SEC Filing - Carrols Restaurant Group, Inc.

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Amendment No. 1 to Form S-1

As filed with the Securities and Exchange Commission on August 25, 2004

Registration No. 333-116737

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

AMENDMENT NO. 1

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

CARROLS HOLDINGS CORPORATION

(Exact Name of Registrant as Specified in its Charter)

Delaware

5812

16-1287774

(State or Other Jurisdiction of

Incorporation or Organization)

(Primary Standard Industrial

Classification Code Number)

(I.R.S. Employer

Identification No.)

968 James Street

Syracuse, New York 13203

(315) 424-0513

(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)

Joseph A. Zirkman, Esq.

Vice-President, General Counsel

c/o Carrols Corporation

968 James Street

Syracuse, New York 13203

(315) 424-0513

(Name, Address Including Zip Code and Telephone Number, Including Area Code, of Agent For Service)

SEE TABLE OF ADDITIONAL REGISTRANTS

Copies to:

Wayne A. Wald, Esq.

Katten Muchin Zavis Rosenman

575 Madison Avenue

New York, New York 10022

(212) 940-8800

Risë B. Norman, Esq.

Simpson Thacher & Bartlett LLP

425 Lexington Avenue

New York, New York 10017

(212) 455-2000

Approximate date of commencement of proposed sale to the public:

As soon as practicable after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ¨

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. ¨

CALCULATION OF REGISTRATION FEE


Title of Each Class of Securities to be Registered	Proposed Maximum Aggregate Offering Price (1)		Amount of Registration Fee
Enhanced Yield Securities (EYSs) (2)
Shares of Class A Common Stock, par value $0.01 per share (3)
% Senior Subordinated Notes (4)
Subsidiary Guarantees of % Senior Subordinated Notes (5)
Total	$	475,000,000	$	60,183	*

*	Previously paid.

(1)	Estimated solely for the purpose of calculating the amount of registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended.

(2)

The EYSs represent shares of the Class A common stock and $ million aggregate principal amount of % senior subordinated notes of Carrols Holdings Corporation (“Carrols Holdings”), including EYSs subject to the underwriters’ over-allotment option to purchase additional EYSs, and an indeterminate number of EYSs of the same series which may be received by holders of EYSs in the future on one or more occasions in replacement of the EYSs being offered hereby in the event of a subsequent issuance of EYSs, upon an automatic exchange of portions of the notes for identical portions of such additional notes as discussed in note (4) below.

(3)	Includes shares of Class A common stock subject to the underwriters’ over-allotment option to purchase additional EYSs.

(4)

Includes $ million aggregate principal amount of Carrols Holdings’ % senior subordinated notes issued in the form of EYSs, which are subject to the underwriters’ over-allotment option to purchase additional EYSs. In addition, $ million aggregate principal amount of senior subordinated notes will be sold separately, not in the form of EYSs, to the public in connection with this offering. Also includes an indeterminate principal amount of senior subordinated notes of the same series as the senior subordinated notes, which will be received by holders of notes in the future on one or more occasions in the event of a subsequent issuance of EYSs, upon an automatic exchange of portions of the notes for identical portions of such additional notes.

(5)	Each of the subsidiary guarantors listed in the Table of Additional Registrants on the next page will guarantee the notes being registered hereby. Pursuant to Rule 457(n) under the Securities Act of 1933, no separate fee for the guarantees is payable.

The Registrants hereby amend this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrants shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

TABLE OF ADDITIONAL REGISTRANTS


Exact Name of Registrant Guarantor as Specified in its Charter	State or Other Jurisdiction of Incorporation or Organization	Primary Standard Industrial Classification Code Number	I.R.S. Employer Identification Number
Carrols Corporation	Delaware	5812	16-0958146
Cabana Bevco LLC	Texas	5810	74-2974628
Cabana Beverages, Inc.	Texas	5810	74-2616290
Carrols J.G. Corp.	Delaware	5812	16-1440019
Carrols Realty Holdings Corp.	Delaware	6500	16-1443701
Carrols Realty I Corp.	Delaware	6500	16-1440018
Carrols Realty II Corp.	Delaware	6500	16-1440017
Get Real, Inc.	Delaware	5810	06-1387866
Pollo Franchise, Inc.	Florida	5812	65-0446291
Pollo Operations, Inc.	Florida	5812	65-0446289
Quanta Advertising Corp.	New York	7310	16-1033405
Taco Cabana, Inc.	Delaware	5810	74-2201241
TC Bevco LLC	Texas	5810	74-2974633
TC Lease Holdings III, V and VI, Inc.	Texas	6500	74-2642647
T.C. Management, Inc.	Delaware	5810	74-2686352
Texas Taco Cabana, L.P.	Texas	5810	74-2686346
TP Acquisition Corp.	Texas	5810	74-2673996

The address, including zip code, of the principal executive offices of each additional registrant is: 968 James Street, Syracuse, New York 13203. Their telephone number at that address is (315) 424-0513.

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities, and we are not soliciting offers to buy these securities in any state where the offer or sale is not permitted.

Subject to Completion, dated August 25, 2004

CARROLS HOLDINGS CORPORATION

LOGO

Enhanced Yield Securities (EYSs)

representing

shares of Class A common stock and

$ % senior subordinated notes due 2016

and

$ % senior subordinated notes due 2016

This is our initial public offering of EYSs and senior subordinated notes. We are offering EYSs representing shares of our Class A common stock and $ million aggregate principal amount of our % senior subordinated notes due 2016. Each EYS initially represents:

•

one share of our Class A common stock; and

•

a % senior subordinated note with $ principal amount.

We are also selling separately, not in the form of EYSs, an additional $ million aggregate principal amount of % senior subordinated notes due 2016, which we refer to in this prospectus as the separate notes. The completion of the offering of the separate notes is a condition to our sale of the EYSs, and the completion of the offering of the EYSs is a condition to our sale of the separate notes. In addition, the completion of the internal corporate transactions described herein is a condition to our offering of the EYSs and the separate notes, and the completion of the offering of the EYSs and the separate notes is a condition to the consummation of the internal corporate transactions.

The notes mature on , 2016. We may defer or may be required to defer interest payments on the notes under specified circumstances and subject to the limitations described in “Description of Notes — Terms of the Notes — Interest Deferral” on page 140 and “Description of Other Indebtedness – New Credit Facility” on page 123. Deferred interest on the notes will bear interest quarterly at a rate equal to the stated annual rate of interest on the notes divided by four.

Upon a subsequent issuance by us of EYSs or additional notes of the same series, a portion of your notes may be automatically exchanged for an identical principal amount of the notes issued in such subsequent issuance, and in that event your EYSs or separate notes will be replaced with new EYSs or new notes. In addition to the notes offered hereby, the registration statement of which this prospectus is a part also registers the notes and new EYSs to be issued upon any such subsequent issuance. For more information regarding these automatic exchanges and the effect they may have on your investment, see “Description of Notes — Covenants Relating to EYSs — Procedures Relating to Subsequent Issuance” on page 147 and “Material U.S. Federal Income Tax Consequences — Consequences to U.S. Holders — Notes — Additional Issuances” on page 179.

Holders of EYSs will have the right to separate the EYSs into the shares of our Class A common stock and the notes represented thereby at any time after the earlier of 45 days from the closing of this offering or the occurrence of a change of control. Similarly, any holder of shares of our Class A common stock and notes may, unless the EYSs have automatically separated, combine the applicable number of shares of Class A common stock and principal amount of notes to form EYSs. Separation of all of the EYSs will occur automatically upon the occurrence of certain events described in this prospectus.

We will apply to list the EYSs on the under the symbol “ .” The notes represented by the EYSs and the separate notes will not be listed on any exchange. Our shares of Class A common stock initially will not be listed for separate trading on any exchange. We anticipate that the initial public offering price will be between $ and $ per EYS and the public offering price of the separate notes will be 100% of their stated principal amount.

Investing in the EYSs, shares of our Class A common stock and/or the notes involves risks. Risk Factors begin on page 26.


	Per EYS (1)	Total	Per Separate Note	Total
Public Offering Price	$	$	%	$
Underwriting Discount	$	$	%	$
Proceeds to Carrols Holdings Corporation (before expenses) (2)	$	$	%	$

(1)	Consists of $ allocated to each note, which represents 100% of its stated principal amount, and $ allocated to each share of Class A common stock.

(2)	Approximately $ million of these proceeds will be paid to the existing stockholders, including certain members of management.

We have granted the underwriters an option to purchase up to an aggregate of additional EYSs on the same terms and conditions as set forth above to cover over-allotments, if any. To the extent we sell more EYSs in connection with the over-allotment option, the cash proceeds to certain of the existing stockholders will be greater.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

Lehman Brothers, on behalf of the underwriters, expects to deliver the EYSs and the separate notes on or about , 2004.

LEHMAN BROTHERS

, 2004

TABLE OF CONTENTS


Summary		1
Risk Factors		26
Cautionary Statement Regarding Forward-Looking Statements		45
The Transactions		46
Use of Proceeds		48
Dividend Policy and Restrictions		50
Capitalization		58
Dilution		59
Unaudited Pro Forma Consolidated Financial Statements		61
Selected Historical Financial Data		68
Management’s Discussion and Analysis of Financial Condition and Results of Operations		73
Business		89
Management		109


Principal Stockholders		118
Certain Relationships and Related Party Transactions		120
Description of Other Indebtedness		123
Description of EYSs		127
Description of Capital Stock		132
Description of Notes		139
Securities Eligible for Future Sale		174
Material U.S. Federal Income Tax Consequences		175
Certain ERISA Considerations		185
Underwriting		186
Experts		193
Legal Matters		193
Where You Can Find More Information		193
Index to Consolidated Financial Statements		F-1

You should rely only upon the information contained in this prospectus. We have not, and the underwriters have not, authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not, and the underwriters are not, making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume the information appearing in this prospectus is accurate only as of the date on the front cover of this prospectus. Our business, financial condition, results of operations and prospects may have changed since that date.

Industry and Market Data

In this prospectus we refer to information and statistics regarding the food industry. Unless otherwise indicated, all U.S. restaurant industry data in this prospectus is from the Technomic Information Services (Technomic) 2004 report entitled “Technomic Top 100: Update and Analysis of the Largest U.S. Chain Restaurant Companies.” We believe that this source is reliable, but we have not independently verified its information and cannot guarantee its accuracy or completeness. The information and statistics we have used from Technomic reflect rounding adjustments.

Burger King^® is a registered trademark and service mark and Whopper^® is a registered trademark of Burger King Brands, Inc., a wholly-owned subsidiary of Burger King Corporation, or BKC. Neither BKC nor any of its subsidiaries, affiliates, officers, directors, agents, employees, accountants or attorneys are in any way participating in, approving or endorsing this offering, any of the underwriting or accounting procedures used in this offering, or any representations made in connection with this offering. The grant by BKC of any franchise or other rights to us is not intended as, and should not be interpreted as, an express or implied approval, endorsement or adoption of any statement regarding financial or other performance which may be contained in this prospectus. All financial information has been prepared by us and is our sole responsibility.

Any review by BKC of this prospectus or the information included in this prospectus has been conducted solely for the benefit of BKC to determine conformance with BKC internal policies, and not to benefit or protect any other person. No investor should interpret such review by BKC as an internal approval, endorsement, acceptance or adoption of any representation, warranty or covenant contained in this prospectus.

The enforcement or waiver of any obligation of Carrols Corporation under any agreement between Carrols Corporation and BKC or BKC affiliates is a matter of BKC or BKC affiliates’ sole discretion. No investor should rely on any representation, assumption or belief that BKC or BKC affiliates will enforce or waive particular obligations of Carrols Corporation under those agreements.

Through and including , 2004 (the 25^th day after the date of this prospectus), all dealers effecting transactions in the EYSs and separate notes, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

SUMMARY

The following is a summary of the principal features of this offering of EYSs and separate notes and should be read together with the more detailed information and financial data and statements contained elsewhere in this prospectus.

Throughout this prospectus, we refer to Carrols Holdings Corporation, a Delaware corporation, as “Carrols Holdings” and, together with its consolidated operations, as “we,” “our” and “us,” unless otherwise indicated. Any reference to “Carrols” refers to our wholly-owned subsidiary, Carrols Corporation, a Delaware corporation, and its consolidated operations, unless otherwise indicated. We are a holding company and have no direct operations. Our principal assets are the capital stock of Carrols and any intercompany notes owed to Carrols Holdings, all of which will be pledged to the creditors under the new credit facility, as described more fully below.

We use a 52-53 week fiscal year ending on the Sunday closest to December 31. For convenience, the dating of the financial information in this prospectus has been labeled as of, and for the years ended, December 31, 1999, 2000, 2001, 2002 and 2003. Similarly, all references herein to the six months ended June 29, 2003 and June 27, 2004 are referred to as the six months ended June 30, 2003 and 2004, respectively.

Throughout this prospectus, we use the terms “EBITDA” and “EBITDA margins” because we believe they are useful financial indicators for measuring segment operating results as well as the ability, on a consolidated basis, to service and/or incur indebtedness. EBITDA, on a consolidated basis, should not be considered as an alternative to cash flows as a measure of liquidity in accordance with generally accepted accounting principles. EBITDA is not necessarily comparable to other similarly titled captions of other companies due to differences in methods of calculation. Management believes the most directly comparable measure to consolidated EBITDA calculated in accordance with GAAP is net cash provided from operating activities. See Reconciliation of Non-GAAP Financial Measures on page 72.

Carrols Holdings Corporation

Company Overview

We are one of the largest restaurant companies in the United States operating 536 restaurants in 16 states as of June 30, 2004. We operate three restaurant brands that provide balance through diversification of our restaurant concepts and geographic dispersion. We own and operate two regional restaurant companies, Taco Cabana^® and Pollo Tropical^® (together referred to by us as our Hispanic Brands). We are also the largest Burger King^® franchisee in the world and have operated Burger King restaurants since 1976. For the year ended December 31, 2003, we had total revenues of $645.0 million, net cash provided from operating activities of $48.2 million and EBITDA of $83.7 million.

The following charts reflect total revenues and EBITDA generated by our Hispanic Brands and Burger King restaurants for the year ended December 31, 2003 which illustrate our balance and diversity:

LOGO

Hispanic Brands. We entered the quick-casual restaurant segment in 1998 with our acquisition of Pollo Tropical, Inc. and we subsequently acquired Taco Cabana, Inc. in late 2000. As of June 30, 2004, our Hispanic Brands were comprised of 184 company-owned and 34 franchised restaurants.

Taco Cabana—Our Taco Cabana restaurants combine generous portions of fresh, premium quality Tex-Mex and traditional Mexican style food in a festive setting with the convenience and value of quick-service restaurants. Menu items include flame-grilled beef and chicken fajitas, quesadillas, traditional Mexican and American breakfasts, other Tex-Mex dishes and fresh-made flour tortillas. Most menu items are made fresh daily in each of our Taco Cabana restaurants. Our Taco Cabana restaurants also offer a distinctive salsa bar as well as a variety of beverage choices, including margaritas and beer. Taco Cabana pioneered the Mexican patio café concept with its first restaurant in San Antonio, Texas in 1978. As of June 30, 2004, we owned and operated 124 Taco Cabana restaurants located in Texas and Oklahoma and franchised nine Taco Cabana restaurants. For the year ended December 31, 2003, our Taco Cabana restaurants generated total revenues of $181.5 million and EBITDA of $24.4 million. In addition, for 2003, our Taco Cabana restaurants generated average annual sales per restaurant of $1.5 million and average EBITDA per restaurant of $0.2 million.

Pollo Tropical—Our Pollo Tropical restaurants feature fresh grilled chicken marinated in a proprietary blend of tropical fruit juices and spices and authentic “made from scratch” side dishes. Our menu emphasizes freshness and quality with a focus on flavorful chicken served “hot off the grill.” Pollo Tropical restaurants combine high quality, distinctive menu items and an inviting tropical setting with the convenience and value of quick-service restaurants. Most menu items are made fresh daily in each of our Pollo Tropical restaurants. Pollo Tropical opened its first company-owned restaurant in 1988 in Miami. As of June 30, 2004, we owned and operated a total of 60 restaurants, 51 of which were located in south Florida and nine of which were located in central Florida. We also franchised 25 Pollo Tropical restaurants as of June 30, 2004, 20 of which were located in Puerto Rico, four in Ecuador and one in Miami. Since our acquisition of Pollo Tropical, we have expanded the brand by over 65% by opening 24 new company-owned restaurants. For the year ended December 31, 2003, our Pollo Tropical restaurants generated total revenues of $110.2 million and EBITDA of $22.6 million. In addition, for 2003, our Pollo Tropical restaurants generated average annual sales per restaurant of $1.8 million, which we believe is among the highest in the quick-casual segment, and average EBITDA per restaurant of $0.4 million.

Burger King. Burger King is the second largest hamburger restaurant chain in the world and we are the largest Burger King franchisee in the world. Burger King restaurants feature flame-broiled hamburgers and other sandwiches, the most popular of which is the WHOPPER^® sandwich. The WHOPPER^® is a large, flame-broiled hamburger on a toasted bun garnished with mayonnaise, lettuce, onions, pickles and tomatoes. Burger King restaurants offer hamburgers, cheeseburgers, chicken and fish sandwiches, breakfast items, french fried potatoes, onion rings, salads, shakes, desserts and a variety of soft drinks and other beverages. In addition, promotional menu items are introduced periodically for limited periods. Burger King continually seeks to develop new products to enhance the menu of its restaurants. As of June 30, 2004, we operated 352 Burger King restaurants located in 13 Northeastern, Midwestern and Southeastern states. For the year ended December 31, 2003, our Burger King restaurants generated total revenues of $353.3 million and EBITDA of $36.8 million. In addition, for 2003, our Burger King restaurants generated average annual sales per restaurant of $1.0 million and average EBITDA per restaurant of $0.1 million.

The Industry

Total restaurant industry revenues in the United States for 2003 were $291.9 billion, an increase of 3.4% over 2002. The U.S. restaurant industry is comprised of five major segments: quick-service, quick-casual, family/ mid-scale, casual dining and fine dining restaurants. Sales in the overall restaurant industry are projected to increase at a compound annual growth rate of 4.8% between 2003 and 2008.

The emerging quick-casual restaurant segment, which includes our Hispanic Brands, combines the convenience of quick-service restaurants with the menu variety, use of fresh ingredients, upscale decor and food quality of casual dining. We believe that the quick-casual restaurant segment is one of the fastest growing segments of the restaurant industry. Sales growth in 2003 of quick-casual chains in the Top 100 restaurant chains was 9.1% as compared to 5.1% for the overall Top 100 restaurant chains, which includes all five major segments.

The quick-service restaurant segment is the largest segment of the U.S. restaurant industry. Technomic identifies eight major types of quick-service restaurants in the United States: hamburger; pizza/pasta; chicken; other sandwich; Mexican; ice cream/yogurt; donut and cafeteria/buffet. Sales at quick-service restaurants in the United States were $144.1 billion in 2003, representing 49% of total U.S. restaurant industry sales. The hamburger segment of the U.S. quick-service restaurant segment, which includes our Burger King restaurants, generated revenues of $50.7 billion in 2003 making it the largest segment of the U.S. quick-service restaurant market. Sales in the hamburger segment are projected to increase at a compound annual growth rate of 3.5% between 2003 and 2008. We believe that the quick-service restaurant segment meets consumers’ desire for a convenient, reasonably priced restaurant experience.

Competitive Strengths

We attribute our success in the quick-casual and quick-service restaurant segments to the following competitive strengths:

Strong Brand Names. We believe our restaurant concepts are highly recognized brands in their market areas.

•

Hispanic Brands—Taco Cabana and Pollo Tropical are highly recognized quick-casual restaurant brands in their respective core markets. Of the 124 Taco Cabana restaurants we owned and operated as of June 30, 2004, 118 were concentrated in five major Texas markets: San Antonio, Houston, Dallas/Fort Worth, Austin and El Paso. All of the 60 Pollo Tropical restaurants we owned and operated as of June 30, 2004 were located in four counties in south and central Florida. We believe that the following factors have contributed to the success of our Hispanic Brands:

•

strong brand awareness in their respective core markets;

•

high quality, freshly prepared food;

•

high frequency of visits and loyalty by core customers; and

•

distinctive menu offerings that capitalize on the growing consumer preference for variety and ethnic foods.

•

Burger King—Since its introduction in 1954, the Burger King brand has become one of the most recognized brands in the restaurant industry. Each year Burger King spends between 4% and 5% of total system sales on advertising (a total of $2.3 billion over the past five years) to sustain and increase this high brand awareness. We believe that strong brand recognition, combined with food quality, value and convenience of Burger King restaurants, provide opportunities for growth for the Burger King brand.

Stable and Diversified Cash Flows. We believe that the stability of our operating cash flows is due to the proven success of our quick-casual and quick-service restaurant concepts, the high degree of customer awareness of our brands and our consistent focus on effective restaurant operations. Over the past five years, our EBITDA margins have ranged between 12.6% and 14.4% and averaged 13.5%. Over the same period, net cash provided from operating activities has ranged from $39.1 million to $56.0 million and averaged $48.4 million. We also believe that multiple concepts operating in diverse geographic areas enable us to capitalize on regions that have rapidly growing populations and to further reduce our dependence on the economic performance of any one particular region or restaurant concept. Taco Cabana, with its quick-casual restaurants primarily located in Texas,

and Pollo Tropical, with its quick-casual restaurants primarily located in Florida, have provided us with geographic, brand and concept diversity. In addition, our Burger King restaurants are geographically dispersed over 13 states in the Northeast, Southeast and Midwest regions.

