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Pastimes : Clown-Free Zone... sorry, no clowns allowed
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To: marginmike who wrote (141303)1/2/2002 2:16:05 PM
From: reaper  Read Replies (1) of 436258
 
MM, in my opinion Outback is terrible as well, but frankly my opinion doesn't count. The opinions of the people who stand in line for a friggin' hour on a Saturday nite to eat at the Outback in Burlington MA (and all of the other Outback's that I see) are the opinions that matter. I don't think that Outback cares that we think they suck, 'cause they do $3.5mm a unit without us eating there. I don't know who eats there or why, all I know is that they DO, and do enough such that Outback generates unit-level capital returns (pre-tax) of over 30%. They generate over $200mm a year in cash flow and do so reliably, and there is a price at which that cash flow should be bought (though I don't think its $35).

Near as I can tell the ROIs don't suck at Papa John's, though I am willing to be persuaded otherwise. They are likely to generate +/- $85-90mm in cash this year, after generating $77mm last year, $90mm in 1999 (before the leveraged recap) and $65mm in 1998. They're going to generate a lot of free cash this year as they have slowed unit expansion. They will pay off +/- $50mm of debt this year, and are prudently levered. I know this isn't the best company in the world, but jeez I can have it today for 6.5-7.0x the after-tax cash flow that they generate every year. Where I come from that's cheap.

Cheers
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