitis, and mad cow; promotions and price discounting by competitors; severe weather; changes in travel patterns; road construction; demographic trends; the cost of food, labor and energy; the availability and cost of suitable restaurant sites; the ability to finance expansion; interest rates; insurance costs; the availability of adequate managers and hourly-paid employees; directives issued by the franchisor regarding operations and menu pricing; the general reputation of Meritage's and its franchisors' restaurants; the relationship between Meritage and its franchisors; legal claims; and the recurring need for renovation and capital improvements. In addition, Meritage's expansion into the casual dining restaurant segment as a franchisee of O'Charley's will subject Meritage to additional risks including, without limitation, unanticipated expenses or difficulties in securing market acceptance of the O'Charley's restaurant brand, the ability of our management and infrastructure to successfully implement the O'Charley's development plan in Michigan, and our limited experience in the casual dining segment. Also, Meritage is subject to extensive government regulations relating to, among other things, zoning, public health, sanitation, alcoholic beverage control, environment, food preparation, minimum and overtime wages and tips, employment of minors, citizenship requirements, working conditions, and the operation of its restaurants. Because Meritage's operations are concentrated in certain areas of Michigan, a marked decline in Michigan's economy, or in the local economies where our restaurants are located, could adversely affect our operations.

Contact Information

    Gary A. Rose
    Vice President & Chief Operating Officer
    Meritage Hospitality Group Inc.