Well Positioned to Continue to Capitalize on Growing Population in Our Core Markets. Due primarily to our acquisition of Taco Cabana in late 2000 as well as the development of new Taco Cabana and Pollo Tropical restaurants over the past five years, total revenues generated by our Hispanic Brands have increased from $83.8 million in 1999 to $291.7 million in 2003. During this time frame, total EBITDA generated by our Hispanic Brands has increased over 250% from $18.5 million in 1999 to $47.0 million in 2003. As of June 30, 2004, we collectively owned and operated or franchised more than 200 restaurants under our Hispanic Brands. Our Hispanic Brand restaurants are concentrated in two regions: Texas and Florida. We expect sales from these restaurants to benefit from the continued population growth in these regions and from the growth of the U.S. Hispanic population, both of which are expected to exceed the national average. According to the U.S. Census Bureau, the U.S. population is forecast to grow by 4.1% from 2005 to 2010 and the population in Texas and Florida is forecast to grow by 6.4% and 6.7%, respectively, during that same period. In addition, the growth of the Hispanic population is expected to outpace overall population growth and increase from 11.8% of the total U.S. population in 2000 to 18.2% by 2025.

Largest Burger King Franchisee. We are the largest Burger King franchisee in the world. We believe that our leadership position, together with our experienced management team, effective management information systems, and a comprehensive infrastructure enable us to operate more efficiently and better enhance restaurant margins and overall performance levels than most other Burger King franchisees. These strengths also enable us to selectively acquire additional Burger King restaurants, continue to develop new restaurants and leverage this expertise across our Hispanic Brands.

Experienced Management Team. Our senior management has extensive experience in the restaurant industry and has a long and successful history of developing, acquiring and operating quick-service and quick-casual restaurants. Management has successfully integrated the acquisitions of Taco Cabana and Pollo Tropical. We believe that our senior management team’s experience in operating restaurants and knowledge of the demographic and other characteristics of our core markets provide us with a competitive advantage.

Business Strategy

Our business strategy is to continue to increase revenues and cash flows through the development of new restaurants and selective acquisitions. Our business strategy also includes improvements in sales at our restaurants through our marketing and product development activities and through our operating efficiencies as a result of our training and sophisticated management information systems. We also may have opportunities to expand our Hispanic Brands in additional markets through franchising and other arrangements. Our strategy is based on the following components:

Leverage Strong Brand Names. We realize significant benefits as an owner and operator of the Taco Cabana and Pollo Tropical restaurant concepts and as a Burger King franchisee. These benefits are the result of the following:

•

strong recognition of the Taco Cabana and Pollo Tropical brands in their core markets;

•

ability to manage brand awareness, marketing and product development for our Hispanic Brands;

•

widespread recognition of the Burger King brand and flagship WHOPPER^® product supported by a national advertising program; and

•

ability to capitalize on Burger King’s product development capabilities.

Grow Sales and Continue to Improve Operating Efficiencies. We maintain a disciplined commitment to increasing the profitability of our existing restaurants. Our strategy is to grow sales in our existing restaurants by continuing to develop new products for our Hispanic Brands, developing and enhancing the efficiency and quality of our proprietary advertising and promotional programs and improving the customer experience at all of our restaurants. Our large base of restaurants, skilled management team and sophisticated management information and operating systems enable us to optimize operating efficiencies for our restaurants. We are able to control restaurant labor and food costs, effectively manage our restaurant operations and ensure consistent application of operating controls through the use of our sophisticated management information and point-of-sale systems. Our size and, in the case of Burger King, the size of the Burger King system enable us to realize benefits from improved bargaining power for purchasing and cost management initiatives. We believe these factors provide the basis for increased restaurant level and company profitability.

Open Additional Restaurants. We believe that many of our existing markets continue to provide opportunities for the development of new Taco Cabana, Pollo Tropical and Burger King restaurants. Our staff of real estate and development professionals are responsible for new restaurant development. Before developing a new restaurant, we conduct an extensive site selection and evaluation process that includes in-depth demographic, market and financial analyses. By selectively increasing the number of restaurants we operate in a particular market, we can increase brand awareness and effectively leverage our management oversight, corporate infrastructure and local marketing expenditures. We intend to use borrowings under our new credit facility and proceeds from future sale-leaseback transactions to fund capital expenditures for new restaurant development. A portion of the new credit facility ($ million) will be reserved to fund such capital expenditures.

We believe there are further growth opportunities for our Hispanic Brands. We plan to open new restaurants in our existing markets which may be either free-standing buildings or restaurants contained within strip shopping centers (in-line restaurants) to further leverage our existing brand awareness. Operating in-line restaurants allows us to selectively expand our brand penetration and visibility in certain of our existing markets, while doing so at a lower cost than developing a restaurant as a free-standing building. We also believe that there may be opportunities to further expand these brands beyond their current core regions of Texas and south and central Florida.

We believe there may be opportunities to expand the number of Burger King restaurants we operate through selective acquisitions from other franchisees and through development of new restaurants in our existing markets. We believe that selective acquisitions of additional Burger King restaurants would result in operating efficiencies from our proven abilities to reduce operating costs and achieve increased economies of scale by leveraging our infrastructure and operating systems.

Explore Franchising and Other Arrangements. We may consider expanding our Hispanic Brands into new markets through franchising and other arrangements, such as joint ventures, which would provide us with additional cash flows through royalties, franchise and other fees. We believe this strategy will allow us to test new markets for future expansion without incurring significant capital expenditures required for developing new company owned and operated restaurants.

The Transactions

In connection with this offering, we will:

•

effect a reclassification of our existing common stock and a number of other internal corporate transactions;

•

enter into a $ million new credit facility; and

•

conduct a tender offer and consent solicitation to repurchase all of Carrols’ 9¹/2% senior subordinated notes.

The closing of this offering is conditioned upon our completion of these transactions.

We estimate that we will sell EYSs and an additional $ million aggregate principal amount of separate notes as part of this offering. The completion of the offering of the separate notes is a condition to our sale of the EYSs, and the completion of the offering of the EYSs is a condition to our sale of the separate notes. Assuming an initial public offering price of $ per EYS, which represents the midpoint of the range set forth on the cover page of this prospectus, and 100% of the stated principal amount of each separate note, we estimate that we will receive aggregate net proceeds of $ million from this offering of EYSs and separate notes, after deducting underwriting discounts, commissions and other estimated transaction expenses.

We will use these net proceeds, together with $ million of borrowings under the new credit facility, as follows:

•

$ million to repurchase shares of our Class B common stock (issued in exchange for our existing common stock) and outstanding options from the existing stockholders, including certain members of management;

•

$ million to repay all outstanding borrowings under the existing credit facility;

•

$ million to repurchase all of Carrols’ 9¹/2% senior subordinated notes in the tender offer or through a redemption; and

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$ million to pay related fees and expenses and transaction bonuses to certain members of management.

If the underwriters exercise their over-allotment option with respect to the EYSs in full, we will use all of the net proceeds we receive from the sale of additional EYSs under the over-allotment option ($ million) to repurchase shares of our Class B common stock held by certain of the existing stockholders, including certain members of management.

We refer to the offering of the EYSs and the separate notes, our internal corporate transactions, the entering into of the new credit facility, the tender offer and consent solicitation, the repurchases of our existing common stock and stock options from the existing stockholders, the repayment in full of the existing credit facility and the retirement of Carrols’ 9¹/2% senior subordinated notes collectively as the “transactions.” Each of the transactions described above is conditioned upon our completion of each of the other transactions.

Internal Corporate Transactions

We have amended our certificate of incorporation and long-term incentive plans to provide for a single class of authorized common stock and to convert all outstanding stock options to purchase each of Carrols Holdings’ Taco Cabana class of common stock and Carrols Holdings’ Pollo Tropical class of common stock into options to purchase only Carrols Holdings’ Carrols class of common stock, which we refer to in this prospectus as our “existing common stock.”

Immediately prior to and in connection with this offering, we will reclassify our existing common stock into two classes of common stock: Class A common stock and Class B common stock. The shares of our existing common stock held by the existing stockholders will be reclassified into shares of Class B common stock.

Concurrently with the closing of this offering, we will repurchase an aggregate of shares of our Class B common stock (issued in exchange for our existing common stock) from Madison Dearborn Capital Partners, L.P. and Madison Dearborn Capital Partners II, L.P., together, Madison Dearborn, and BIB Holdings (Bermuda) Ltd., which we refer to collectively in this prospectus as the “existing financial investors.” In addition, we will repurchase an aggregate of shares of our Class B common stock (issued in exchange for our existing common stock) from certain of our directors and officers, and repurchase options to purchase an aggregate of shares of our Class B common stock (issued in exchange for options to purchase our existing common stock) from certain of our directors, officers and current and former key employees.

Options to purchase our Class B common stock (issued in exchange for options to purchase our existing common stock) held by certain of our directors, officers and current and former key employees and not repurchased by us in connection with this offering will be exchanged for an aggregate of shares of restricted Class B common stock to be issued under a newly-adopted restricted stock plan. In addition, certain members of management will be granted an aggregate of shares of restricted Class B common stock to be issued under such restricted stock plan. In this prospectus, we refer to all of the foregoing transactions as our “internal corporate transactions.”

New Credit Facility

Concurrently with the closing of this offering, Carrols will repay all outstanding borrowings due to the current lenders under its senior secured credit facility, which we refer to in this prospectus as the “existing credit facility,” and will amend and restate the existing credit facility with a new syndicate of lenders, including Lehman Brothers as lead arranger and bookrunner. In this prospectus, we refer to this amended and restated senior secured credit facility as the “new credit facility.” The new credit facility will be comprised of a secured revolving credit facility in a total principal amount of up to $ million (including $ million reserved for letters of credit) and a term loan facility consisting of senior secured notes in an aggregate principal amount of $ million. A portion of the new credit facility ($ million) will be reserved to fund capital expenditures for new restaurant development. While the new credit facility will permit us to pay dividends on our shares of Class A common stock and Class B common stock and interest to holders of the notes, it will contain significant restrictions on our ability to do so, and on our subsidiaries’ ability to make dividend and interest payments to us. The revolving credit facility will have a five-year maturity and the term loan facility will have a seven-year maturity. See “Description of Other Indebtedness—New Credit Facility.”

Tender Offer and Consent Solicitation

In connection with this offering, we will commence a tender offer and consent solicitation with respect to all of Carrols’ outstanding 9¹/2% senior subordinated notes due 2008 for an expected total consideration of $ million. In this prospectus, we refer to these notes as “Carrols’ 9¹/2% senior subordinated notes.” As of June 30, 2004, $170 million aggregate principal amount of Carrols’ 9¹/2% senior subordinated notes were outstanding. The closing of this offering will be conditioned upon the receipt of the tender and consent of at least a majority in aggregate principal amount of Carrols’ 9¹/2% senior subordinated notes outstanding in order to delete the restrictive covenants contained in the indenture governing those notes, and the consummation of the tender offer and consent solicitation will be conditioned upon the closing of this offering. Holders that provide consents will be obligated to tender and holders who tender will be obligated to consent. After we receive the required consents, we intend to enter into a supplemental indenture to remove the restrictive covenants contained in the indenture to facilitate this offering. We cannot assure you that the tender offer and consent solicitation will be consummated on the terms described above. If any notes are not tendered pursuant to the tender offer, we intend to redeem such outstanding notes. The notes are redeemable at our option on or after December 1, 2003 at a price

of 104.75% of the principal amount if redeemed before December 1, 2004. We will use a portion of the net proceeds from this offering and borrowings under the new credit facility to pay for Carrols’ 9¹/2% senior subordinated notes accepted for purchase in the tender offer and consent solicitation or redeemed after this offering.

The Existing Stockholders

The existing financial investors and certain of our directors, officers and current and former key employees are the owners of all our outstanding existing common stock (and, in the case of our directors, officers and current and former key employees, outstanding options to purchase our existing common stock) prior to this offering. In this prospectus, we refer to these owners as the “existing stockholders.” As discussed above, the existing stockholders will be selling an aggregate of shares of our Class B common stock (issued in exchange for an aggregate of shares of our existing common stock), and options to purchase shares of our Class B common stock (issued in exchange for options to purchase an aggregate of shares of our existing common stock) to us for $ million, which we will purchase with a portion of the proceeds of this offering, or shares of our Class B common stock (issued in exchange for an aggregate of shares of our existing common stock), for $ million if the underwriters exercise their over-allotment option with respect to the EYSs.

Following the completion of our internal corporate transactions and upon the consummation of the other transactions, we anticipate that the existing financial investors will own an aggregate of shares of our outstanding Class B common stock, representing approximately % of our outstanding capital stock, or an aggregate of shares representing approximately % of our outstanding capital stock, if the underwriters’ over-allotment option with respect to the EYSs is exercised in full. In addition, we anticipate that the other existing stockholders will own an aggregate of shares of our outstanding Class B common stock (including an aggregate of shares of restricted Class B common stock issued under a newly adopted restricted stock plan), representing approximately % of our outstanding capital stock, or an aggregate of shares representing approximately % of our outstanding capital stock, if the underwriters’ over-allotment option with respect to the EYSs is exercised in full.

Exchange Rights of Class B Common Stockholders

After the second anniversary of the consummation of this offering, either the holders of the Class B common stock may elect, or we may require such holders, to exchange the Class B common stock for EYSs or, if the EYSs have been automatically separated or if the Class A common stock is listed for separate trading on a stock exchange, Class A common stock, subject to certain restrictions. Each share of Class B common stock will be exchangeable into EYSs at a fixed rate of shares of Class B common stock for one EYS. After the second anniversary of the consummation of the offering, if the EYSs have automatically separated or if the shares of our Class A common stock are listed for separate trading on a stock exchange, the holders of the Class B common stock may convert one share of Class B common stock into one share of Class A common stock. Following this offering, we expect that there will be shares of Class B common stock (or shares of Class B common stock if the underwriters exercise their over-allotment option with respect to the EYSs in full) exchangeable into EYSs (or EYSs if the underwriters exercise their over-allotment option in full). For a more complete description of this exchange right and the terms of our Class A common stock and Class B common stock, see “Description of Capital Stock.”

The indenture governing the notes will provide that, in the event there is a subsequent issuance of notes (including upon the issuance of additional EYSs in exchange for our Class B common stock) and such notes are issued with OID or are issued after an issuance of notes with OID, each holder of EYSs or separate notes, as the case may be, agrees that a portion of such holder’s notes will be exchanged for a portion of the notes acquired by the holders of such subsequently issued notes, as described herein. As a result of these exchanges, the OID associated with the issuance of the new notes will be effectively spread among all holders of notes on a pro rata basis, which may adversely affect your tax treatment. For additional information, see “Material U.S. Federal Income Tax Consequences.”

Our Corporate Structure After this Offering

The following chart reflects our corporate structure immediately after this offering (without giving effect to the exercise of the underwriters’ over-allotment option with respect to the EYSs), including percentages of voting control:

LOGO

General Information About This Prospectus

Throughout this prospectus, unless otherwise noted, we have assumed:

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no exercise of the underwriters’ over-allotment option with respect to the EYSs;

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the reclassification of our existing common stock (and options to purchase our existing common stock);

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the purchase of all of Carrols’ 9¹/2% senior subordinated notes in the tender offer and consent solicitation for aggregate consideration of $ million, including accrued and unpaid interest to the tender purchase date;

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a % annual interest rate on the notes, which is subject to change depending on market conditions prior to the pricing date; and

•

an initial public offering price of $ per EYS (which represents the midpoint of the range set forth on the cover page of this prospectus) comprised of $ allocated to one share of Class A common stock and $ (100% of the stated principal amount) allocated to each note, and 100% of the stated principal amount of each separate note.

Unless the context otherwise requires, references in this prospectus to this “offering” refer collectively to the offering of EYSs, including the shares of Class A common stock and notes represented by such EYSs, and $ million aggregate principal amount of separate notes.

Recent Developments

We restated our financial statements, including applicable footnotes, for periods ended prior to December 31, 2003 to report real estate transactions for 86 restaurants consummated during 1991 to 2000 as financing transactions under SFAS No. 98, “Accounting for Leases”, rather than as sale/leaseback transactions.

The restatement was due to lease provisions in certain of our sale/leaseback transactions, which in our opinion have minimal commercial impact upon the relevant terms of the leases. Had we been aware of the potential impact of these provisions upon our financial statements, we believe that both we and the respective lessors would have agreed to exclude those provisions from each lease without affecting any of the material terms of such leases. We may amend these leases in the future to address these provisions and to qualify them for treatment as operating leases as originally intended. However, we cannot assure you as to when or whether any or all of such leases will be amended.

The impact of the restatement was to record on our balance sheets the property and equipment of the restaurants subject to these transactions and record the proceeds from these transactions (including the gains previously deferred) as a form of debt financing. The restatement also impacted our financial results by increasing the depreciation expense for the property and equipment subject to these transactions and recharacterizing the lease payments previously accounted for as rent expense for these restaurants as principal repayments and interest expense. The restatement had no impact on our liquidity and net cash flows. In addition, there was no impact on sale/leaseback transactions that were consummated in 2002 and 2003.

prior non-compliance and defaults resulting from the restatement. In addition, the existing credit facility was amended to exclude all adjustments resulting from this restatement on our financial covenant requirements and to treat on a prospective basis the specified leases as if no restatement or recharacterization had occurred.

See Note 2 to the consolidated financial statements included elsewhere in this prospectus for a complete discussion of the restatement. Amounts affected by the restatement that appear in this prospectus have also been restated.

Our Corporate Information

Our principal executive office is located at 968 James Street, Syracuse, New York 13203, and our telephone number is (315) 424-0513. Our internet address is www.carrols.com. Such internet address is a textual reference only, meaning that the information contained on the website is not part of this prospectus and is not incorporated in this prospectus by reference. Carrols Holdings is a Delaware corporation, incorporated in 1986.

The Offering

Summary of the EYSs and Notes

We are offering EYSs at an initial public offering price of $ per EYS, which represents the midpoint of the range set forth on the cover page of this prospectus, and $ million aggregate principal amount of separate notes at an assumed initial public offering price of 100% of their stated principal amount. The completion of the offering of separate notes is a condition to our sale of the EYSs and the completion of the offering of EYSs is a condition to our sale of the separate notes. Unless the context requires otherwise, the EYSs and the Class A common stock and notes represented by the EYSs, together with the separate notes, are referred to in this prospectus as the “offered securities.”

What are EYSs?

EYSs are securities comprised of Class A common stock and notes.

Each EYS initially represents:

•

one share of our Class A common stock; and

•

a % note with $ principal amount.

The ratio of Class A common stock to principal amount of notes represented by an EYS is subject to change in the event of a stock split, recombination or reclassification of our Class A common stock. For example, if we effect a two-for-one stock split, from and after the effective date of the stock split, each EYS will represent two shares of Class A common stock and the same principal amount of notes as it previously represented. Similarly, if thereafter we elect to effect a two-for-one combination, from and after the effective date of the combination, each EYS will represent one share of Class A common stock and the same principal amount of notes as it previously represented. Likewise, if we effect a recombination or reclassification of our Class A common stock, each EYS will thereafter represent the appropriate number of shares of Class A common stock on a recombined or reclassified basis, as applicable, and the same principal amount of notes as it previously represented.

If additional notes are issued and such notes are issued with original issue discount, referred to as OID, or if we issue notes subsequent to an issuance of notes with OID, a portion of each holder’s notes, whether held as separate notes or in the form of EYSs, will be exchanged without any further action on the part of the holder for a portion of the additional notes, so that each holder of separate notes or EYSs, as the case may be, will thereafter own indivisible note units comprised of the original notes and the additional notes in the same aggregate principal amount as such holder held prior to the automatic exchange. The principal amount of the original note and the additional note in each indivisible note unit will be identical. Accordingly, following an automatic exchange of notes, each note represented by an EYS and each separate note will consist of an indivisible note unit with an aggregate principal amount equal to the aggregate principal amount of the original note immediately prior to such exchange.

What payments can I expect to receive as a holder of EYSs or separate notes?

Assuming we make our scheduled interest payments on the notes, and pay dividends in the amount contemplated by the dividend policy to be adopted by our board of directors upon consummation of this offering, for the first four full fiscal quarters following the consummation of this offering, holders of the EYSs will receive in the aggregate approximately $ per year in interest on the notes and dividends on the Class A common stock represented by each EYS, and holders of the separate notes will receive $ per year per $ principal amount of their notes. We expect to make interest and dividend payments for the first four full fiscal quarters following the consummation of this offering, quarterly on the day of each , , and to holders of record on the day or, if such day is not a business day, on the immediately preceding business day of such month.

You will be entitled to receive quarterly interest payments for the first four full fiscal quarters following the consummation of this offering, at an annual rate of % of the aggregate principal amount of notes or, in the case of notes represented by EYSs, approximately $ per EYS per year, subject to our right to defer interest payments on the notes for an aggregate period not to exceed eight quarters prior to , 2009 and on up to four occasions after , 2009 for up to two quarters per occasion, so long as in each case we are not otherwise in default under the indenture governing the notes. The new credit facility will contain provisions that will require us under certain circumstances to defer interest payments on the notes pursuant to our option under the indenture to defer such payments. For a detailed description of these circumstances, see “Description of Notes—Terms of the Notes—Interest Deferral” and “Description of Other Indebtedness—New Credit Facility.”

Holders of the EYSs will also receive quarterly dividend payments on the shares of our Class A common stock represented by the EYSs, if and to the extent dividends are declared by our board of directors and permitted by applicable law and the terms of our then existing indebtedness. Specifically, the indenture governing the notes and the new credit facility will restrict our ability to declare and pay dividends on our Class A common stock as described under “Dividend Policy and Restrictions,” “Description of Notes” and “Description of Other Indebtedness—New Credit Facility.” Upon the closing of this offering, our board of directors is expected to adopt a dividend policy which contemplates that, subject to applicable law and the terms of our then existing indebtedness, dividends for the first four full fiscal quarters following the consummation of this offering will be approximately $ per share of our Class A common stock and Class B common stock. We cannot assure you that we will pay dividends at this level in the future, if at all. Any dividends paid to one class of our common stock must be paid to the other.

Can the board of directors of the Company modify or repeal the dividend policy with respect to the Class A common stock and the Class B common stock?

Yes. Our board of directors may, in its discretion, modify or repeal the dividend policy described above to comply with the requirements of applicable law or our indebtedness or for any other reason that the board of directors believes to be in the interest of our stockholders.

Will my rights as a holder of EYSs be any different than the rights of a beneficial owner of separately held Class A common stock and notes?

