Fast Food Restaurants

Garden Fresh Restaurant Corp.

Garden Fresh <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: LTUS)") else Response.Write("(Nasdaq: LTUS)") end if %> was founded in 1983 and currently operates 46 restaurants in California, Florida, Arizona and New Mexico under the names Souplantation and Sweet Tomatoes. The restaurants feature an "all you can eat" salad bar, soup bar, hot pasta bar, frozen yogurt area, and fresh fruit bar, as well as a bakery that cranks out fresh bread, muffins, and foccacios.

The company sells at a substantial discount to its peers in terms of sales, largely as a result of its "green" concept. Considering its minimal capital requirements in comparison with its more senior rivals, its 10% return on investment has room for growth as supplier costs can be leveraged over a broader number of units (assuming capital turnover remains high). With the company growing its floor space 20% a year, it looks attractive at 12x 1997 earnings estimates.

Latest Financials

Net sales for the third quarter rose 25.7% to $23.5 million from $18.7 million a year ago. The increase reflects 46 restaurants in operation at the end of the current third quarter, up from 39 a year ago. On a same-store sales basis, sales advanced 5% from the corresponding period last year. Third quarter net income rose 23.9% to $1,192,000 versus $962,000 for the third quarter of fiscal 1996. Earnings per share increased to $0.27 per share on 4.4 million shares, up from $0.23 per share on 4.2 million shares for the third quarter of the prior year.

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