No. As a holder of EYSs you are the beneficial owner of the Class A common stock and notes represented by your EYSs. As such, through your broker or bank and The Depository Trust Company, or DTC, you will have exactly the same rights, privileges and preferences, including voting rights, rights to receive distributions, rights and preferences in the event of a default under the indenture governing the notes, ranking upon bankruptcy and rights to receive communications and notices as a beneficial owner of separately held Class A common stock and notes, as applicable, would have through its broker or bank and DTC.

Do I have voting rights as a holder of EYSs?

EYSs have no voting rights separate and apart from the underlying securities. As a holder of EYSs, you will be able to vote with respect to the underlying shares of Class A common stock. The existing stockholders, through their ownership of shares of Class B common stock, will own % of the voting power of our common stock outstanding immediately following the offering of the EYSs (or % if the over-allotment option with respect to the EYSs is exercised in full). Shares of our Class A common stock and shares of our Class B common stock are entitled to the same voting rights per share and vote together as a single class on all matters with respect to which holders are entitled to vote.

Will the EYSs be listed on an exchange?

Yes. We will apply to have our EYSs listed on the under the symbol “ .” Listing is subject to our fulfillment of all of the requirements of the , including the distribution of the EYSs to a minimum number of public holders.

Will the shares of our Class A common stock and the notes represented by the EYSs be separately listed on an exchange?

No. The notes represented by the EYSs and the separate notes will not be listed on any exchange. Our shares of Class A common stock will not be listed for separate trading on the unless and until a sufficient number of shares are held separately and not in the form of EYSs and other conditions for listing on the have been satisfied as may be necessary to satisfy applicable listing requirements. If more than the required number of our outstanding shares of Class A common stock are no longer held in the form of EYSs and other conditions for listing on the have been satisfied for a period of 30 consecutive trading days, we will apply to list the shares of our Class A common stock for separate trading on the . The Class A common stock and notes represented by the EYSs will be freely tradable without restriction or further registration under the Securities Act, unless they are purchased by “affiliates” as that term is defined in Rule 144 under the Securities Act.

Will the separate notes be the same as the notes issued as a component of the EYSs?

Yes. The separate notes will be identical to the notes represented by EYSs, will have the same CUSIP number, and will be part of the same series of notes and issued under the same indenture. Accordingly, holders of separate notes and holders of notes represented by EYSs will vote together as a single class, in proportion to the aggregate principal amount of notes they hold, on all matters on which holders of notes are entitled to vote under the indenture governing the notes.

In what form will the offered securities be issued?

The offered securities will be issued in book-entry form only. This means that you will not be a registered holder of EYSs or the securities represented by the EYSs, or the separate notes, and you will not receive a certificate for your EYSs or the securities represented by your EYSs or the separate notes. You must rely on your broker, bank or other DTC nominee that will maintain your book-entry position to receive the benefits and exercise the rights of a holder of the offered securities.

Can I separate my EYSs into shares of Class A common stock and notes or combine shares of Class A common stock and notes to form EYSs?

Yes. Holders of any EYSs may at any time after the earlier of 45 days from the date of the closing of this offering or the occurrence of a change of control, through their broker, bank or other DTC nominee, separate the EYSs into the shares of our Class A common stock and the notes represented thereby. Similarly, unless the EYSs have previously been automatically separated, any holder of shares of our Class A common stock and notes may, at any time, through his or her broker, bank or other DTC nominee, combine the applicable number of shares of Class A common stock and principal amount of notes to form EYSs. Separation and combination of EYSs will occur promptly in accordance with DTC’s procedures and upon receipt of instructions from your broker and may involve transaction fees charged by your broker and/or financial intermediary. See “Description of EYSs—Book-Entry Settlement and Clearance—Separation and Combination.”

Will my EYSs automatically separate into shares of common stock and notes upon the occurrence of certain events?

Yes. Separation of all of the EYSs will occur automatically upon the occurrence of any redemption of the notes, whether in whole or in part, upon the maturity of the notes, upon the continuance of a payment default for 90 days under the indenture governing the notes or upon certain bankruptcy events.

What will happen if we issue additional EYSs or notes of the same series in the future?

We may in the future sell additional EYSs and/or notes of the same series, which will have terms that are identical to those of the EYSs or notes being sold in this offering. Additional EYSs will represent the same proportion of Class A common stock and notes as are represented by the then outstanding EYSs. In addition, we will be required to issue additional EYSs in the future upon the exercise of exchange rights by us or the holders of our Class B common stock. If we issue notes in the future (whether or not in the form of EYSs) and these notes are sold with OID for U.S. federal income tax purposes, holders of the notes outstanding prior to such issuance and purchasers of the newly issued notes will automatically exchange among themselves a portion of the notes they hold so that immediately following such automatic exchange, each holder of notes will own a pro rata portion of the new notes and the old notes. The aggregate principal amount of new notes and old notes held by any holder after the exchange will be the same as the aggregate principal amount of the notes held by such holder prior to the exchange. Accordingly, following an automatic exchange of notes, each note will consist of an indivisible note unit with an aggregate principal amount equal to the aggregate principal amount of the original note immediately prior to such exchange. This exchange will be effected automatically, without any action by the holders, through the facilities of DTC. DTC has advised us that the implementation of this automatic exchange may cause a delay in the settlement of trades for up to 24 hours. See “Description of EYSs—Book Entry Settlement and Clearance—Procedures Relating to Subsequent Issuances.”

Other than potential tax and bankruptcy implications and subject to market perception, we do not believe that the automatic exchange will affect the economic attributes of your investment in our EYSs or notes. The tax and bankruptcy implications of an automatic exchange are summarized below and are described in more detail in “Risk Factors—Risks Relating to the EYSs, the Shares of Our Class A Common Stock and the Notes” and “Material U.S. Federal Income Tax Consequences—Consequences to U.S. Holders—Notes—Additional Issuances.”

This automatic exchange should not impair the rights you might otherwise have to assert a claim under applicable securities laws against us or the underwriters with respect to the full amount of notes purchased by you.

What are the U.S. federal income tax consequences of an investment in the EYSs?

Certain of the U.S. federal income tax consequences of an investment in EYSs are uncertain. We intend to treat the purchase of EYSs in this offering as the purchase of shares of our Class A common stock and notes and, by purchasing EYSs, you will agree to such treatment. You must allocate the purchase price of the EYSs between the shares of our Class A common stock and the notes in proportion to their respective initial fair market values, which will establish your initial tax basis in the shares of our Class A common stock and the notes. We expect to report the initial fair market value of each share of our Class A common stock as $ and the initial fair market value of each $ principal amount of the notes as $ , and by purchasing EYSs, you will agree to such allocation. If this allocation is not respected, our interest deductions may be reduced or your income inclusions (on account of interest) may be increased.

We intend to treat the notes included in the EYSs as debt for U.S. federal income tax purposes, and we intend to deduct interest on such notes for tax purposes. Such position is subject to challenge by the Internal Revenue Service (the “IRS”). If the notes are treated as equity rather than debt for U.S. federal income tax purposes, then the stated interest on the notes could be treated as dividends, and interest on the notes would not be deductible by us for U.S. federal income tax purposes, which could significantly reduce our future after-tax cash flow and adversely affect our ability to make interest and dividend payments. In addition, if the notes are treated as equity, payments on the notes to foreign holders generally would be subject to U.S. federal withholding taxes, and we could be liable for withholding taxes that were not collected on our prior interest payments to foreign holders. Payments to foreign holders would not be grossed-up on account of any such taxes.

Dividends paid on our Class A common stock through 2008 are expected to qualify for taxation to non-corporate EYS holders at long-term capital gain rates. Interest income on the notes will be taxable to U.S. individuals at ordinary income tax rates.

What are the U.S. federal income tax consequences of a subsequent issuance of notes?

The U.S. federal income tax consequences to you of the subsequent issuance of notes with OID upon a subsequent offering by us of EYSs or notes of the same series are uncertain.

The indenture governing the notes will provide that, in the event there is a subsequent issuance of notes and such notes are issued with OID or are issued after an issuance of notes with OID, each holder of EYSs or separate notes, as the case may be, agrees that a portion of such holder’s notes will be exchanged for a portion of the notes acquired by the holders of such subsequently issued notes, as described above. As a result of these exchanges, the OID associated with the issuance of the new notes will be effectively spread among all holders of notes on a pro rata basis, which may adversely affect your tax treatment, as described below.

We intend to take the position that any subsequent issuance of notes, whether or not such notes are issued with OID, will not result in a taxable exchange of your notes for U.S. federal income tax purposes, but because of a lack of legal authority on point (1) our counsel is unable to opine on the matter and (2) there can be no assurance that the IRS will not assert that such a subsequent issuance of notes should be treated as a taxable exchange of a portion of your notes, whether held separately or in the form of EYSs, for a portion of the notes subsequently issued. In that event, you generally would have to recognize the gain (if any) realized by you on such exchange, but any loss realized by you on the exchange would most likely be disallowed. Your initial tax basis in the notes deemed to have been received in the exchange would equal the fair market value of such notes on the date of the deemed exchange (increased to reflect any disallowed loss), and your holding period for such notes would begin on the day after the deemed exchange.

Regardless of whether the exchange of notes is treated as a taxable event, such exchange could result in holders having to include OID in their taxable income prior to the receipt of cash. Following any subsequent issuance of notes with OID (or any issuance of notes thereafter), we (and our agents) will report any OID on the subsequently issued notes ratably among all holders of EYSs and separate notes, and each holder of EYSs and separate notes will, by purchasing EYSs or notes, agree to report OID in a manner consistent with this approach. However, the IRS might assert that any OID should be reported only to the persons that initially acquired such subsequently issued notes (and their transferees), and may challenge your reporting OID on your tax returns.

Immediately following an exchange of notes, we will file a Current Report on Form 8-K (or any other applicable form) to announce and quantify any changes in OID attributable to the notes.

Because there is no statutory, judicial or administrative authority directly addressing the tax treatment of the EYSs or instruments similar to the EYSs, we urge you to consult your own tax advisor concerning the tax consequences to you of an investment in the EYSs. For additional information, see “Material U.S. Federal Income Tax Consequences.”

What is the initial and prospective accounting treatment of the EYSs?

There is no explicit guidance under generally accepted accounting principles regarding the accounting and financial reporting of unit securities, such as the EYSs, comprised of common stock and notes. Any accounting treatment followed by us for the EYSs may be subject to future scrutiny and challenge. Authoritative accounting bodies such as the FASB, EITF or SEC may issue future guidance, rules or interpretations which may require us to adjust our accounting treatment for the EYSs. For our interpretation of the accounting treatment based on existing guidance available, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Significant Accounting Policies.”

If the accounting treatment followed by us for the EYSs changes, the trading value of the EYSs or the notes and the Class A common stock represented thereby may decline.

Summary of the Common Stock

Issuer

Carrols Holdings Corporation

Shares of Class A common stock represented by EYSs

shares, or shares if the underwriters exercise their over-allotment option with respect to the EYSs in full.

Shares of Class B common stock to be outstanding following the offering

shares, or shares if the underwriters exercise their over-allotment option with respect to the EYSs in full.

Voting rights

Subject to applicable law, each outstanding share of our Class A common stock and Class B common stock will carry one vote per share and, as a general matter, will vote together as a single class.

Dividends

You and the holders of our Class B common stock will receive quarterly dividends on the shares of our common stock if, and to the extent, dividends are declared by our board of directors and permitted by applicable law and the terms of our then outstanding indebtedness. Specifically, the indenture governing the notes and the new credit facility both will restrict our ability to declare and pay dividends on our common stock as described in detail under “Dividend Policy and Restrictions.” Upon the closing of this offering, our board of directors is expected to adopt a dividend policy which contemplates that, subject to applicable law and the terms of our then existing indebtedness, dividends for the first four full fiscal quarters following the consummation of this offering will be approximately $ per share of our Class A common stock and $ per share of our Class B common stock.

Under our certificate of incorporation, for each quarterly dividend payment period, if we declare and pay dividends on our Class A common stock, the holders of each share of our Class B common stock will be entitled to dividend payments equal to times the amount of dividends paid on each share to the holders of our Class A common stock.

During the quarter in which the consummation of the offering occurs and through the dividend payment date with respect to the quarter ended , if for any of those periods the amount of cash to be distributed is insufficient to pay dividends at the levels described above on our Class A common stock and Class B common stock, any shortfall will first reduce the dividend on the Class B common stock to zero prior to reducing the dividend on the Class A common stock. Dividends on the Class B common stock will not be increased in any subsequent quarter to reflect any such previous reduction.

Dividend payments are not mandatory or guaranteed and holders of our common stock do not have any legal right to receive, or require us to pay, dividends. Furthermore, our board of directors may, in its sole discretion, amend or repeal this dividend policy

with respect to the Class A and Class B common stock at any time. Our board of directors may decrease the level of dividends for the Class A and Class B common stock below the expected dividend rates set forth above or discontinue entirely the payment of dividends. See “Risk Factors—Our board of directors may, in its discretion, amend or repeal the dividend policy it is expected to adopt upon the closing of this offering. You may not receive the level of dividends provided for in the dividend policy or any dividends at all” and “Dividend Policy and Restrictions.”

Dividend payment dates

If declared, dividends for the first four full fiscal quarters following the consummation of this offering will be paid quarterly on the day of each , , and to holders of record on the day or, if such day is not a business day, on the immediately preceding business day of such month.

Listing

Our shares of Class A common stock will not be listed for separate trading on the unless and until a sufficient number of shares are held separately and not in the form of EYSs and other conditions for listing on as may be necessary are satisfied. If more than the required number of our outstanding shares of Class A common stock are no longer held in the form of EYSs and other conditions for listing on are satisfied for a period of 30 consecutive trading days, we will apply to list the shares of our Class A common stock for separate trading on the . The notes and Class A common stock represented by the EYSs will be freely tradable without restriction or further registration under the Securities Act, unless they are purchased by “affiliates” as that term is defined in Rule 144 under the Securities Act. Our shares of Class B common stock will not be listed for separate trading and will have limitations on their transferability.

Rights to exchange shares of Class B common stock for EYSs or shares of Class A common stock

Summary of Notes

When we refer to the notes in this prospectus, we are referring to the notes represented by the EYSs and the separate notes.

Issuer

Carrols Holdings Corporation

Notes represented by EYSs being offered to the public

$ million aggregate principal amount (or $ million aggregate principal amount if the underwriters exercise their over-allotment option with respect to the EYSs in full).

Notes being offered to the public separately, not in the form of EYSs

$ million aggregate principal amount.

Notes to be outstanding following the offering

$ million aggregate principal amount (or $ million aggregate principal amount if the underwriters exercise their over-allotment option with respect to the EYSs in full).

Interest rate

% per year.

Interest payment dates

Interest on the notes will be payable quarterly in arrears on the day of each , , and commencing , 2004 to holders of record on the day or, if such day is not a business day, on the immediately preceding business day of such month.

Maturity date

The notes will mature on , 2016.

Interest deferral

We may, at our election, subject to certain restrictions, defer interest payments on the notes. We may defer interest payments prior to , 2009 on one or more occasions during this period for up to an aggregate period of eight quarters. In addition, after , 2009, we may, subject to certain restrictions, defer interest payments on the notes on up to four occasions for up to two quarters per occasion. However, we may not defer interest on more than one occasion after , 2009 unless and until all previously deferred interest (and interest on deferred interest) has been paid in full. The new credit facility will contain provisions that will require us under certain circumstances to defer interest payments on the notes pursuant to our option under the indenture to defer such payments.

During any interest deferral period and so long as any deferred interest or interest on deferred interest remains outstanding, we will not be permitted to make any payment of dividends on our common stock.

For a detailed description of interest deferral provisions of the indenture see “Description of Notes—Terms of the Notes—Interest Deferral.”

In the event that interest payments on the notes are deferred, you would be required to recognize interest income for U.S. federal income tax purposes even if you do not currently receive the related cash interest payments.

Ranking

The notes will be unsecured and

•

subordinated in right of payment to all of our existing and future senior indebtedness, including our guarantee under the new credit facility;

•

equal in right of payment to our other existing and future senior subordinated indebtedness; and

•

effectively subordinated to all indebtedness of our existing and future subsidiaries that are not guarantors of the notes.

As of June 30, 2004, after giving pro forma effect to the transactions, we would have had approximately $ million of total consolidated indebtedness, of which $ million would have been senior to the notes.

Note guarantees

The notes will be fully, unconditionally and jointly and severally guaranteed on an unsecured senior subordinated basis by each of our existing domestic subsidiaries and all future domestic subsidiaries that are borrowers or become guarantors under the new credit facility or any successor credit facility, other than certain inactive or immaterial subsidiaries that we may designate as unrestricted subsidiaries. Any guarantees will rank equally with all subsidiary guarantors’ other unsecured senior subordinated indebtedness, and will be subordinated in right of payment to any subsidiary guarantors’ senior indebtedness, including their borrowings or guarantees under the new credit facility.

Optional redemption

On or after , 2009, we may redeem some or all of the notes at any time at the redemption prices described in the section “Description of Notes—Optional Redemption.”

In addition, upon the occurrence of a tax event (as defined in the indenture governing the notes), we may, at our option, redeem the notes at any time at a redemption price of 100% of the principal amount to be redeemed plus accrued and unpaid interest to the redemption date.

Mandatory offer to repurchase

If we experience specific kinds of changes in control, we must offer to repurchase the notes at 101% of their stated principal amount, plus accrued and unpaid interest, if any, to the date of redemption. In order to exercise that right, a holder must separate its EYSs into the shares of Class A common stock and notes represented thereby and hold the notes separately. See “Description of Notes—Repurchase at the Option of Holders.”

Procedures relating to subsequent issuances

The indenture governing the notes will provide that in the event we issue additional notes (including any issuance of EYSs in exchange for shares of Class B common stock) having identical terms as the notes but a different CUSIP number and such notes are issued with OID, each holder of EYSs or the separate notes, as the case may be, agrees that a portion of such holder’s notes, whether held as part of EYSs or separately, will be automatically exchanged for a portion of the notes acquired by the holders of such subsequently issued notes, and the records of any record holders of notes will be revised to reflect such exchanges. Consequently, following each such subsequent issuance and exchange, without any action by such holder, each holder of EYSs or the separate notes, as the case may be, will own an indivisible unit composed of notes of each separate issuance in the same proportion as each holder. However, the aggregate stated principal amount of notes owned by each other holder will not change as a result of such subsequent issuance and exchange. The automatic exchange of notes summarized above should not impair the rights any holder would otherwise have to assert a claim under applicable securities laws against us with respect to the full amount of notes purchased by such holder. However, subsequent issuances of notes by us may adversely affect the tax and non-tax treatment of the EYSs and notes. See “Risk Factors—Subsequent issuances of notes may adversely affect your tax treatment.”

Restrictive Covenants

The indenture governing the notes will contain covenants that, among other things, limit our ability and that of the restricted subsidiaries to:

•

incur additional indebtedness and issue preferred equity;

•

pay dividends or make other distributions in respect of our shares or to make other types of restricted payments or investments;

•

sell assets;

•

agree to payment restrictions affecting our restricted subsidiaries;

•

consolidate, merge, sell or otherwise dispose of all or substantially all of our assets;

•

enter into transactions with affiliates;

•

create liens; and

•

enter into new lines of business.

Each of the covenants will be subject to a number of important exceptions and qualifications. See “Description of Notes—Certain Covenants.”

Listing

We do not anticipate that the notes will trade on any exchange. The notes will be freely tradable without restriction or further registration under the Securities Act, unless they are purchased by “affiliates” as that term is defined in Rule 144 under the Securities Act.

Credit Rating

Moody’s Investors Service, Inc. and Standard & Poor’s Rating Services, a division of The McGraw-Hill Companies, Inc., have provided credit ratings for the notes of and , respectively. The ratings are subject to review of final documentation.

Representation Letter

None of the separate notes may be purchased, directly or indirectly, by persons who are also (1) purchasing EYSs in this offering or (2) holders of Class B common stock following our internal corporate transactions. Furthermore, prior to the closing of this offering, each person purchasing separate notes in this offering and holders of our Class B common stock will be asked to make certain representations to us in furtherance of these restrictions. Except for the representations and restrictions set forth in the representation letter, there are no other representations or restrictions. See “Underwriting.”

Risk Factors

You should carefully consider the information under the heading “Risk Factors” and all other information in this prospectus before investing in the EYSs, the shares of our Class A common stock and/or the notes.

Summary Consolidated Financial Statements

The following table sets forth our summary consolidated financial information derived from our audited consolidated financial statements for each of the fiscal years ended December 31, 2001, 2002 and 2003 and our unaudited consolidated financial statements for the six months ended June 30, 2003 and 2004, which are included elsewhere in this prospectus.

The unaudited consolidated financial statements for the six months ended June 30, 2003 and 2004 include all adjustments, consisting of normal recurring adjustments, which, in our opinion, are necessary for a fair presentation of the financial position and results of operations for these periods. The results of operations for the six months ended June 30, 2003 and 2004 are not necessarily indicative of the results to be expected for the full year.

The information in the table below is only a summary and should be read together with our consolidated financial statements as of December 31, 2002 and 2003, for the years ended December 31, 2001, 2002 and 2003, as of the six months ended June 30, 2004, and for the six months ended June 30, 2003 and 2004, “Selected Historical Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” all as included elsewhere in this prospectus. The figures in the table below reflect rounding adjustments.

We restated our financial statements including applicable footnotes for periods ended prior to December 31, 2003 to report real estate transactions for 86 restaurants consummated during 1991 to 2000 as financing transactions under SFAS No. 98, “Accounting for Leases”, rather than as sale/leaseback transactions. See Note 2 to the consolidated financial statements included elsewhere in this prospectus for a complete discussion of the restatement. Amounts affected by the restatement that appear in this prospectus have also been restated.


	Year Ended December 31,							Six Months Ended June 30,
	(Restated)			(Restated)				(Restated)
	2001			2002		2003		2003		2004
	(Dollars in thousands, except per share data)
Statements of Operations Data:
Revenues:
Restaurant sales	$	654,710		$	655,545	$	643,579	$	317,165	$	334,067
Franchise royalty revenues and fees		1,579			1,482		1,406		696		756

Total revenues		656,289			657,027		644,985		317,861		334,823

Costs and expenses:
Cost of sales		189,947			183,976		181,182		87,819		96,001
Restaurant wages and related expenses		192,918			196,258		194,315		96,824		99,522
Restaurant rent expense		31,207			30,494		31,383		15,350		17,287
Other restaurant operating expenses		86,435			87,335		89,880		43,812		44,749
Advertising expense		28,830			28,041		27,351		15,005		12,873
General and administrative		35,393			36,610		37,135		18,220		20,249
Depreciation and amortization		47,388			42,766		43,102		21,824		21,686
Impairment losses		578			1,285		4,151		645		569
Other expense (1)		8,841			—		—		—		—

Total operating expenses		621,537			606,765		608,499		299,499		312,936

Income from operations		34,752			50,262		36,486		18,362		21,887
Interest expense		40,552			34,955		32,363		16,643		14,901

Income (loss) before income taxes		(5,800	)		15,307		4,123		1,719		6,986
Provision for income taxes		274			5,593		1,767		744		2,557

Net income (loss)	$	(6,074	)	$	9,714	$	2,356	$	975	$	4,429

Per Share Data:
Basic net income (loss) per share	$	(5.31	)	$	8.49	$	2.06	$	0.85	$	3.87
Diluted net income (loss) per share		(5.31	)		7.99		1.92		0.81		3.54


	Year Ended December 31,									Six Months Ended June 30,
	(Restated)			(Restated)						(Restated)
	2001			2002			2003			2003			2004
	(Dollars in thousands, except per share data)
Other Financial Data:
Cash provided from operating activities	$	47,968		$	55,964		$	48,239		$	21,734		$	28,608
Cash used for investing activities		(49,156	)		(55,071	)		(29,472	)		(16,847	)		(7,487	)
Cash provided from (used for) financing activities		881			(760	)		(18,891	)		(4,860	)		(20,209	)
Capital expenditures, excluding acquisitions		47,575			54,155			30,244			19,517			7,051
EBITDA (2)		89,771			94,313			83,739			40,831			44,142
EBITDA margin (3)		13.7	%		14.4	%		13.0	%		12.8	%		13.2	%
Ratio of earnings to fixed charges (4)		—			1.33x			1.09x			1.08x			1.33x

Operating Statistics:
Total number of restaurants (at end of period)		532			529			532			530			536

Taco Cabana:
Number of restaurants (at end of period)		120			116			121			119			124
Average number of restaurants		120.3			114.6			118.9			117.1			122.5
Revenues:
Restaurant sales	$	177,398		$	174,982		$	181,068		$	88,163		$	97,545
Franchise royalty revenues and fees		405			429			413			199			214

Total revenues		177,803			175,411			181,481			88,362			97,759
Average annual sales per restaurant (5)		1,475			1,527			1,523
EBITDA (2)		24,467			28,278			24,411			12,202			12,998
EBITDA margin (3)		13.8	%		16.1	%		13.5	%		13.8	%		13.3	%
Change in comparable restaurant sales (6)		1.6	%		(0.2	)%		(3.0	)%		(5.1	)%		4.9	%

Pollo Tropical:
Number of restaurants (at end of period)		53			58			60			60			60
Average number of restaurants		50.4			55.6			59.4			58.8			60.0
Revenues:
Restaurant sales	$	96,437		$	100,444		$	109,201		$	53,277		$	60,096
Franchise royalty revenues and fees		1,174			1,053			993			497			542

Total revenues		97,611			101,497			110,194			53,774			60,638
Average annual sales per restaurant (5)		1,913			1,807			1,838
EBITDA (2)		22,085			22,384			22,553			10,940			14,748
EBITDA margin (3)		22.6	%		22.1	%		20.5	%		20.3	%		24.3	%
Change in comparable restaurant sales (6)		(0.3	)%		(4.2	)%		2.3	%		(0.8	)%		11.0	%

Burger King:
Number of restaurants (at end of period)		359			355			351			351			352
Average number of restaurants		353.3			355.6			352.2			353.8			351.9
Restaurant sales	$	380,875		$	380,119		$	353,310		$	175,725		$	176,426
Average annual sales per restaurant (5)		1,078			1,069			1,003
EBITDA (2)		43,219			43,651			36,775			17,689			16,396
EBITDA margin (3)		11.3	%		11.5	%		10.4	%		10.1	%		9.3	%
Change in comparable restaurant sales (6)		1.3	%		(1.3	)%		(7.2	)%		(9.0	)%		0.7	%


	December 31,									June 30, 2004
	(Restated) 2001			(Restated) 2002			2003			Actual			Pro Forma As Adjusted(7)
	(Dollars in thousands, except per share data)
Balance Sheet Data (At Period End):
Total assets	$	552,111		$	547,388		$	486,874		$	467,606		$
Working capital deficiency		(34,967	)		(34,975	)		(40,857	)		(44,819	)

Debt:
Senior and senior subordinated debt	$	368,500		$	357,300		$	294,100		$	264,050		$
Capital leases and other debt		5,144			3,045			1,732			1,414
Lease financing obligations		88,471			86,702			84,685			83,585

Total debt	$	462,115		$	447,047		$	380,517		$	349,049		$


Stockholders’ equity	$	8,888		$	18,602		$	20,958		$	25,387		$

(1)	Other expense in 2001 resulted from the closure of seven Taco Cabana restaurants in the Phoenix, Arizona market and the discontinuance of restaurant development in that market. See Note 8 to the consolidated financial statements included elsewhere in this prospectus.

(2)	Reconciliation of Non-GAAP Financial Measures

EBITDA is defined as income before interest, income taxes, depreciation and amortization, impairment losses, and non-cash other income and expense. EBITDA is presented because we believe it is a useful financial indicator for measuring segment operating results as well as the ability, on a consolidated basis, to service and/or incur indebtedness. However, EBITDA should not be considered as an alternative on a consolidated basis to cash flows as a measure of liquidity in accordance with generally accepted accounting principles. EBITDA is not necessarily comparable to other similarly titled captions of other companies due to differences in methods of calculation. Management believes the most directly comparable measure to consolidated EBITDA calculated in accordance with GAAP is net cash provided from operating activities. A reconciliation of consolidated EBITDA to net cash provided from operating activities is presented below:


	Year Ended December 31,									Six Months Ended June 30,
	(Restated) 2001			(Restated) 2002			2003			(Restated) 2003			2004
EBITDA	$	89,771		$	94,313		$	83,739		$	40,831		$	44,142
Adjustments to reconcile EBITDA to net cash provided from operating activities:
Loss (gain) on sale of assets		390			24			(386	)		—			(288	)
Interest expense		(40,552	)		(34,955	)		(32,363	)		(16,643	)		(14,901	)
Provision for income taxes		(274	)		(5,593	)		(1,767	)		(744	)		(2,557	)
Deferred income taxes		(1,688	)		5,553			(130	)		248			(109	)
Change in operating assets and liabilities		(1,467	)		(3,378	)		(854	)		(1,958	)		2,321
Other expense (a)		1,788			—			—			—			—

Net cash provided from operating activities	$	47,968		$	55,964		$	48,239		$	21,734		$	28,608

(a)

Reflects occupancy and other exit costs related to the closure of seven Taco Cabana restaurants in the first quarter of 2002. See Note 8 to the consolidated financial statements included elsewhere in this prospectus.

(3)	EBITDA margin is derived by dividing EBITDA by the total revenues applicable to the entity shown above.

(4)

For purposes of determining the ratio of earnings to fixed charges, earnings are defined as income before income taxes plus fixed charges. Fixed charges consist of interest expense, including capitalized interest, on all indebtedness, amortization of deferred financing costs and one-third of rental expense on operating leases representing that portion of rental expense that we deemed to be attributable to interest. Our earnings were insufficient to cover our fixed charges for the year ended December 31, 2001 by $5,800.

(5)	Average annual sales per restaurant is derived by dividing restaurant sales for the applicable year by the average number of restaurants for the applicable year.

(6)	The change in comparable restaurant sales is calculated using only those restaurants that have been open since the beginning of the earliest period being compared (12 months for Burger King and 18 months for Pollo Tropical and Taco Cabana).

(7)

The pro forma as adjusted balance sheet data has been prepared assuming consummation of the transactions, including this offering, our internal corporate transactions, the use of proceeds from this offering, the repayment of all outstanding borrowings under our existing credit facility, the purchase or redemption of all our outstanding 9¹/2% senior subordinated notes, the completion of the new credit facility and payment of related fees and expenses. The pro forma as adjusted balance sheet data gives effect to those transactions as if they had occurred on June 30, 2004.

RISK FACTORS

You should carefully consider the risks described below, as well as other information and data included in this prospectus, before deciding whether to invest in the EYSs or the separate notes. Any of the following risks could materially adversely affect our business, financial condition or results of operations, which may result in your loss of all or part of your original investment.

Risks Relating to the EYSs, the Shares of Our Class A Common Stock and the Notes

Our substantial debt could adversely affect our financial condition and prevent us from fulfilling our obligations under the notes and restrict our ability to pay dividends with respect to shares of our Class A common stock represented by EYSs.

We have a significant amount of indebtedness. The following table sets forth our total debt, total stockholders’ equity, total capitalization and ratio of total debt to total capitalization as of June 30, 2004, after giving pro forma effect to the transactions:


Total debt (1)		$
Total stockholders’ equity
Total capitalization

Ratio of total debt to total capitalization

(1)	Including $ million of notes, borrowings of $ million outstanding under the new credit facility, $ million of lease financing obligations and $ million of capital leases and other debt.

Our ability to make distributions, pay dividends or make other payments will be subject to applicable law and contractual restrictions contained in the instruments governing any indebtedness of ours and our subsidiaries, including the new credit facility, which we will guarantee on a senior secured basis. Our level of debt could have negative consequences to you and to us. For example, it could:

•

make it more difficult for us to satisfy our obligations with respect to the notes;

•

increase our vulnerability to general adverse economic and industry conditions, as well as increases in interest rates;

•

limit our ability to fund future working capital, capital expenditures, debt service and general corporate requirements;

•

require us to dedicate a substantial portion of our cash flow from operations to the payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures and other general corporate purposes;

•

place us at a competitive disadvantage compared to our competitors that have less debt;

•

limit our ability to borrow additional funds;

•

make it more difficult to comply with the covenants in the indenture and the new credit facility, which could in turn result in an event of default under our indebtedness, which, if not cured or waived, could have a material adverse effect on us; and

•

limit our flexibility in planning for, or reacting to, changes in our business and future business opportunities.

Despite our substantial debt, we may still incur significantly more debt, which could exacerbate the risks described above.

We and our subsidiaries may be able to incur substantial additional indebtedness in the future. The terms of the indenture governing the notes and the new credit facility will not fully prohibit us from doing so. As of June

30, 2004, after giving pro forma effect to the transactions, we would have had $ million available for additional borrowing under the new credit facility. All borrowings under the new credit facility will rank senior in right of payment to the notes, and any future guarantees of the new credit facility will rank senior to any future guarantees of the notes. The indenture governing the notes will allow us under certain circumstances to issue additional notes identical to the notes offered hereby (other than issuance date). For instance, if we or the holders of the Class B common stock were able to exercise rights to convert such Class B common stock into EYSs, we could be obligated to issue up to an additional $ million principal amount of notes in the form of EYSs. To the extent not all of Carrols’ 9¹/2% senior subordinated notes are tendered pursuant to the tender offer and consent solicitation, outstanding Carrols’ 9¹/2% senior subordinated notes will rank pari passu with the guarantees of the notes until such notes are redeemed.

We will require a significant amount of cash to service our debt, including the notes, and to pay dividends with respect to shares of our common stock and our ability to generate cash depends on many factors beyond our control.

Our ability to make payments on our indebtedness, including the notes, to pay dividends with respect to shares of our common stock and to fund operating and capital expenditures will depend on our ability to generate cash in the future. We expect that a significant liquidity requirement will be for debt service on amounts outstanding under the new credit facility and under the notes. In addition, we currently expect to distribute a significant portion of any remaining cash earnings to our stockholders in the form of quarterly dividends.

Our ability to generate cash from our operations in the future is also, to a certain extent, subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. For example, a general increase in interest rates could result in increased interest payments required pursuant to our floating rate debt and decreased net cash flow available to service the notes or pay dividends.

Significant assumptions underlie our current plans to meet our liquidity needs, including that we will be successful in implementing our business strategy and that there is no material adverse change in our business, liquidity or capital requirements. We may not generate sufficient cash flow to meet our operating expenses or capital expenditure requirements, to service our debt requirements and to pay expected dividends. We may need to adopt alternate strategies, including:

•

reducing or delaying capital expenditures;

•

selling assets;

•

restructuring or refinancing our indebtedness; or

•

seeking additional equity capital, including additional issuances of EYSs and/or common stock.

These alternate strategies may not be completed on commercially reasonable terms, if at all.

We may not generate sufficient funds from operations to repay the principal amount of our indebtedness at maturity or in the event you exercise your right to require us to purchase your notes upon a change of control. If we were to incur additional debt, our debt service requirements would increase.

Credit ratings may affect our ability to obtain financing and the cost of such financing.

Our ability to obtain external and, in particular, debt financing is affected by our debt ratings, which are periodically reviewed by the major credit rating agencies. Moody’s and Standard & Poor’s have provided ratings for the notes of and , respectively. The ratings are subject to review of final documentation. In determining our credit ratings, the rating agencies generally consider a number of both quantitative and qualitative factors. These factors include earnings, fixed charges such as interest, cash flows, total debt outstanding, off-balance-sheet obligations and other commitments, total capitalization and various ratios

calculated from these factors. The ratings provided to us by Moody’s and S&P for the notes indicate that those rating agencies would describe the notes as imposing significant liquidity requirements and constraints on our ability to use cash flow from our operations in our business, which factors increase our vulnerability to future business, financial and economic conditions impacting on our ability to generate cash from our operations.

Restrictive covenants in the new credit facility and the indenture for our notes will restrict our ability to pursue our business strategies.

Unlike credit facilities of similarly situated borrowers, which customarily prohibit payments of dividends on the borrower’s common stock, the new credit facility will permit us to pay dividends on shares of our common stock, so long as our interest coverage ratio remains above certain established levels and no default or event of default exists under the new credit facility. Because the payment of dividends will decrease the amount of cash available to service our senior debt, the new credit facility will impose restrictions on our operations that are more restrictive than customary for credit facilities of similarly situated borrowers that prohibit or substantially limit payments of dividends. These restrictions, together with similar restrictions contained in the indenture governing the notes, may significantly limit or prohibit us from engaging in certain transactions, including:

•

disposing of assets;

•

incurring additional indebtedness;

•

repaying other indebtedness;

•

making capital expenditures above certain levels;

•

paying dividends or making distributions in respect of our shares or making certain other restricted payments or investments;

•

entering into acquisitions;

•

repurchasing or redeeming capital stock;

•

engaging in mergers or consolidations;

•

engaging in certain transactions with subsidiaries and affiliates;

•

allowing our restricted subsidiaries to make certain payments;

•

creating liens; and

•

entering into new lines of businesses.

In addition, the new credit facility will include other and more restrictive covenants and will prohibit us from prepaying our other debt, including the notes, while debt under the new credit facility is outstanding. The new credit facility will require us to maintain specified financial ratios and satisfy certain financial tests as described in detail under “Description of Other Indebtedness—New Credit Facility.” Our ability to meet these financial ratios and tests may be affected by events beyond our control, and we may need to refrain from certain actions or take actions we otherwise would avoid in order to continue to meet these ratios and tests. In addition, the restrictions to be included in the new credit facility could limit our ability to finance future operations or capital needs or engage in other business activities that may be in our interest.

Our failure to comply with the restrictions in the new credit facility and the indenture governing the notes could lead to a default under the terms of the new credit facility. In the event of such a default, the lenders under the new credit facility may elect to:

•

declare all borrowings outstanding, together with accrued interest and other fees, to be immediately due and payable; or

•

prevent us from making payments on the notes,

either of which would result in an event of default under the indenture governing the notes. The lenders under the new credit facility will also have the right in these circumstances to terminate any commitments they have to provide further borrowings. If we are unable to repay outstanding borrowings when due, the lenders under the new credit facility will also have the right to proceed against the collateral, including our available cash, granted to them to secure the debt. The collateral will consist of substantially all of our and our subsidiaries’ assets. If the debt under the new credit facility were to be accelerated, our assets may not be sufficient to repay in full that debt and our other debt, including the notes.

The restrictions contained in the new credit facility and the indenture governing the notes could:

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limit our ability to plan for, or react to, market conditions or meet capital needs or otherwise restrict our activities or business plans; and

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adversely affect our ability to finance our operations or to engage in other business activities that would be in our interest.

For a more full description of the restrictive covenants and maintenance covenants to be contained in the new credit facility and in the indenture, see the sections entitled, “Description of Other Indebtedness—New Credit Facility” and “Description of Notes—Certain Covenants.”

We may amend the new credit facility or the indenture governing the notes, or we may enter into new agreements that govern our senior indebtedness. The amended or new terms may significantly affect our ability to pay interest to holders of our EYSs and the notes and dividends to holders of our EYSs.

The new credit facility and the indenture governing the notes will contain significant restrictions on our ability to pay interest on the notes and dividends on shares of our common stock based on meeting specified financial ratios, and compliance with other conditions. As a result of general economic conditions, conditions in the lending markets, the results of our business or for any other reason, we may elect or be required to amend or refinance the new credit facility or the notes, at or prior to maturity, or enter into additional agreements for senior indebtedness. Regardless of any protection you have in the indenture governing the notes, any such amendment, refinancing or additional agreement may contain covenants that could limit in a significant manner our ability to pay interest payments and dividends to you.

Our board of directors may, in its discretion, amend or repeal the dividend policy it is expected to adopt upon the closing of this offering. You may not receive the level of dividends provided for in the dividend policy or any dividends at all.

Our board of directors may, in its discretion, amend or repeal the dividend policy it is expected to adopt upon the closing of this offering. Our board of directors may decrease the level of dividends provided for in this dividend policy or entirely discontinue the payment of dividends. Future dividends with respect to shares of our common stock, if any, will depend on, among other things, our results of operations, cash requirements, financial condition, contractual restrictions, business opportunities, provisions of applicable law and other factors that our board of directors may deem relevant. The indenture governing the notes and the new credit facility will contain significant restrictions on our ability to make dividend payments, including, if we defer interest on the notes pursuant to the terms of the new credit facility or the indenture, restrictions on the payment of dividends until we have paid all deferred interest. See “Dividend Policy and Restrictions.”

We may not have the ability to raise the funds necessary to pay our indebtedness at maturity or to finance any change of control offer required by the indenture.

A significant portion of our cash flows from operations will be dedicated to maintaining our restaurants and servicing our debt requirements. In addition, we currently expect to distribute a significant portion of any remaining cash earnings to our stockholders in the form of quarterly dividends. Moreover, prior to the maturity

of the notes, we will not be required to make any payments of principal on the notes. We may not generate sufficient funds from operations to repay the principal amount of our indebtedness at maturity. We may therefore need to refinance our debt or raise additional capital. These alternatives may not be available to us when needed or on satisfactory terms due to prevailing market conditions, a decline in our business or restrictions contained in our senior debt obligations.

Likewise, upon the incurrence of certain specific kinds of change of control events, we may be required to offer to repurchase all or a portion of the notes. We would be required to purchase all of the notes at 101% of their principal amount, plus accrued interest to the date of repurchase. If a change of control occurs, we cannot be sure that we would have enough funds to pay for all of the notes. If we were required to repurchase the notes, we would need to secure third-party financing if we do not have available funds to meet our purchase obligations. However, we may not be able to secure such financing on favorable terms, if at all. In addition, the new credit facility will prohibit us from repurchasing the notes until we first repay the new credit facility in full. If we do not have enough cash to repay the new credit facility, we will need to refinance the new credit facility or obtain a waiver from the lenders under the new credit facility. We may not be able to do so on favorable terms, if at all.

In addition, a change of control will result in an event of default under the new credit facility and may lead to an acceleration of other senior debt, if any. Such events may permit the holders under such debt instruments to reduce the borrowing base under such debt instruments or accelerate the debt and, if the debt is not paid, to take action that could ultimately result in a sale of substantially all of our assets. This would further reduce our ability to raise cash to purchase the notes.

Your right to receive payments on the notes and the guarantees is junior to our existing and future senior indebtedness, secured indebtedness and the indebtedness of our subsidiaries that are not guarantors.

We are a holding company and conduct all of our operations through our subsidiaries. The notes and the note guarantees issued by our subsidiary guarantors will be unsecured senior subordinated obligations, junior in right of payment to the senior debt of Carrols Holdings and each subsidiary guarantor, respectively. The indebtedness under the existing credit facility is secured by substantially all of our assets and is expected to remain secured under the new credit facility. Should a default or acceleration of this indebtedness occur, the holders of this indebtedness could sell the assets to satisfy all or part of what is owed. As a result of the subordinated nature of the notes and related guarantees, upon any distribution to our creditors or the creditors of the subsidiary guarantors in bankruptcy, liquidation or reorganization or similar proceeding relating to us or the subsidiary guarantors or our or their property, the holders of our senior indebtedness and senior indebtedness of the subsidiary guarantors will be entitled to be paid in full in cash before any payment may be made with respect to the notes or the subsidiary guarantees.

In the event of a bankruptcy, liquidation, reorganization or similar proceeding relating to us or the subsidiary guarantors, holders of the notes will participate with trade creditors and all other holders of unsecured indebtedness of ours or the subsidiary guarantors similarly subordinated in the assets remaining after we and the subsidiary guarantors have paid all senior indebtedness. In any of these cases, we and the subsidiary guarantors may not have sufficient funds to pay all of our creditors, and holders of the notes may receive less, ratably, than the holders of senior indebtedness. In such event we and the subsidiary guarantors would not be able to make all principal payments on the notes.

The subordination provisions of the indenture governing the notes will also provide that payments to you under the subsidiary guarantees may be blocked for up to 179 days by holders of designated senior indebtedness if a default other than a payment default exists under such senior indebtedness. During any period in which payments to holders of the notes are blocked in this manner, any amounts received by holders of the notes with respect to the subsidiary guarantees, including as a result of any legal action to enforce the subsidiary guarantees, would be required to be turned over to the holders of senior indebtedness. Because of the existence of the subordination provisions, including the requirement that holders of the notes pay over distributions to holder of

senior indebtedness, holders of the notes may receive less ratably than our other unsecured creditors, including trade creditors. See “Description of Notes—Subordination.”

As of June 30, 2004, after giving pro forma effect to the transactions, the notes and the subsidiary guarantees would have ranked junior, on a consolidated basis, to $ million of total debt and $ million of outstanding senior debt (including $ million of lease financing obligations and $ million of capital leases and other debt), and $ million of letters of credit. In addition, as of June 30, 2004, after giving pro forma effect to the transactions, we would have had the ability to borrow up to an additional $ million under the new credit facility (including amounts reserved for letters of credit), which would have ranked senior in right of payment to the notes.

In the event of bankruptcy or insolvency, the notes and guarantees could be adversely affected by principles of equitable subordination or recharacterization.

In the event of bankruptcy, liquidation, reorganization or similar proceedings relating to us or the subsidiary guarantors, a party in interest may seek to subordinate the notes or guarantees to creditors under principles of equitable subordination or to recharacterize the notes as equity which could have the effect of voiding the guarantees. While we believe that any such attempt should fail, we cannot assure you as to the outcome of such proceedings. In the event of a subordination or recharacterization, you may not recover any amounts owing on the notes until all senior claims have been paid. Moreover, in the event of such a recharacterization of the notes as equity, holders of the notes might be required to return any payment made to them while the company was insolvent or if the company was rendered insolvent by the payment, potentially up to six years prior to our bankruptcy. Similarly, if the notes were recharacterized as equity, holders of the notes might be required to return any payment made to them by a subsidiary guarantor in respect of the notes while such subsidiary was insolvent or if such subsidiary was rendered insolvent by the payment, potentially up to six years prior to its bankruptcy. An entity would be considered insolvent for these purposes if at the time of, or due to such payment, the fair saleable value of its assets was less than its debts, including contingent liabilities, it was engaged or about to engage in a business or a transaction for which its remaining assets available to carry on its business constituted unreasonably small capital, or it intended to incur, or believed it would incur, debts beyond its ability to pay as they mature.

The realizable value of our assets upon liquidation may be insufficient to satisfy claims.

As of June 30, 2004, our total assets included intangible assets (principally goodwill with respect to our acquisitions of Taco Cabana and Pollo Tropical and franchise rights relating to our acquisition of Burger King restaurants) in the amount of $207.9 million, representing 44.5% of our total consolidated assets. The value of our proprietary intangible assets will continue to depend significantly upon the continued profitability of our Hispanic Brands. As a result, in the event of a default on the notes or any bankruptcy or dissolution of our company, the realizable value of these assets may be substantially lower and may be insufficient to satisfy the claims of our creditors.

We are a holding company and rely on dividends, interest and other payments, advances and transfers of funds from our subsidiaries to meet our debt service and other obligations.

We are a holding company and conduct all of our operations through our subsidiaries and currently have no significant assets other than our Carrols shares, all of which will be pledged to the creditors under the new credit facility that we guarantee. As a result, we will rely on dividends and other payments or distributions from Carrols, and indirectly from the subsidiaries of Carrols, to meet our debt service obligations and enable us to pay dividends. The ability of our direct and indirect subsidiaries to pay dividends or make other payments or distributions to us will depend on their respective operating results and may be restricted by, among other things, the laws of their jurisdiction of organization (which may limit the amount of funds available for the payment of dividends), agreements of those subsidiaries, the terms of the new credit facility and the covenants of any future outstanding indebtedness we or our direct and indirect subsidiaries incur. See “Dividend Policy and Restrictions.”

If we defer interest on the notes, you may be owed a substantial amount of deferred interest that will not be due and payable until a later date.

Under the indenture governing the notes, we may, at our election, subject to certain restrictions, defer interest payments on the notes prior to , 2009 on one or more occasions for up to an aggregate period of eight quarters. In addition, after , 2009, we may, subject to certain restrictions, defer interest payments on the notes on up to four occasions for up to two quarters per occasion, so long as in each case we are not otherwise in default under the indenture. However, we may not defer interest during any period on more than one occasion after , 2009 unless and until all previously deferred interest (and interest on deferred interest) has been paid in full. The new credit facility will contain provisions that will require us under certain circumstances to defer interest payments on the notes pursuant to our option under the indenture to defer such payments.

Deferred interest on the notes will bear interest at the same rate per annum as the stated rate of interest applicable to the notes, compounded quarterly, until paid in full. At the end of any interest deferral period, we will be obligated to resume quarterly payments of interest on the notes, including interest on deferred interest. All interest deferred prior to , 2009, must be repaid by us on or prior to , 2009. All interest deferred after , 2009, must be repaid by us on or before maturity. You may be owed a substantial amount of deferred interest that will not be due and payable until such dates. If you sell your EYSs or separate notes during an interest deferral period, you will not receive any payment of deferred interest from us. In addition, we will not be permitted to pay any dividend payments on our common stock until we have paid all of the deferred interest.

Interest on the notes might not be deductible by us for U.S. federal income tax purposes.

As discussed more fully under “Material U.S. Federal Income Tax Consequences,” we believe that the notes issued as part of an EYS should be treated as debt for U.S. federal income tax purposes. However, there is no authority that directly addresses the U.S. federal income tax treatment of instruments substantially identical to the EYSs, and our treatment of the notes as debt therefore may be challenged by the IRS. If the notes were to be treated as equity for U.S. federal income tax purposes, then our interest payments would be recharacterized as non-deductible dividends, which would materially increase our taxable income and, thus, our U.S. federal and applicable state income tax liability. This would reduce our after-tax cash flows and could materially and adversely impact our ability to make interest and dividend payments.

If the notes were treated as equity rather than debt for U.S. federal income tax purposes, payments made to foreign holders would be subject to withholding of U.S. federal income taxes.

Foreign holders could be subject to withholding and estate taxes with regard to the notes in the same manner as they will be with regard to our common stock, and we could be liable for withholding taxes that were not collected on our prior interest payments to foreign holders. Payments to foreign holders would not be grossed-up for any such taxes. For discussion of these tax related risks, see “Material U.S. Federal Income Tax Consequences.”

The allocation of the purchase price of the EYSs may not be respected.

The purchase price of each EYS must be allocated for income tax purposes between the share of our Class A common stock and the note in proportion to their respective fair market values at the time of purchase. If our allocation is not respected, it is possible that the notes will be treated as having been issued with OID (if the allocation to the notes were determined to be too high) or amortizable bond premium (if the allocation to the notes were determined to be too low). You generally would have to include any OID in income in advance of the receipt of cash attributable to that income, and would be able to elect to amortize bond premium over the term of the notes. If the notes were to be treated as having been issued with bond premium, then our interest deductions would be correspondingly reduced, and our U.S. federal and applicable state income tax liability increased, which could adversely affect our cash flow available for interest and dividend payments.

The interest rate on the notes might not be viewed as an arm’s length interest rate.

We plan to deduct the interest expense on the notes from taxable income for income tax purposes and to report the full benefit of the income tax deductions in our consolidated financial statements. If the Internal Revenue Service were to determine that the interest rate on the notes exceeds an arm’s length interest rate, any excess amount over arm’s length interest rate would not be deductible and could be recharacterized as a dividend payment instead of an interest payment. The reclassification of interest payments as dividend payments would cause our taxable income and, thus, our U.S. federal income tax liability to be increased, which could adversely affect our cash flows available for interest and dividend payments, and we could be liable for withholding taxes (and interest and possible penalties for failure to withhold) that were not collected on our prior interest payments to foreign holders.

If we subsequently issue notes with significant OID, we may not be able to deduct all of the interest on those notes.

It is possible that notes we issue in a subsequent issuance will be issued at a discount to their face value. If such discount were to cause the notes to have “significant original issue discount,” then the notes would be classified as “applicable high yield discount obligations,” or AHYDOs, and a portion of the OID on the notes could be nondeductible by us and the remainder would be deductible only when paid. This treatment would have the effect of increasing our taxable income and may adversely affect our cash flow available for interest and dividend payments.

Subsequent issuances of notes may adversely affect your tax treatment.

The indenture governing the notes will provide that, in the event there is a subsequent issuance of notes with OID or after any such issuance, each holder of EYSs or the separate notes, as the case may be, agrees that a portion of such holder’s notes will be exchanged for a portion of the notes acquired by the holders of such subsequently issued notes. Consequently, immediately following such subsequent issuance, each holder of subsequently issued notes held either as part of EYSs or separately, and each holder of existing notes held either as part of EYSs or separately, will own an inseparable unit composed of a proportionate percentage of both the old notes and the newly issued notes. Therefore, subsequent issuances of notes with OID may adversely affect your tax treatment by increasing the OID, if any, that you were previously accruing with respect to the notes, resulting in your having to accrue interest income in advance of receiving the related cash payments.

Following any subsequent issuance of notes with OID (or any issuance of notes thereafter), we and our agents will report any OID on the subsequently issued notes ratably among all holders of EYSs and the separate notes, and each holder of EYSs and the separate notes will, by purchasing EYSs, agree to report OID in a manner consistent with this approach. Therefore, a subsequent issuance of notes with OID may adversely affect your tax treatment by creating OID on notes that you originally purchased without OID, resulting in your having to accrue interest income in advance of receiving the related cash payments. However, the Internal Revenue Service may assert that any OID should be reported only to the persons that initially acquired such subsequently issued notes and their transferees. In such case, the Internal Revenue Service might further assert that, unless a holder can establish that it is not a person that initially acquired such subsequently issued notes or a transferee thereof, all of the notes held by such holder have OID. Any of these assertions by the Internal Revenue Service could create significant uncertainties in the pricing of EYSs and the notes, and could adversely affect the market for EYSs and the notes. For a discussion of these tax related risks, see “Material U.S. Federal Income Tax Consequences.”

Deferral of interest payments would have adverse tax consequences for you and may adversely affect the trading price of the notes.

If we defer interest payments on the notes, holders of the notes will be required to recognize interest income for U.S. federal income tax purposes in respect of interest payments on the notes represented by the EYSs or the

separate notes, as the case may be, held by holders of the notes before they receive any cash payment of this interest. See “Material U.S. Federal Income Tax Considerations—Deferral of Interest.” In addition, we will not pay holders of the notes this cash if they sell the EYSs or the separate notes, as the case may be, before the end of any deferral period or before the record date relating to interest payments that are to be paid.

If we defer interest, the selling price of the EYSs or the separate notes might not fully reflect the value of accrued but unpaid interest on the notes. For a discussion of these tax related risks, see “Material U.S. Federal Income Tax Consequences.”

Any OID attributable to you could reduce the amount of principal you could recover from us in a bankruptcy proceeding.

Under New York and federal bankruptcy law, holders of subsequently issued notes having OID may be limited to an amount equal to the sum of (1) the initial offering price for the notes and (2) the portion of the OID that is not deemed to constitute “unmatured interest” for the purposes of the United States Bankruptcy Code. Any OID that was not amortized as of the date of the commencement of a bankruptcy filing would constitute “unmatured interest.” As a result, an automatic exchange that results in a holder receiving a note with OID could have the effect of ultimately reducing the amount such holder can recover from us in the event of an acceleration or bankruptcy.

You will be immediately diluted by $ per share of Class A common stock if you purchase EYSs in this offering.

If you purchase EYSs in this offering, based on the book value of the assets and liabilities reflected on our balance sheet, you will experience an immediate dilution of $ per share of Class A common stock represented by the EYSs which exceeds the entire price allocated to each share of Class A common stock represented by the EYSs in this offering because there will be a net tangible book deficit for each share of Class A common stock outstanding immediately after this offering. Our net tangible book deficiency as of June 30, 2004, after giving pro forma effect to the transactions, would have been approximately $ million, or $ per share of Class A common stock.

Borrowings under the new credit facility will be made at a floating rate of interest and, as a result, our interest expense may increase significantly which could cause our net income and distributable cash to decline significantly.

The new credit facility will be subject to periodic renewal or must otherwise be refinanced. We may not be able to renew or refinance the new credit facility, or if renewed or refinanced, the renewal or refinancing may occur on less favorable terms. Borrowings under the new credit facility will be made at a floating rate of interest. In the event of an increase in the base reference interest rates, our interest expense will increase and could have a material adverse effect on our ability to make cash dividend payments to our stockholders. Our ability to continue to expand our business will, to a large extent, be dependent upon our ability to borrow funds under the new credit facility and to obtain other third-party financing, including through the sale of EYSs or any other sale of securities. We cannot assure you that such financing will be available to us on favorable terms, if at all.

The indenture governing the notes and the new credit facility will permit us to pay a significant portion of our free cash flow to stockholders in the form of dividends.

Although the indenture governing the notes and the new credit facility will have some limitations on our payment of dividends, they will permit us to pay a significant portion of our free cash flow to stockholders in the form of dividends and, following completion of this offering, we intend to pay quarterly dividends. Specifically, the indenture governing the notes will permit us to pay dividends out of our excess cash, as defined in the indenture, as described in detail under “Description of Notes—Certain Covenants—Restricted Payments.” Any amounts paid by us in the form of dividends will not be available in the future to satisfy our obligations under the notes.

Because we will use a significant portion of the proceeds of this offering to purchase shares of common stock from the existing stockholders, we will have less of the proceeds of this offering available to repay our existing debt.

We will use a significant portion of the net proceeds from this offering to purchase shares of our Class B common stock (issued in exchange for shares of our existing common stock) and options to purchase our Class B common stock (issued in exchange for options to purchase shares of our existing common stock) from the existing stockholders in connection with this offering. As a result of these purchases from the existing stockholders, our total indebtedness will be higher after the offering and we will not have any remaining net proceeds from this offering available to us after the repayment of all outstanding borrowings under the existing credit facility, the repurchase of all of Carrols’ 9¹/2% senior subordinated notes in the tender offer or through a redemption, the payment of bonuses and other payments to management and the payment of related fees and expenses. The lack of any remaining available net proceeds from this offering on a going-forward basis may require us to borrow more money under the new credit facility or seek other sources of capital to repay debt, fund our operations or continue to expand our business.

The notes or the guarantees of the notes by our subsidiaries may not be enforceable.

Under federal bankruptcy law and comparable provisions of state fraudulent transfer laws, the notes or the subsidiary guarantees could be voided, or claims in respect of the notes or the subsidiary guarantees could be subordinated to all other debt of ours or a subsidiary guarantor, as applicable, if, among other things, we or the subsidiary guarantor, at the time that we issued the notes or it assumed the guarantee received less than reasonably equivalent value or fair consideration for issuing the notes or the subsidiary guarantee and, at the time we issued the notes or it issued the guarantee:

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was insolvent or rendered insolvent by reason of issuing the notes or the guarantees and the application of the proceeds of the notes or the guarantees;

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was engaged or about to engage in a business or a transaction for which our or such guarantor’s remaining assets available to carry on our or its respective business constituted unreasonably small capital;

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intended to incur, or believed that we or such guarantor would incur, debts beyond our or such guarantor’s ability to pay the debts as they mature; or

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was a defendant in an action for money damages, or had a judgment for money damages entered against us or such guarantor if, in either case, after final judgment, the judgment is unsatisfied.

In addition, any payment by us or the subsidiary guarantor pursuant to the notes or the subsidiary guarantees could be voided and required to be returned to us or the guarantor or to a fund for the benefit of the creditors of ours or the guarantor.

The measures of insolvency for the purposes of fraudulent transfer laws vary depending upon the law applied in any proceeding to determine whether a fraudulent transfer has occurred. Generally, however, an entity would be considered insolvent if, at the time it incurred the debt, or due to the incurrence of such debt:

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the sum of its debts, including contingent liabilities, was greater than the fair saleable value of its assets;

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the present fair saleable value of its assets was less than the amount that would be required to pay its probable liability on its existing debts, including contingent liabilities, as they become absolute and mature; or

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it could not pay its debts as they become due.

We believe that immediately after the issuance of the notes and the guarantees and the application of the proceeds therefrom, we and each of the subsidiary guarantors will be solvent, will have sufficient capital to carry on our respective businesses and will be able to pay our respective debts as they mature. However, we cannot be sure as to what standard a court would apply in making these determinations or that a court would reach the same conclusions with regard to these issues. Regardless of the standard that the court uses, we cannot be sure that the issuance by us of the notes or by the subsidiary guarantors of the subsidiary guarantees would not be voided or

that the notes or the subsidiary guarantees would not be subordinated to our or their other debt. If the guarantee of any subsidiary guarantor were voided, the notes would be effectively subordinated to all debt of that subsidiary guarantor.

Interest rates are currently near historic lows. If interest rates rise, the trading value of the EYSs may decline.

We cannot predict the interest rate environment or guarantee that interest rates will not rise in the future. Interest rates are currently near historic lows. Should interest rates rise or should the threat of rising interest rates develop, debt markets may be adversely affected. As a result, the trading value of the EYSs or the notes and Class A common stock represented thereby may decline.

There is not an active trading market for EYSs or securities similar to the EYSs in the United States, and uncertainties exist with respect to their tax treatment, which may affect the trading price of the EYSs.

EYSs are a novel type of security and there is not an active market for EYSs, or securities similar to the EYSs, in the United States. Because of this, investors may be unfamiliar with these new securities and the demand for them may be lower than for securities that have been actively traded for a number of years. Additionally, the IRS may challenge the U.S. federal income tax treatment of EYSs or instruments similar to EYSs. This possibility or an actual IRS challenge of the tax treatment of EYSs or securities similar to EYSs could also lead to lower demand for these securities when compared to more actively traded securities. We cannot assure you that an active trading market for the EYSs will develop in the future, which may cause the price of the EYSs to fluctuate substantially.

Before this offering, there has not been a public market for the EYSs, shares of our Class A common stock or the notes. The price of the EYSs may fluctuate substantially, which could negatively affect EYS holders.

None of the EYSs, the shares of our Class A common stock or the notes has a public market history. We cannot assure you that an active trading market for the EYSs will develop in the future, and we currently do not expect that an active trading market for the shares of our Class A common stock will develop until the notes are redeemed or mature. If the notes represented by your EYSs are redeemed or mature, the EYSs will automatically separate and you will then hold shares of our Class A common stock. We will not apply to list our shares of Class A common stock for separate trading on the or any other stock exchange until the number of shares held separately and not represented by EYSs is sufficient to satisfy applicable requirements for separate trading on such exchange. In addition, the Class A common stock may not be approved for listing at such time. We do not intend to list the notes on any securities exchange. Accordingly, we cannot assure that there will be a market for the notes.

The price of the EYSs or notes may fluctuate substantially, which could negatively affect holders of EYSs or holders of the separate notes.

The initial public offering price of the EYSs will be determined by negotiations among us, the existing stockholders and the underwriters and may not be indicative of the market price of the EYSs after this offering. Factors such as quarterly variations in our financial results, announcements by us or others, developments affecting us, our customers and our suppliers, general interest rate levels and general market volatility could cause the market price of the EYSs to fluctuate significantly.

The limited liquidity of the trading market for the separate notes, may adversely affect the trading price of the separate notes.

We are separately selling $ million aggregate principal amount of notes representing approximately % of the total outstanding notes, assuming the underwriters exercise their over-allotment option with respect

to the EYSs in full. While the separate notes are part of the same series of notes as, and are identical to, the notes represented by the EYSs, at the time of the issuance of the separate notes, the notes represented by the EYSs will not be separable for at least 45 days and will not be separately tradable until separated. As a result, the initial trading market for the separate notes will be very limited. After the holders of the EYSs are permitted to separate their EYSs, a sufficient number of holders of EYSs may not separate their EYSs into shares of our Class A common stock and notes to create a sizable and more liquid trading market for the separate notes. Therefore, a liquid market for the separate notes may not develop or may not develop in a timely manner, which may adversely affect the ability of the holders of the separate notes to sell any of their separate notes and the price at which these holders would be able to sell any of the separate notes.

If the EYSs automatically separate, the limited liquidity of the market for the notes and Class A common stock may adversely affect your ability to sell the notes and Class A common stock.

Although we will use our reasonable efforts to list our Class A common stock for separate trading on the under certain circumstances, we may not be successful in listing the Class A common stock due to our inability to meet the listing requirements at such time. The notes represented by the EYSs will not be listed on any stock exchange. Upon separation of the EYSs, no sizable market for the notes and the Class A common stock may ever develop and the liquidity of any trading market for the notes or the Class A common stock that does develop may be limited. As a result, your ability to sell your notes and Class A common stock, and the market price you can obtain, could be adversely affected.

Future sales or the possibility of future sales of a substantial amount of EYSs, shares of our Class A common stock or notes may depress the price of the EYSs and the shares of our Class A common stock and the notes.

Future sales or the availability for sale of substantial amounts of EYSs or shares of our Class A common stock or a significant principal amount of the notes in the public market could adversely affect the prevailing market price of the offered securities and could impair our ability to raise capital through future sales of our securities.

Upon completion of this offering, we will have EYSs outstanding, in respect of in the aggregate shares of our Class A common stock and $ million aggregate principal amount of the notes. In addition, we will have outstanding an additional $ million aggregate principal amount of the separate notes. All of the offered securities will be freely tradable without restriction or further registration under the Securities Act, unless, in the case of EYSs, the EYSs and securities represented thereby are purchased by “affiliates” as that term is defined in Rule 144 under the Securities Act.

Additionally, upon completion of this offering, the existing financial investors will own an aggregate of shares of our Class B common stock, representing approximately % of our outstanding capital stock, and the other existing stockholders will own an aggregate of shares of our Class B common stock, representing approximately % of our outstanding capital stock.

We may issue shares of our Class A common stock and/or notes, which may be in the form of EYSs, or other securities from time to time as consideration for future acquisitions and investments. In the event any such acquisition or investment is significant, the number of shares of our Class A common stock and the aggregate principal amount of notes, which may be in the form of EYSs, or the number or aggregate principal amount, as the case may be, of other securities that we may issue may in turn be significant. In addition, we may also grant registration rights covering those EYSs, shares of our Class A common stock, notes or other securities in connection with any such acquisitions and investments.

If we defer interest payments on the notes, the trading price of the EYSs or notes may be adversely affected.

Subject to certain limitations, we have the option to defer interest payments on the notes for certain periods pursuant to the terms of the indenture governing the notes. In addition, the new credit facility will contain provisions that will require us under certain circumstances to defer interest payments on the notes pursuant to our option under the indenture to defer such payments. If we defer interest payments on the notes, holders of the notes will continue to accrue, but will not be paid, interest. In addition, we will not be permitted to pay, and you will not receive, any dividend payments on the shares of our Class A common stock until we have paid all the deferred interest. Therefore, if we defer interest payments and we have stopped paying dividends on the Class A common stock during the same period, the EYSs and the notes may trade at prices that do not fully reflect the value of any accrued but unpaid interest on the notes and, in the case of the EYSs, will most likely trade at lower prices because no dividends will be paid on the Class A common stock during such period. This deferral feature and dividend restrictions may mean that the market prices for the EYS and the notes may be more volatile than other securities that do not have such deferral features.

Our amended and restated certificate of incorporation and amended and restated by-laws and several other factors could limit another party’s ability to acquire us and deprive our investors of the opportunity to obtain a takeover premium for their securities.

Our amended and restated certificate of incorporation and amended and restated by-laws will contain certain provisions that may make it difficult for another company to acquire us and for you to receive any related takeover premium for your securities. For example, our amended and restated certificate of incorporation will authorize the issuance of preferred stock without stockholder approval and upon such terms as the board of directors may determine. The rights of the holders of shares of our common stock will be subject to, and may be adversely affected by, the rights of holders of any class or series of preferred stock that may be issued in the future. We will also have a classified board of directors. We are also subject to Section 203 of the Delaware General Corporation Law, which prohibits us from engaging in a “business combination” with an “interested stockholder” for a three-year period following the time that this stockholder becomes an interested stockholder, unless the business combination is approved in a prescribed manner.

Risks Relating to the Restaurant Industry and our Business

Intense competition in the restaurant industry could make it more difficult to expand our business and could also have a negative impact on our sales if customers favor our competitors or we are forced to change our pricing and other marketing strategies.

The restaurant industry is highly competitive. In each of our markets, our restaurants compete with a large number of national and regional restaurant chains, as well as locally owned restaurants, offering low and medium-priced fare. We also compete with convenience stores, delicatessens and food counters in grocery stores, cafeterias and other purveyors of moderately priced and quickly prepared food.

Our Taco Cabana restaurants, although part of the quick-casual segment of the restaurant industry, compete with quick-service operators, including those in the quick-service Mexican segment such as Taco Bell, other quick-casual operators and traditional casual dining Mexican restaurants. In addition to quick-service hamburger restaurant chains as well as other types of quick-service restaurants, Pollo Tropical’s competitors include national and regional chicken-based concepts, such as Boston Market and Kentucky Fried Chicken (KFC), and regional grilled chicken concepts.

With respect to our Burger King restaurants, our largest competitors are McDonald’s and Wendy’s restaurants. According to publicly available information, McDonald’s restaurants had aggregate U.S. system wide sales of $22.1 billion for the year ended December 31, 2003 and operated 13,600 restaurants in the United States at that date, and Wendy’s restaurants had aggregate system wide sales of $7.4 billion for the year ended December 31, 2003 and operated 5,761 restaurants in the United States at that date.

To remain competitive, we, as well as certain of the other major quick-casual and quick-service restaurant chains, have increasingly offered selected food items and combination meals at discounted prices. These changes in pricing and other marketing strategies have had, and in the future may continue to have, a negative impact on our sales and earnings.

Additionally, we may encounter difficulties growing beyond our presence in our existing core markets. We cannot assure you that we will be able to successfully grow our market presence beyond the current key regions within our existing markets, as we may encounter well-established competitors in new areas. In addition, we may be unable to find attractive locations or successfully market our products as we expand beyond our existing core markets, as the competitive circumstances and consumer characteristics in these new areas may differ substantially from those in areas in which we currently operate. As a result of the foregoing, we cannot assure you that we will be able to successfully integrate or profitably operate new company-operated restaurants outside our core markets.

Factors specific to the quick-casual and quick-service restaurant segments may adversely affect our results of operations, which may cause a decrease in earnings and revenues.

The quick-casual and quick-service restaurant segments are highly competitive and can be materially affected by many factors, including:

•

changes in local, regional or national economic conditions;

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changes in demographic trends;

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changes in consumer tastes;

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changes in traffic patterns;

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consumer concerns about health and nutrition;

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increases in the number of, and particular locations of, competing restaurants;

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inflation;

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increases in utility costs;

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increases in the cost of food, such as beef and chicken, and packaging;

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increased labor costs, including healthcare and minimum wage requirements;

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regional weather conditions; and

•

the availability of experienced management and hourly-paid employees.

As a result of certain of these factors, in 2003, our Taco Cabana and Burger King same store sales declined by 3.0% and 7.2%, respectively, as compared to 2002 and, consequently, our earnings were adversely affected in such period.

We are highly dependent on the Burger King system and our ability to renew our franchises with Burger King Corporation. The failure to renew our franchises or Burger King’s failure to effectively compete could materially reduce our results of operations.

Due to the nature of franchising and Carrols’ agreements with BKC, our success is, to a large extent, directly related to the success of the nationwide Burger King system. In turn, the ability of the nationwide Burger King system to compete effectively depends upon the success of the management of the Burger King system by BKC and the success of its advertising programs. We cannot assure you that Burger King will be able to compete effectively with other quick-service restaurants.

Under our franchise agreements with BKC, we are required to comply with operational programs established by BKC. For example our franchise agreements with BKC require that our restaurants comply with specified design criteria. In addition, BKC has the right to require us during the tenth year of a franchise agreement to remodel our restaurants to conform with the then-current image of Burger King. In addition, although not required, we may not be able to avoid adopting menu price discount promotions instituted by BKC which may be unprofitable.

BKC’s consent is required for us to expand and acquire additional Burger King restaurants. BKC has a right of first refusal to acquire existing Burger King restaurants which we may seek to acquire. We cannot assure you that BKC will continue to consent to our acquisitions of existing Burger King restaurants in the future or that it would not exercise its right of first refusal with regard to restaurants we seek to acquire. In addition, BKC must consent to renew our franchise agreements when they expire. Our franchise agreements with BKC typically have 20-year terms and are set to expire as follows:

•

two of our franchise agreements with BKC are due to expire in 2004;

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24 of our franchise agreements with BKC are due to expire in 2005; and

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an additional 17 of our franchise agreements with BKC are due to expire in 2006.

We cannot assure you that BKC will grant each of our requests for successor franchise agreements. In addition, we may be obligated to make capital improvements to particular restaurants to bring them up to Burger King current design standards in connection with obtaining successor franchise agreements and thus incur substantial costs.

In addition, Carrols’ franchise agreements with BKC do not give us exclusive rights to operate Burger King restaurants in any defined territory. Although we believe that BKC generally seeks to ensure that newly granted franchises do not materially adversely affect the operations of existing Burger King restaurants, we cannot assure you that a franchise given by BKC to a third party will not adversely affect any single Burger King restaurant that we operate.

We may incur significant liability or reputational harm if claims are brought against us.

We may be subject to complaints, regulatory proceedings or litigation from guests or other persons alleging food-related illness, injuries suffered in our premises or other food quality, health or operational concerns, including environmental claims. A significant judgment against us could have a material adverse effect on our financial performance. Adverse publicity resulting from such allegations or alleged discrimination or other operating issues stemming from one of our locations or a limited number of our locations could adversely affect our business, regardless of whether the allegations are true, or whether we are ultimately held liable. For example, on November 16, 1998, the Equal Employment Opportunity Commission filed a complaint alleging that Carrols has engaged in a pattern and practice of unlawful discrimination, harassment and retaliation against former and current female employees. It is not possible to predict what adverse impact, if any, this case could have on our financial condition or results of operations and cash flows. This case and any future cases which may be filed against us could materially adversely affect us if we lose such cases and have to pay substantial damages or if we settle such cases. In addition, this case and any future cases may materially and adversely affect our operations by increasing our litigation costs and insurance premiums and diverting our attention and resources to address such actions. See “Business—Legal Proceedings.”

We can be adversely affected by widespread negative publicity regarding food quality, illness, injury or other health concerns.

Negative publicity about food quality, illness, injury or other health concerns (including health implications of obesity and transfatty acids) or alleged discrimination or other operating issues stemming from one location or a limited number of locations could substantially affect us, regardless of whether they pertain to our own restaurants. For example, health concerns about the consumption of beef or chicken or by specific events such as the outbreak of Bovine Spongiform Encephalopathy (mad cow disease) or Avian Influenza (bird flu) could lead to changes in consumer preferences, reduce consumption of our products and adversely affect our financial performance. Similarly these events could reduce the available supply of beef or chicken or significantly raise the price of beef or chicken.

Changes in consumer taste could negatively impact our business.

We obtain a significant portion of our revenues from the sale of hamburgers, chicken, various types of sandwiches, Mexican and other ethnic foods. The quick-casual and quick-service restaurant segments are characterized by the frequent introduction of new products, often accompanied by substantial promotional campaigns. In recent years, numerous companies in the quick-casual and quick-service restaurant segments have introduced products positioned to capitalize on the growing consumer preference for food products that are, or are perceived to be, healthy, nutritious, low in calories and low in fat content. If we do not timely capitalize on a new product, we may not receive the full benefits of a consumer shift toward that product or products. In addition, any significant event that adversely affects consumption of our products, such as cost, changing tastes or health concerns, could adversely affect our financial performance.

If a significant disruption in service or supply by any of our suppliers or distributors were to occur, it could create disruptions in the operations of our restaurants, which could have a material adverse effect on our business.

Our financial performance is dependent on our continuing ability to offer fresh, premium quality food at competitive prices. If a significant disruption in service or supply by certain of our suppliers or distributors were to occur, it could create disruptions in the operations of our restaurants, which could have a material adverse effect on us.

For our Taco Cabana and Pollo Tropical restaurants, we have negotiated directly with local and national suppliers for the purchase of food and beverage products and supplies. Taco Cabana and Pollo Tropical restaurants’ food and supplies are ordered from approved suppliers and are shipped via distributors to the restaurants. For our Taco Cabana restaurants, SYGMA Network, Inc. serves as our primary distributor of food and beverage products and supplies. For our Pollo Tropical restaurants, Henry Lee, a division of Gordon Food Service, serves as our primary distributor of food and paper products. We rely on a single supplier of chicken for our Pollo Tropical restaurants and, although we believe that alternative sources of chicken are available to us, if such supplier is unable to service us, this could lead to a material disruption of service or supply until a new supplier is engaged. With respect to our distributors for our Taco Cabana and Pollo Tropical restaurants, although we believe that alternative distributors are available to us, if any of our distributors is unable to service us, this could lead to a material disruption of service or supply until a new distributor is engaged.

If labor costs increase, we may not be able to make a corresponding increase in our revenues and our profitability may decline.

Wage rates for a substantial number of our employees are at or slightly above the minimum wage. As federal and/or state minimum wage rates increase, we may need to increase not only the wage rates of our minimum wage employees but also the wages paid to the employees at wage rates which are above the minimum wage, which will increase our costs and adversely affect our results of operations.

The efficiency and quality of our competitors’ advertising and promotional programs could have a material adverse effect on our results of operations and financial condition.

Should our competitors increase spending on advertising and promotion, should the cost of television or radio advertising increase, should our advertising funds materially decrease for any reason, or should our advertising and promotion be less effective than our competitors’, there could be a material adverse effect on our results of operations and financial condition.

Newly acquired or developed restaurants may not perform as we expect and we cannot assure you that our growth and development plans will be achieved.

Part of our growth strategy is to develop additional Taco Cabana and Pollo Tropical restaurants both within and outside our core markets and to selectively acquire and develop additional Burger King restaurants. Development involves substantial risks, including the following:

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the inability to obtain or self-fund development financing;

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development costs that exceed budgeted amounts;

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delays in completion of construction;

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the inability to obtain all necessary zoning and construction permits;

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the inability to identify, or the unavailability of, suitable sites on acceptable leasing or purchase terms;

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developed restaurants that do not achieve desired revenue or cash flow levels once opened;

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incurring substantial unrecoverable costs in the event a development project is abandoned prior to completion;

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the inability to recruit, train and retain managers and other employees necessary to staff each new restaurant;

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changes in governmental rules, regulations and interpretations; and

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changes in general economic and business conditions.

We cannot assure you that our growth and development plans can be achieved. Our development plans will require additional management, operational and financial resources. For example, we will be required to recruit and train managers and other personnel for each new restaurant. We cannot assure you that we will be able to manage our expanding operations effectively and our failure to do so could adversely affect our results of operations.

Our business is regional and we therefore face risks related to reliance on certain markets.

As of June 30, 2004, excluding our franchised locations, approximately 96% of our Taco Cabana restaurants are located in Texas and all of our Pollo Tropical restaurants are located in Florida. Also, 65% of our Burger King restaurants are located in New York and Ohio. Therefore, the economic conditions, state and local government regulations, weather conditions affecting Florida, Texas, New York and Ohio and the tourism industry affecting Florida may have a material impact on the success of our restaurants in those locations. For example, the events of September 11, 2001 had a significant negative impact on tourism in Florida, which adversely impacted the revenues and operating results at our Pollo Tropical restaurants.

We cannot assure you that the current locations of our existing restaurants will continue to be economically viable or that additional locations will be acquired at reasonable costs.

The location of our restaurants has significant influence on their success. We cannot assure you that current locations will continue to be economically viable or that additional locations can be acquired at reasonable costs. In addition, economic conditions where restaurants are located could decline in the future, which could result in potentially reduced sales in those locations. We cannot assure you that new sites will be as profitable as existing sites.

If the sale/leaseback market requires significantly higher yields, we may not enter into sale/leaseback transactions and as a result would not receive the related net proceeds.

From time to time, we sell our restaurant properties in sale/leaseback transactions. We historically have used, and intend to use, the net proceeds from such transactions to reduce outstanding debt and fund future capital expenditures for new restaurant development. However, the sale/leaseback market may cease to be a reliable source of additional cash flows for us in the future if capitalization rates become less attractive or other unfavorable market conditions develop. For example, should the sale/leaseback market require significantly higher yields, we may not enter into sale/leaseback transactions, which could adversely affect our ability to reduce outstanding debt and fund new capital expenditures for future restaurant development.

The loss of the services of our senior executives could have a material adverse effect on our business, financial condition or results of operations.

Our success depends to a large extent upon the continued services of our senior management, including Alan Vituli, Chairman of the Board and Chief Executive Officer, and Daniel T. Accordino, President and Chief Operating Officer, who have substantial experience in the restaurant industry. Our current employment agreements with Mr. Vituli and Mr. Accordino expire on September 30, 2004. In connection with this offering, we intend to enter into new employment agreements with Messrs. Vituli and Accordino. We believe that it would be extremely difficult to replace Messrs. Vituli and Accordino with individuals having comparable experience. Consequently, the loss of the services of Mr. Vituli or Mr. Accordino could have a material adverse effect on our business, financial condition or results of operations.

Government regulation could adversely affect our financial condition and results of operations.

We are subject to extensive laws and regulations relating to the development and operation of restaurants, including regulations relating to the following:

•

zoning;

•

the preparation and sale of food;

•

liquor licenses which allow us to serve alcoholic beverages at our Taco Cabana restaurants;

•

employer/employee relationships, including minimum wage requirements, overtime, working and safety conditions, and citizenship requirements;

•

federal and state laws that prohibit discrimination and laws regulating design and operation of facilities, such as the Americans With Disabilities Act of 1990; and

•

federal and state regulations governing the operations of franchises, including rules promulgated by the Federal Trade Commission.

In the event that legislation having a negative impact on our business is adopted, you should be aware that it could have a material adverse impact on us. For example, substantial increases in the minimum wage could adversely affect our financial condition and results of operations. Local zoning or building codes or regulations can cause substantial delays in our ability to build and open new restaurants.

If one of our employees sells alcoholic beverages to an intoxicated or minor patron, we may be liable to third parties for the acts of the patron.

We serve alcoholic beverages at our Taco Cabana restaurants and are subject to the “dram-shop” statutes of the jurisdictions in which we serve alcoholic beverages. “Dram-shop” statutes generally provide that serving alcohol to an intoxicated or minor patron is a violation of the law.

In most jurisdictions, if one of our employees sells alcoholic beverages to an intoxicated or minor patron, we may be liable to third parties for the acts of the patron. We cannot guarantee that those patrons will not be served or that we will not be subject to liability for their acts. Our liquor liability insurance coverage may not be adequate to cover any potential liability and insurance may not continue to be available on commercially acceptable terms or at all, or we may face increased deductibles on such insurance. Any increase in the number or size of “dram-shop” claims could have a material adverse effect on us through the costs of: defending against such claims; paying deductibles and increased insurance premium amounts; implementing improved training and heightened control procedures for our employees; and paying any damages or settlements on such claims.

Federal, state and local environmental regulations relating to the use, storage, discharge, emission and disposal of hazardous materials could expose us to liabilities, which could adversely affect our results of operations.

We are subject to a variety of federal, state and local environmental regulations relating to the use, storage, discharge, emission and disposal of hazardous materials. We own and lease numerous parcels of real estate on which our restaurants are located.

Failure to comply with environmental laws could result in the imposition of severe penalties or restrictions on operations by governmental agencies or courts of law which could adversely affect operations. Also, in the event of the determination of contamination on properties owned or operated by us, we can be held liable for severe penalties and costs of remediation. These penalties could adversely affect operations.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains statements which constitute forward-looking statements including, without limitation, the statements under “Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business.” The words “believes,” “anticipates,” “plans,” “expects,” “intends,” “estimates,” “projects” and similar expressions are intended to identify forward-looking statements. Those statements include statements regarding our intent, belief or current expectations. Investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those projected in the forward-looking statements. We believe important factors that could cause actual results to differ materially from our expectations include the following:

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competitive conditions;

•

economic and regulatory factors;

•

environmental conditions and regulations;

•

general economic conditions, particularly at the retail level;

•

weather conditions;

•

significant disruptions in service or supply by any of our suppliers or distributors;

•

labor and employment benefit costs;

•

the outcome of pending or yet-to-be instituted legal proceedings;

•

our ability to manage our growth and successfully implement our business strategy;

•

the risks associated with the expansion of our business;

•

general risks associated with food service industry;

•

our inability to integrate any businesses we acquire;

•

our borrowing costs and credit ratings, which may be influenced by the credit ratings of our competitors;

•

the availability and terms of necessary or desirable financing or refinancing and other risks and uncertainties;

•

the risk of events similar to those of September 11, 2001 or an outbreak or escalation of any insurrection or armed conflict involving the United States or any other national or international calamity;

•

factors that affect the food industry generally, including recalls if products become adulterated or misbranded, liability if product consumption causes injury, ingredient disclosure and labeling laws and regulations and the possibility that consumers could lose confidence in the safety and quality of certain food products, as well as recent publicity concerning the health implications of obesity and transfatty acids; and

•

other factors discussed under “Risk Factors” or elsewhere in this prospectus.

Developments in any of these areas, which are more fully described elsewhere in this prospectus and which descriptions are incorporated into this section by reference, could cause our results to differ materially from results that have been or may be projected by or on our behalf.

All forward-looking statements included in this prospectus are based on information available to us on the date of this prospectus. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained in this prospectus. We urge you not to unduly rely on forward-looking statements contained in this prospectus.

THE TRANSACTIONS

In connection with this offering, we will effect the transactions described below. For additional information concerning the transactions, see “Use of Proceeds,” “Description of Other Indebtedness” and “Capitalization.”

Internal Corporate Transactions. We have amended our certificate of incorporation and long-term incentive plans to provide for a single class of authorized common stock and to convert all outstanding stock options to purchase each of Carrols Holdings’ Taco Cabana class of common stock and Carrols Holdings’ Pollo Tropical class of common stock into options to purchase only Carrols Holdings’ Carrols class of common stock.

Immediately prior to and in connection with this offering, we will reclassify our existing common stock into two classes of common stock: Class A common stock and Class B common stock. Shares of our Class A common stock will be issued as part of the EYSs. The shares of our existing common stock held by the existing stockholders will be reclassified into shares of Class B common stock.

Concurrently with the closing of this offering, we will repurchase an aggregate of shares of our Class B common stock (issued in exchange for an aggregate of shares of our existing common stock) from the existing financial investors for $ million, which we will purchase with a portion of the proceeds of this offering. In addition, we will repurchase shares of our Class B common stock (issued in exchange for an aggregate of shares of our existing common stock) from certain of our directors and officers and options to purchase an aggregate of shares of our Class B common stock (issued in exchange for options to purchase an aggregate of shares of our existing common stock) from certain of our directors, officers and current and former key employees for $ million.

Options to purchase our Class B common stock (issued in exchange for options to purchase our existing common stock) held by certain of our directors, officers and current and former key employees and not repurchased by us in connection with this offering will be exchanged for an aggregate of restricted shares of our Class B common stock to be issued under a newly-adopted restricted stock plan. In addition, certain members of management will be granted an aggregate of shares of restricted Class B common stock to be issued under such restricted stock plan.

Following the completion of our internal corporate transactions and upon the consummation of the other transactions, we anticipate that the existing financial investors will own an aggregate of shares of our outstanding Class B common stock, representing approximately % of our outstanding capital stock, or an aggregate of shares representing approximately % of our outstanding capital stock, if the underwriters’ over-allotment option with respect to the EYSs is exercised in full. In addition, we anticipate that the other existing stockholders will own an aggregate of shares of our outstanding Class B common stock, representing approximately % of our outstanding capital stock, or an aggregate of shares, representing approximately % of our outstanding capital stock, if the underwriters’ over-allotment option with respect to the EYSs is exercised in full.

The holders of our Class B common stock will have certain rights to, or we may require such holders to, exchange their Class B common stock for EYSs or shares of Class A common stock. For a complete description of this exchange right and the terms of our Class A common stock and Class B common stock, see “Description of Capital Stock.”

New Credit Facility. Concurrently with the closing of this offering, Carrols will repay all outstanding borrowings due to the current lenders under the existing credit facility (including $ million aggregate principal amount of term loan borrowings and all outstanding revolving credit borrowings ($ million) as of ), plus accrued and unpaid interest. The terms of the existing credit facility allow us to prepay loans without premium or penalty. The existing credit facility will be amended and restated in connection with this offering with a new syndicate of lenders, including Lehman Brothers as lead arranger and bookrunner. The new credit facility will be comprised of a secured revolving credit facility in a total principal amount of up to $ million (including amounts reserved for letters of credit) and a term loan facility consisting of senior

secured notes in an aggregate principal amount of $ million. A portion of the new credit facility ($ million) will be reserved to fund capital expenditures for new restaurant development. While the new credit facility will permit us to pay dividends on the shares of our Class A common stock and Class B common stock and interest to holders of the notes, it will contain significant restrictions on our ability to do so, and on our subsidiaries’ ability to make dividend and interest payments to us. The revolving credit facility will have a five-year maturity and the term loan facility will have a seven-year maturity. See “Description of Other Indebtedness—New Credit Facility.”

Tender Offer and Consent Solicitation. In connection with this offering, we will commence a tender offer and consent solicitation with respect to all of Carrols’ 9¹/2% senior subordinated notes for an expected total consideration of $ million. As of June 30, 2004, $170 million aggregate principal amount of Carrols’ 9¹/2% senior subordinated notes were outstanding. The closing of this offering will be conditioned upon the receipt of the tender and consent of at least a majority in aggregate principal amount of Carrols’ 9¹/2% senior subordinated notes outstanding in order to delete the restrictive covenants contained in the indenture governing those notes, and the consummation of the tender offer and consent solicitation will be conditioned upon the closing of this offering. Holders that provide consents will be obligated to tender and holders who tender will be obligated to consent. After we receive the required consents, we intend to enter into a supplemental indenture to remove the restrictive covenants contained in the indenture to facilitate this offering. We cannot assure you that the tender offer and consent solicitation will be consummated on the terms described above. If any notes are not tendered pursuant to the tender offer, we intend to redeem such outstanding notes. The notes are redeemable at our option on or after December 1, 2003 at a price of 104.75% of the principal amount if redeemed before December 1, 2004. We will use a portion of the net proceeds from this offering and borrowings under the new credit facility to pay for Carrols’ 9¹/2% senior subordinated notes accepted for purchase in the tender offer and consent solicitation or redeemed after this offering.

USE OF PROCEEDS

Assuming an initial public offering price of $ per EYS, which represents the midpoint of the range set forth on the cover page of this prospectus, and 100% of the stated principal amount of each separate note, we estimate that we will receive aggregate net proceeds of $ million from this offering of EYSs and separate notes, after deducting underwriting discounts, commissions and other estimated transaction expenses. We will use these net proceeds, together with $ million of borrowings under the new credit facility as follows:

•

$ million to repay all outstanding borrowings under the existing credit facility;

•

$ million to repurchase all of Carrols’ 9¹/2% senior subordinated notes in the tender offer or through a redemption; and

•

$ million to pay related fees and expenses and transaction bonuses to certain members of management.

If the underwriters exercise their over-allotment option to purchase additional EYSs in full, we will use all of the net proceeds we receive from the sale of additional EYSs under the over-allotment option ($ million) to repurchase shares of our Class B common stock held by certain of the existing stockholders including certain members of management.

The existing credit facility consists of a $50 million revolving credit facility (including a standby letter of credit facility for up to $20 million, of which an aggregate of $10.8 million of letters of credit under the facility were outstanding as of June 30, 2004), a $70 million term loan A facility and an $80 million term loan B facility. There was $1.3 million of outstanding borrowings as of June 30, 2004 under the revolving credit facility. As of June 30, 2004, $25.6 million principal amount was outstanding under the term loan A facility and $67.1 million principal amount was outstanding under the term loan B facility. The weighted average interest rate on outstanding borrowings under the existing credit facility as of June 30, 2004 was 5.0%. The revolving credit facility and the term loan A facility expire on December 31, 2005. The term loan B facility expires on December 31, 2007.

Carrols also has $170 million aggregate principal amount outstanding of unsecured Carrols’ 9¹/2% senior subordinated notes due 2008.

The table below sets forth our estimate of the sources and uses of funds required to effect the transactions, assuming they all occurred as of , 2004.

Total Sources and Uses of Funds

(Dollars in thousands)


Sources of Funds:
New credit facility (1)		$
EYSs offered hereby
Separate notes offered hereby

Total Sources of Funds		$

Uses of Funds:
Repurchases of equity from existing stockholders (2)		$
Repayment of the existing credit facility (3)
Repurchase of Carrols’ 9½% senior subordinated notes (4)
Related fees and expenses and transaction bonuses (5)

Total Uses of Funds		$

(1)	The new credit facility will consist of a $ million term loan facility and a $ million revolving facility.

(2)	Represents our purchase from the existing stockholders of a total of shares of our Class B common stock (issued in exchange for our existing common stock) and outstanding options.

(3)	Represents all outstanding borrowings under the existing credit facility.

(4)	The notes bear interest at a rate of 9½% and mature on December 1, 2008. Includes tender premium and consent fees to be paid to holders of such outstanding notes.

(5)	Includes an aggregate of $600,000 of transaction bonuses payable to certain members of management.

DIVIDEND POLICY AND RESTRICTIONS

General

Upon completion of this offering, our board of directors will adopt a dividend policy which reflects a basic judgment that our stockholders would be better served if we distributed our excess cash to them instead of retaining it in our business. Under this policy, cash generated by our business in excess of operating needs and reserves, interest and principal payments on indebtedness and capital expenditures (to the extent not financed) would in general be distributed as regular quarterly dividends to the holders of our Class A common stock and Class B common stock rather than retained by us and used to finance growth opportunities.

As described more fully below, you may not receive any dividends as a result of the following factors:

•

nothing requires us to pay dividends;

•

while our current dividend policy contemplates the distribution of our excess cash, this policy could be modified or revoked at any time;

•

even if our dividend policy were not modified or revoked, the actual amount of dividends distributed under the policy and the decision to make any distribution is entirely at the discretion of our board of directors;

•

the amount of dividends distributed is subject to debt covenant restrictions under our indenture and our new credit facility;

•

we are a holding company and conduct all of our operations through our subsidiaries and the ability of such subsidiaries to pay dividends or make other payments or distributions to us will depend on their respective operating results and other restrictions;

•

the amount of dividends distributed by us and our subsidiaries is subject to state law restrictions;

•

our stockholders have no contractual or other legal right to dividends; and

•

we may not have enough cash to pay dividends due to changes to our operating earnings, working capital requirements and anticipated cash needs.

We currently intend to pay an initial dividend under this policy on with respect to the period commencing on the completion of this offering and ending based on a quarterly dividend level of $ per share of Class A common stock and $ per share of Class B common stock, and to continue to pay quarterly dividends at these rates for the remainder of the first four full fiscal quarters following the consummation of this offering. In respect of the first four full fiscal quarters following the consummation of this offering, this would be $ per share, or $ million in the aggregate on the Class A common stock and $ per share, or $ million in the aggregate on the Class B common stock. In determining our expected initial dividend levels, we reviewed and analyzed, among other things, our operating and financial performance in recent years, the anticipated cash requirements associated with our new capital structure, our anticipated capital expenditure requirements, our expected other cash needs, the terms of our debt instruments, including our new credit facility, other potential sources of liquidity and various other aspects of our business.

Under our certificate of incorporation, for each quarterly dividend payment period, if we declare and pay dividends on our Class A common stock, the holders of our Class B common stock will be entitled to dividend payments equal to times the amount of dividends paid to the holders of our Class A common stock.

If we have any remaining cash after the payment of dividends as contemplated above, our board of directors will, in its sole discretion, decide to use that cash for those purposes it deems necessary including, but not limited to, funding additional capital expenditures, repaying indebtedness, paying additional dividends or for general corporate purposes. However, notwithstanding this dividend policy, the amount of dividends, if any, for each

quarterly dividend payment date, including the dividend payment date, will be determined by our board of directors on a quarterly basis after taking into account the factors set forth above and the dividend restrictions and other factors set forth below.

Under our organizational documents, with respect to the quarter in which the consummation of the offering occurs and through the dividend payment date with respect to the quarter ended , dividends on our Class B common stock will be subordinated to the payment of dividends on our Class A common stock. Specifically, if for any of those periods the amount of cash to be distributed is insufficient to pay dividends at the levels described above on our Class A common stock and Class B common stock, any shortfall will first reduce the dividend on the Class B common stock to zero prior to reducing the dividend on the Class A common stock. Dividends on the Class B common stock will not accrue or be increased in any subsequent quarter to reflect any such previous reduction. Dividends on our Class B common stock will not be subordinated to dividends on our Class A common stock for any period subsequent to .

We have not paid any dividends in the past five years.

Minimum Adjusted EBITDA

We believe that, in order to fund dividends to holders of our Class A common stock and Class B common stock at the levels described above from cash generated by our business, our minimum Adjusted EBITDA, as defined in the indenture governing our notes, for the twelve month period ending would need to be at least $ million. As described under “—Assumptions and Considerations” below, we believe that our minimum Adjusted EBITDA for the twelve month period ending will be at least $ million. We have also determined that if our Adjusted EBITDA for such period were at or above this level, we would be permitted to pay dividends at these levels under the restricted payment covenants in our new credit facility and our indenture. The following table sets forth our calculation that $ million of Adjusted EBITDA would be sufficient to fund dividends at the above levels and would satisfy such restricted payment covenants. Such computation of Adjusted EBITDA is not a measure determined in accordance with GAAP but is solely a defined term under the indenture.


Estimated Cash Available to Pay Dividends Based on Estimated Minimum Adjusted EBITDA		Amount
		(dollars in thousands)
Estimated minimum EBITDA (1)		$
Estimated non-cash adjustments

Estimated minimum Adjusted EBITDA
Less:
Estimated capital expenditures, not otherwise financed (2)
Estimated cash interest expense on notes (3)
Estimated cash interest expense on new credit facility (4)
Estimated principal payments on revolver funding capital expenditures (2)(4)
Estimated cash interest and principal payments on other indebtedness (5)
Estimated cash income taxes

Estimated cash available to pay dividends on our outstanding common stock (6)		$

Estimated fixed charge coverage ratio derived from the above (7)
Estimated interest coverage ratio derived from the above (8)
Estimated senior leverage ratio derived from the above (9)

The prospective financial information included in this prospectus has been prepared by, and is the responsibility of, our management. PricewaterhouseCoopers LLP has neither examined nor compiled the accompanying prospective financial information and, accordingly, PricewaterhouseCoopers LLP does not express an opinion or any other form of assurance with respect thereto. The PricewaterhouseCoopers LLP report included in this prospectus relates to our historical financial information. It does not extend to the prospective financial information and should not be read to do so.

The following table illustrates, for our fiscal year ended December 31, 2003 and for the twelve months ended June 30, 2004, the amount of excess cash that would have been available for distributions to our stockholders, assuming, in each case, that the offering had been consummated at the beginning of such period, subject to the assumptions described in such table. Excess cash is not a measure determined in accordance with GAAP but is solely a defined term under the indenture.


Pro Forma Excess Cash
	Year Ended December 31, 2003	Twelve Months Ended June 30, 2004
	(in thousands)
Net cash provided from operating activities	$	$
Depreciation and amortization expense
Deferred income taxes
Change in operating assets and liabilities
Gain on disposal of property and equipment
Provision for income taxes

EBITDA (1)
Other non-cash adjustments (10)

Adjusted EBITDA
Capital expenditures, not otherwise financed (2)
Estimated cash income taxes (11)
Estimated cash interest expense on notes (3)
Estimated cash interest expense on new credit facility (4)
Estimated principal payments on revolver funding capital expenditures (2)(4)
Estimated cash interest and principal payments on other indebtedness (5)
Estimated additional public company costs (12)

Excess cash that would have been available to pay dividends	$

(1)

In comparing our estimated minimum EBITDA to our historical EBITDA, our historical EBITDA does not include approximately $ in incremental ongoing expenses associated with being a public EYS issuer, including estimated incremental audit fees, director and officer liability insurance, expenses related to stockholders meetings, printing expenses, investor relations expenses, additional filing fees, additional trustee fees, registrar and transfer agent fees, directors’ fees, additional legal fees, listing fees and miscellaneous fees. We have estimated these costs based on management’s experience and by querying vendors and others with appropriate experience.

(2)

Our total capital expenditures were approximately $30.2 million for the year ended December 31, 2003 and approximately $17.8 million for the twelve months ended June 30, 2004. Total capital expenditures primarily include capital expenditures for restaurant maintenance and remodeling and growth capital expenditures for new restaurant development.

Growth capital expenditures include expenditures for new restaurant development necessary for developing new restaurants and the purchase of related real estate. Growth capital expenditures are initiated at the discretion of management based on a cost and benefit analysis for each item as it may occur. We intend to use borrowings under our new credit facility and proceeds from future sale-leaseback transactions to fund growth capital expenditures for new restaurant development. A portion of the new credit facility ($ million) will be reserved to fund such capital expenditures. Under our indenture and our new credit facility, capital expenditures, to the extent not financed, are subtracted from Adjusted EBITDA for the purposes of determining estimated cash available to pay dividends on our common stock, and the repayment of short-term indebtedness that financed such capital expenditures is subtracted from Adjusted EBITDA for purposes of determining estimated cash available to pay dividends on our common stock. Management estimates that growth capital expenditures for new restaurant development are expected to be approximately $ million for the twelve months ending .

Maintenance capital expenditures include expenditures for the ongoing reinvestment and enhancement of our restaurants. Maintenance capital expenditures tend to sustain the current capacity or efficiencies of our operations and restaurants. Remodeling capital expenditures include expenditures for renovating and in some cases rebuilding the interior and exterior of our existing restaurants which, in the past, have been generally expenditures associated with franchise renewals with respect to our Burger King restaurants. Timing of maintenance and remodeling activities can fluctuate from quarter to quarter, thereby affecting our quarterly cash flow. Restaurant

maintenance and remodeling capital expenditures, to the extent not financed, are subtracted from Adjusted EBITDA for purposes of determining estimated cash available to pay dividends on our common stock, and the repayment of short-term indebtedness that financed such capital expenditures is subtracted from Adjusted EBITDA for purposes of determining estimated cash available to pay dividends on our common stock. Management estimates that restaurant maintenance capital expenditures and restaurant remodeling capital expenditures are expected to be approximately $ million and $ million, respectively, for the twelve month period ended .

For a more detailed discussion of our capital expenditures, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Investing activities including capital expenditures.”

(3)	Reflects our anticipated cash interest expense under our new capital structure. Accordingly, it assumes % interest on $ million of notes represented by EYSs, and $ million of notes not represented by EYSs.

(4)

Reflects our anticipated cash interest expense under our new capital structure. Accordingly, it assumes interest at current rates, estimated as % average interest rate on $ million principal amount of outstanding term loan borrowings under the new credit facility, % average interest rate on an estimated annual average annual principal balance of $ million revolving credit borrowings under the new credit facility, and % commitment fee on the average unused balance of $ million under the revolving credit facility in the new credit facility. The average balance on our revolver was determined by taking into consideration our historical seasonality, working capital requirements and capital expenditures, after giving effect to the offering and the new capital structure.

(5)	Reflects anticipated cash principal and interest payments on lease financing obligations and capital leases and other debt.

(6)	The table reflects the following:


		Dividends
	Number of Shares	Per Share	Aggregate
			(in thousands)
Estimated dividends on our outstanding Class A common stock		$	$
Estimated dividends on our outstanding Class B common stock		$

Estimated dividends on our outstanding common stock			$

(7)

Fixed charge coverage ratio is calculated as Adjusted EBITDA for the applicable period (the four full fiscal quarters ending on or prior to the date of calculation) divided by consolidated interest expense for such period. Under the indenture governing the notes, we may not pay dividends on our capital stock if our fixed charge coverage ratio is below . For purposes of calculating the fixed charge coverage ratio, Adjusted EBITDA and consolidated interest expense shall be calculated by treating as sale/leaseback transactions instead of lease financing obligations (i) the transactions entered into in connection with lease financing obligations in an aggregate amount of $84.1 million consummated during 1991 to 2000 (which transactions were restated by us in our financial statements as lease financing obligations, rather than as sale/leaseback transactions) and (ii) any other sale/leaseback transactions entered into prior to or after the date of the consummation of the offering which may in the future be restated as lease financing obligations. See Note 2 to our consolidated financial statements included elsewhere in this prospectus for a complete discussion of the restatement.

(8)	Interest coverage ratio is calculated as .

(9)	Senior leverage ratio is calculated as .

(10)

Other non-cash adjustments include a reduction of $2,146 for the amortization of a purchase discount over the life of the related supplier contract for the year ended December 31, 2003 and also for the twelve months ended June 30, 2004 and an addition of $526 and $599 for non-cash postretirement benefit costs for the year ended December 31, 2003 and the twelve months ended June 30, 2004, respectively.

(11)

Except as provided below, consists of the estimated amount of cash income taxes we would have paid for the periods indicated, assuming we had completed this offering on January 1, 2003 and July 1, 2003, respectively, and had put in effect on that date the corporate structure and capital structure to be in effect following this offering. Cash income taxes were estimated at the taxing jurisdiction level and include payments for withholding and other taxes on distributions to us from our subsidiaries.

(12)

Consists of estimated incremental audit fees, director and officer liability insurance, expenses related to stockholders meetings, printing expenses, investor relations expenses, additional filing fees, additional trustee fees, registrar and transfer agent fees, directors’ fees, additional legal fees, listing fees and miscellaneous fees. We have estimated these costs based on management’s experience and by querying vendors and others with appropriate experience.

Assumptions and Considerations

Based on a review and analysis conducted by our management and our board, we believe that our minimum Adjusted EBITDA for the first four full fiscal quarters following the consummation of this offering, cash interest expense, working capital and revolver availability in the above tables are reasonable. We considered numerous factors in making such determination, including the following:

•

our Adjusted EBITDA for 2003 and the twelve-month period ended June 30, 2004 was $ million and $ million respectively;

•

the levels of our capital expenditures in the twelve months ended June 30, 2004 and in 2003 were not necessarily indicative of amounts we expect to spend on capital expenditures over the next four fiscal quarters. We expect that capital expenditures for restaurant maintenance and remodeling and growth capital expenditures for new restaurant development will be approximately $ million and $ million, respectively, for the next four full fiscal quarters;

•

we have been able to operate with a substantial working capital deficit because (a) restaurant operations are primarily conducted on a cash basis, (b) rapid turnover results in a limited investment in inventories, and (c) cash from sales is usually received before related accounts for food, supplies and payroll become due; and

•

average annual draws on the revolver under the new credit facility would have been approximately $ million on a pro forma basis.

We have also assumed:

•

that our general business climate, including such factors as consumer demand for our products, competitive activity and costs of our products, will remain consistent with previous financial periods; and

•

the absence of extraordinary business events, such as health concerns affecting the restaurant industry or our company, that might adversely affect our financial results.

If our Adjusted EBITDA for the twelve months ending were to fall below the $ million level (or if our assumptions as to capital expenditures or interest expense were too low or our assumptions as to the sufficiency of our revolver to finance our working capital needs and our growth capital expenditures for new restaurant development were to prove incorrect), we would need to either reduce or eliminate dividends or, to the extent we were permitted to do so under the indenture and the new credit facility, to fund a portion of our dividends with borrowings or from other sources. If we were to use working capital or permanent borrowings to fund dividends, we would have less cash available for future dividends and other purposes, which could negatively impact our financial condition, our results of operations and our ability to maintain or expand our business.

Because our business is moderately seasonal and average restaurant sales are normally higher in June, July and August than December, January and February, our liquidity needs are greatest during these winter months. Consequently, we will likely have to borrow under our revolver to finance seasonal and periodic variations and allow the payment of regular quarterly dividends even if our annual Adjusted EBITDA were to equal or exceed $ million.

We cannot assure you that our Adjusted EBITDA will in fact equal or exceed the minimum level set forth above, and our belief that it will equal or exceed such level is subject to all of the risks, considerations and factors identified in other sections of this registration statement, including those identified in the sections entitled “Risk Factors,” “Cautionary Statement Regarding Forward Looking Statements” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

As noted above, we have estimated our initial dividend levels and our minimum Adjusted EBITDA only for the twelve-month period ending . Moreover, there can be no assurance that during or following such period we will pay dividends at the levels estimated above, or at all. Dividend payments are within the absolute discretion of our board of directors and will be dependent upon many factors and future developments that could differ materially from our current expectations. Indeed, over time our capital and other cash needs will invariably be subject to uncertainties which could impact the level of any dividends we pay in the future.

In addition, our new credit facility will need to be refinanced on or prior to . We may not be able to renew or refinance the new credit facility, or if renewed or refinanced, the renewal or refinancing may occur on less favorable terms, which could materially adversely affect our ability to pay dividends. Borrowings under our new credit facility will bear interest at a variable interest rate. Although the rate on a portion of our term loan borrowings may be effectively fixed through the use of swap agreements, our interest expense under our new credit facility will increase if interest rates in the general economy rise and will further increase to the extent that we have any outstanding borrowings under the revolving credit facility. In addition, some of the terms of the notes that may be viewed as favorable to the senior lenders, such as our ability to defer interest, become less favorable in 2009, which may materially adversely affect our ability to refinance or renew our new credit facility beyond such dates. If we are unable to refinance or renew our new credit facility, our failure to repay all amounts due on the maturity date would cause a default under the new credit facility. We expect our scheduled principal repayments on debt to be approximately $ million in .

The notes will mature in 2016, and we may not be able to refinance the notes when they become due. If we are unable to refinance the notes, our failure to repay all amounts due on the maturity date would cause a default under the indenture. Even if we were able to refinance the notes, the refinancing may occur on terms that are less favorable to us, which would materially adversely affect our results of operations and our ability to pay dividends.

In addition, to the extent we finance capital expenditures with indebtedness, we will begin to incur incremental debt service obligations. Our intended policy to distribute rather than retain excess cash is based upon our assessment of our financial performance, our cash needs and our investment opportunities. If these factors were to change based on, for example, competitive or economic developments (which could increase our need for capital expenditures), or new investment opportunities, we would need to reassess that policy. Our board is free to depart from or change our dividend policy at any time and could do so, for example, if it were to determine that we had insufficient cash to take advantage of growth opportunities. Although our management currently has no specific plans to increase growth capital spending beyond the level of growth capital expenditures we anticipate over the next twelve months, our management will evaluate growth opportunities as they arise and may pursue opportunities that it believes would eventually result in net increases to our cash available for distribution.

Restrictions on Payment of Dividends

Under state law, we can only pay dividends either out of “surplus” (which is defined as total assets at fair market value minus total liabilities, minus statutory capital) or out of current or the immediately preceding year’s earnings. We do not anticipate that we will have, and in prior years would not have had, sufficient earnings to pay dividends at the levels described above and therefore expect that we will pay dividends out of surplus. Although we believe we will have sufficient surplus to pay dividends at the anticipated levels during the first year following this offering, our board will seek periodically to assure itself of this before actually declaring any dividends. Further, in subsequent years, we may seek opinions from outside valuation firms to the effect that there is sufficient surplus to pay dividends, and such opinions may not be forthcoming. If we sought and were not able to obtain such an opinion, we likely would not be able to declare and pay dividends.

distributions from Carrols and, indirectly, from the subsidiaries of Carrols, to meet our debt service obligations and enable us to pay dividends. The ability of our direct and indirect subsidiaries to pay dividends or make other payments or distributions to us will depend on their respective operating results and may be restricted by, among other things, the laws of their jurisdiction of organization (which may limit the amount of funds available for the payment of dividends), agreements of those subsidiaries, the terms of the new credit facility and the covenants of any future outstanding indebtedness we or our direct and indirect subsidiaries incur. Currently, none of our subsidiaries are party to any agreement restricting any such subsidiary’s ability to pay dividends or make other distributions to us other than the new credit facility.

Our subsidiaries are incorporated in Delaware, New York, Texas and Florida.

•

Under New York law, dividends may only be declared and paid by a New York corporation out of surplus, provided that any such payment will not render such company insolvent and that net assets that remain following the payment of such dividends shall at least equal the amount of the stated capital.

•

Under Texas law:

(i)

dividends may only be declared and paid by a Texas corporation if, after giving effect to such payment, such company will be solvent and the payment does not exceed the surplus of such company; and

(ii)

distributions may only be paid by a Texas limited liability company if, after giving effect to such payment, all liabilities of the limited liability company, other than certain liabilities to members, exceed the fair value of the limited liability company assets, except that the fair value of property subject to a liability for which recourse of creditors is limited shall be included in the limited liability company assets to the extent the fair value of that property exceeds the liability.

•

Under Florida law, dividends may only be declared and paid by a Florida corporation if, after giving effect to such payment, such corporation will be able to pay its debts as they become due in the usual course of business and such corporation’s total assets would be more than the sum of its total liabilities plus the amount that would be needed, if such corporation were to be dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of stockholders whose preferential rights are superior to those receiving the distribution.

Under the indenture governing the notes, dividends are restricted as follows:

•

we may not pay dividends if such payment together with all other restricted payments we made since the date of this offering will exceed $ million plus 100% of our excess cash (as defined below) for the period beginning on the first day of the first fiscal quarter following this offering and ending on the last day of our then most recently ended fiscal quarter at the time such dividend is declared and paid. We define excess cash as Adjusted EBITDA minus the sum of (a) cash interest expense, whether or not capitalized, including any deferred interest, (b) cash income taxes; capital expenditures, not otherwise financed, (c) any cash non-recurring charges, (d) cash expenditures constituting certain permitted investments, and (e) certain repayments of (1) long-term indebtedness (including any current portion of long-term indebtedness) and (2) short-term indebtedness that financed capital expenditures referred to above;

•

we may not pay dividends if our consolidated fixed charge coverage ratio for the twelve-month period ended on the last day of the most recent fiscal quarter is less than : 1.00;

•

we may not pay any dividends while interest on the notes is being deferred or, after the end of any interest deferral, so long as any deferred interest (and accrued interest thereon) had not been paid in full; and

•

we may not pay any dividends if a default or event of default under the indenture governing the notes has occurred and is continuing.

See “Description of Notes—Certain Covenants—Restricted Payments” for a complete description of these restrictions.

Our new credit facility prevents us from receiving distributions from Carrols to pay dividends on our Class A common stock and our Class B common stock if and for so long as, among other conditions, (a) our interest coverage ratio is less than : for the twelve month period ended on the last day of the most recent fiscal quarter, (b) our senior leverage ratio is greater than : for the twelve month period ended on the last day of the most recent fiscal quarter, (c) any interest on the notes is being deferred or, after the end of any interest deferral, any deferred interest (or interest on deferred interest) has not been paid in full, (d) while a default or event of default under the new credit facility has occurred, is continuing, or will result from the payment of such dividend, (e) we do not have sufficient liquidity (as set forth in the new credit facility), or (g) we have not provided to the lenders financial statements required to be delivered by us under the new credit facility. During periods in which we are permitted to pay dividends under our new credit facility, such dividends will be limited to an amount not to exceed 100% of available cash (as defined in our new credit facility) minus the sum of (i) any interest due and payable in respect of the notes during such fiscal quarter, plus (ii) any outstanding deferred interest under the notes. If the payment of dividends is suspended under our new credit facility, we will nevertheless continue to be permitted to pay dividends on our Class A common stock and Class B common stock in an aggregate amount not to exceed $ as long as no default or event of default shall be in existence or result therefrom and if all interest due and payable on the notes shall have been paid in full and there is no outstanding deferred interest on such notes. In addition, during the period when the payment of dividends is suspended under the new credit facility, an amount equal to 50% of available cash (as defined under the new credit facility) for the most recently completed fiscal quarter minus the amount of interest paid or payable on the notes during such period that dividends are suspended (other than interest deferred during any prior period) must be applied to make mandatory prepayments of term loan borrowings under the new credit facility. See “Description of Certain Indebtedness—New Credit Facility” for a more detailed description of the new credit facility.

Subject to the limitations described elsewhere in this prospectus, we have the ability to issue additional EYSs, Class A common stock, other equity securities or preferred stock for such consideration and on such terms and conditions as are established by our board of directors in its sole discretion and without the approval of the holders of our EYSs or Class A common stock. It is possible that we will fund acquisitions, if any, through the issuance of additional EYSs, common stock, other equity securities or preferred stock. Holders of any additional EYSs, common stock or other equity securities issued by us may be entitled to share equally with the holders of EYSs in dividend distributions. The certificate of designation of any preferred stock issued by us may provide that the holders of preferred stock are senior to the holders of our common stock with respect to the payment of dividends. If we were to issue additional EYSs, common stock, other equity securities or preferred stock, it would be necessary for us to generate additional excess cash in order for us to distribute dividends at the same rate per share as distributed prior to any such additional issuance.

Dividend payments are not mandatory or guaranteed, and holders of our common stock do not have any legal right to receive, or require us to pay, dividends. Our board of directors may, in its sole discretion, amend or repeal our dividend policy with respect to the Class A and Class B common stock at any time. Furthermore, our board of directors may decrease the level of dividends provided for the Class A and Class B common stock below the intended dividend rates set forth above, or discontinue entirely the payment of dividends. See “Risk Factors—Our board of directors may, in its discretion, amend or repeal the dividend policy it is expected to adopt upon the closing of this offering. You may not receive the level of dividends provided for in the dividend policy or any dividends at all.”

CAPITALIZATION

The following table sets forth our cash and cash equivalents and capitalization as of June 30, 2004:

•

on an actual basis;

•

on a pro forma adjusted basis as if the transactions contemplated in this prospectus had occurred on that date, including this offering, our internal corporate transactions, the use of proceeds from this offering, the repayment of all outstanding borrowings under our existing credit facility, the purchase or redemption of all our outstanding 9¹/2% senior subordinated notes, the closing of the new credit facility and payment of related fees and expenses; and

•

as further adjusted assuming full exercise of the underwriters’ over-allotment option to purchase additional EYSs.

You should read this table in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Use of Proceeds,” the consolidated financial statements and the notes to those statements included elsewhere in this prospectus, and the financial data set forth under “Selected Historical Financial Data.”


	As of June 30, 2004
	Actual			Adjustments	As Adjusted Assuming No Exercise of Underwriters’ Over- Allotment Option	Adjustments	As Further Adjusted Assuming Full Exercise of the Underwriters’ Over- Allotment Option
	(Dollars in thousands, except per share data)
Cash and cash equivalents	$	3,326

Debt, including current portion:
Existing credit facility	$	94,050
Carrols’ 9¹/2% senior subordinated notes		170,000
Lease financing obligations, including current portion		83,585
Capital leases and other debt		1,414
Notes offered hereby		—
New credit facility		—

Total long-term debt		349,049

Class B common stock (1)
Stockholders’ equity:
Preferred stock, par value $0.01; authorized 100,000 shares, issued and outstanding—none		—
Non-voting common stock, par value $0.01; authorized 4,000,000 shares, issued and outstanding—none		—
Voting common stock, par value $0.01; authorized 3,000,000 shares, issued and outstanding 1,144,144 shares		11
Class A common stock, par value $0.01; authorized shares, issued and outstanding shares		—
Class B common stock, par value $0.01; authorized shares, issued and outstanding shares (1)		—
Additional paid-in capital		32,042
Accumulated deficit		(6,666	)

Total stockholders’ equity		25,387

Total capitalization	$	374,436

(1)	For a discussion of the accounting treatment of our Class B common stock, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Significant Accounting Policies—EYSs and Class B common stock.”

DILUTION

Dilution is the amount by which:

•

the portion of the offering price paid by the purchasers of the EYSs to be sold in the offering that is allocated to our shares of Class A common stock represented by the EYSs, exceeds

•

the net tangible book value or deficiency per share of our common stock after the offering.

Net tangible book value or deficiency per share of our Class A common stock is determined at any date by subtracting our total liabilities from our total assets less our intangible assets and dividing the difference by the number of shares of common stock deemed to be outstanding at that date.

Our net tangible book deficiency as of June 30, 2004 was $ million, or $ per share of common stock. After giving effect to our receipt and intended use of approximately $ million of estimated net proceeds (after deducting estimated underwriting discounts and commissions and transaction expenses) from our sale of EYSs and separate notes in this offering (including the repurchase for $ million, or $ million if the underwriters exercise their over-allotment option with respect to the EYSs in full, of our existing common stock (and options to purchase shares of our existing common stock) from certain of the existing stockholders), our pro forma as adjusted net tangible book deficiency as of June 30, 2004 would have been $ million, or $ per share of common stock. This represents an immediate increase in net tangible book value of $ per share of our common stock to the existing stockholders and an immediate dilution of $ per share of our common stock to new investors purchasing Class A common stock represented by the EYSs in this offering.

The following table illustrates this substantial and immediate dilution to new investors:


	Per Share of Class A Common Stock	Per Share of Class A Common Stock Assuming Full Exercise of the Over-Allotment Option
Portion of the initial public offering price of $ per EYS allocated to one share of Class A common stock
Net tangible book value (deficiency) per share as of June 30, 2004
Increase per share attributable to cash payments made by investors in this offering
Net tangible book value (deficiency) as adjusted after this offering
Dilution in net tangible book value per share to new investors

The following table sets forth on a pro forma basis as of June 30, 2004, as if the transactions contemplated in this prospectus had occurred on such date including this offering, the internal corporate transactions, the use of proceeds from this offering, the repayment of all outstanding borrowings under our existing credit facility, the purchase or redemption of all our outstanding 9¹/2% senior subordinated notes, the closing of the new credit facility and payment of related fees and expenses. The following table also assumes no exercise of the underwriters’ over-allotment option with respect to the EYSs:

•

the total number of shares of our Class A common stock represented by EYSs and of Class B common stock to be outstanding following the consummation of the transactions;

•

the total consideration paid by the existing stockholders and to be paid by the new investors purchasing EYSs in this offering; and

•

the average price per share of common stock paid by the existing stockholders (cash and stock) and to be paid by new investors purchasing EYSs in this offering:

Shares of Common

Stock Purchased

Total Consideration

Average Price

Per Share of

Common Stock

Number

Percent

Amount

Percent

(in thousands)

Existing stockholders

Class B common stock

New investors

Class A common stock

Total

UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

The unaudited pro forma consolidated statements of income for the year ended December 31, 2003 and the six months ended June 30, 2004, and the unaudited pro forma consolidated balance sheet as of June 30, 2004 give effect to the consummation of the transactions, including this offering, the issuance of EYSs, the application of the proceeds therefrom, the internal corporate transactions, the closing of the new credit facility, the repayment of all outstanding borrowings under our existing credit facility and the purchase or redemption of all of our outstanding 9¹/2% senior subordinated notes pursuant to this prospectus and payment of related fees and expenses. For the year ended December 31, 2003 and the six months ended June 30, 2004, we assumed that the transactions occurred on January 1, 2003 for the purpose of preparing the unaudited pro forma consolidated statements of income. We assumed that the transactions occurred on June 30, 2004 for the purpose of preparing the unaudited pro forma consolidated balance sheet.

The unaudited pro forma consolidated financial statements should be read in conjunction with our historical consolidated financial statements that are included elsewhere in this prospectus.

Pro forma adjustments to historical financial information include adjustments that we deem reasonable and appropriate and are factually supported based on currently available information. These unaudited pro forma financial statements are included for informational purposes only and may not be indicative of what actual results would have been had the transactions occurred on the dates described above. The unaudited pro forma financial statements also do not purport to present our financial results for future periods.

The pro forma consolidated financial statements give effect to the transactions assuming the following:

•

no exercise of the underwriters’ over-allotment option;

•

a % annual interest rate on the notes;

•

a % annual interest rate on term loan borrowings under the new credit facility;

•

an initial public offering price of $ per EYS, comprised of $ allocated to one share of Class A common stock and $ allocated to the principal amount of notes included in each EYS, which equals 100% of the principal amount thereof;

•

an initial public offering price of the notes that are being offered separately and not in the form of EYSs, of 100% of their stated principal amount; and

•

the allocated portion of the retained interest has been valued at $ per share. The equity portion of the Class B common stock has been valued at $ .

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

(dollars in thousands, except per share data)


	Year Ended December 31, 2003
	Historical		Pro Forma Adjustments	Pro Forma
Statement of Operations Data:
Restaurant sales	$	643,579	$	$
Franchise royalty revenues and fees		1,406

Total revenues		644,985

Costs and expenses:
Cost of sales		181,182
Restaurant wages and related expenses		194,315
Restaurant rent expense		31,383
Other restaurant operating expenses		89,880
Advertising expense		27,351
General and administrative		37,135
Depreciation and amortization		43,102
Impairment losses		4,151

Total operating expenses		608,499

Income from operations		36,486
Interest expense (1)		32,363

Income before income taxes		4,123
Provision for income taxes (2)		1,767

Net income		2,356

Accretion of temporary equity (3)


Net income (loss) available to shareholders	$		$	$


Per Share Data:
Class B earnings per share—basic and fully diluted	$		$	$
Class A earnings per share—basic and fully diluted
Class B shares outstanding—basic and fully diluted
Class A shares outstanding—basic and fully diluted

The accompanying notes are an integral part of the unaudited pro forma consolidated financial statements.

NOTES TO UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENT

(1)	To adjust interest expense to reflect the payment of all outstanding principal amounts of borrowings under the new credit facility and the outstanding 9¹/2% senior subordinated notes and the issuance of new debt:


	Amount	Interest Rate	Interest Expense
	(In thousands)
New notes
New credit facility borrowings
New credit facility unused revolver fee
Amortization of debt issuance costs

Less—historical interest expense

Net pro forma adjustment

Interest expense on a pro forma basis includes $ million of non-cash amortization of debt issuance costs.

(2)

As described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Significant Accounting Policies—EYSs and Class B Common Stock,” we plan to account for the issuance of EYSs as representing shares of common stock and notes. We will deduct as interest expense the interest on the notes from taxable income for income tax purposes and report the full benefit of the income tax deduction in our consolidated financial statements. We cannot assure you that the IRS will not seek to challenge the treatment of these notes as debt and the amount or timing of interest expense deducted. If the IRS were to challenge this treatment successfully, we would have to pay additional income taxes and record an additional liability for the previously recorded benefit for the interest deductions.

(3)

To adjust for accretion expense on the shares of Class B common stock. This accretion discount is the difference between the % senior subordinated note (represented by an EYS) with a $ principal amount and the fair value of the temporary equity of $ . The total discount to be accreted is approximately $ . The discount will be accreted over two years which is the length of time up to the earliest date such shares of Class B common stock could be exchanged for EYSs. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Significant Accounting Policies—EYSs and Class B Common Stock.”

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

(dollars in thousands, except per share data)


	Six Months Ended June 30, 2004
	Historical		Pro Forma Adjustments	Pro Forma
Statement of Operations Data:
Restaurant sales	$	334,067	$	$
Franchise royalty revenues and fees		756

Total revenues		334,823

Costs and expenses:
Cost of sales		96,001
Restaurant wages and related expenses		99,522
Restaurant rent expense		17,287
Other restaurant operating expenses		44,749
Advertising expense		12,873
General and administrative		20,249
Depreciation and amortization		21,686
Impairment losses		569

Total operating expenses		312,936

Income from operations		21,887
Interest expense (1)		14,901

Income before income taxes		6,986
Provision for income taxes (2)		2,557

Net income		4,429

Accretion of temporary equity (3)		—


Net income (loss) available to shareholders	$	4,429	$	$


Per Share Data:
Class B earnings per share—basic and fully diluted	$		$	$
Class A earnings per share—basic and fully diluted
Class B shares outstanding—basic and fully diluted
Class A shares outstanding—basic and fully diluted

The accompanying notes are an integral part of the unaudited pro forma consolidated financial statements.

NOTES TO UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENT

(1)	To adjust interest expense to reflect the payment of all outstanding principal amounts of borrowings under the new credit facility and the outstanding 9¹/2% senior subordinated notes and the issuance of new debt:


	Amount	Interest Rate	Interest Expense
	(In thousands)
New notes
New credit facility borrowings
New credit facility unused revolver fee
Amortization of debt issuance costs

Less—historical interest expense

Net pro forma adjustment

Interest expense on a pro forma basis includes $ million of non-cash amortization of debt issuance costs.

(2)

(3)

To adjust for accretion expense on the shares of Class B common stock. This accretion discount is the difference between the % senior subordinated note (represented by an EYS) with a $ principal amount and the fair value of the temporary equity of $ . The total discount to be accreted is approximately $ million. The discount will be accreted over two years which is the length of time up to the earliest date such shares of Class B common stock could be exchanged for EYSs. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Significant Accounting Policies—EYSs and Class B Common Stock.”

UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET

(in thousands, except per share data)


	Historical June 30, 2004			Effects of the Reorganization and the Offering	Total Pro Forma
ASSETS
Current Assets:
Cash and cash equivalents	$	3,326		$	$
Trade and other receivables, net		2,017
Inventories		5,158
Prepaid rent		2,681
Prepaid expenses and other current assets		4,015
Deferred income taxes		6,286

Total current assets		23,483

Property and equipment, net		215,982
Franchise rights, net		84,024
Goodwill, net		123,861
Deferred income taxes		8,728
Other assets (1)		11,528

Total assets	$	467,606		$	$


LIABILITIES AND STOCKHOLDER’S EQUITY
Current Liabilities:
Accounts payable	$	18,120		$	$
Accrued interest		1,373
Accrued payroll, related taxes and benefits		14,322
Other liabilities		16,581
Accrued income taxes		1,565
Current portion of long-term debt		13,885
Current portion of lease financing obligations		2,456

Total current liabilities		68,302

Long-term debt, net of current portion		251,579
Lease financing obligations, net of current portion		81,129
Deferred income sale/leaseback of real estate		10,371
Accrued postretirement benefits		3,249
Other liabilities		27,589

Total liabilities		442,219

Commitments and contingencies
Class B common shares
Stockholders’ equity:
Preferred stock, par value $0.01; authorized 100,000 shares, issued and outstanding—none		—
Non-voting common stock, par value $0.01; authorized 4,000,000 shares, issued and outstanding none		—
Voting common stock, par value $0.01; authorized 3,000,000 shares, issued and outstanding 1,444,444		11
Additional paid-in capital		32,042
Accumulated deficit		(6,666	)

Total stockholders’ equity		25,387

Total liabilities and stockholders’ equity	$	467,606		$	$

The accompanying notes are an integral part of the unaudited pro forma consolidated financial statements.

NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET

(1)	To record the write-off of debt issuance costs related to the payment of existing indebtedness and to record the debt issuance costs related to the new credit facility and the notes, as follows:


Write-off existing debt issuance costs	$	(	)
Record debt issuance costs—notes
Record debt issuance costs—new credit facility

	$

SELECTED HISTORICAL FINANCIAL DATA

Restatement

The impact of the restatement was to record on our balance sheets the property and equipment of the restaurants subject to these transactions and record the proceeds from these transactions (including the gains previously deferred) as a form of debt financing. The restatement also impacted our financial results by increasing the depreciation expense for the property and equipment subject to these transactions and recharacterizing the lease payments previously accounted for as rent expense for these restaurants as principal repayments and interest expense. The restatement had no impact on our liquidity and net cash flow. In addition, there was no impact on sale/leaseback transactions that were consummated in 2002 and 2003.

As a result of the restatement, we were in default related to certain required financial leverage ratios and other covenants under the existing credit facility. We obtained a waiver from our senior secured lenders of any prior non-compliance and defaults resulting from the restatement. In addition, the existing credit facility was amended to exclude all adjustments resulting from this restatement on our financial covenant requirements and to treat on a prospective basis the specified leases as if no restatement or recharacterization had occurred.

The following summary of selected financial data has been revised to reflect this restatement. See Note 2 to the consolidated financial statements included elsewhere in this prospectus for the restatement adjustments for the years ended 2001 and 2002 and the six months ended June 30, 2003.

Selected Financial Data

The following table sets forth our selected consolidated financial data derived from our audited consolidated financial statements for each of the fiscal years ended December 31, 1999, 2000, 2001, 2002 and 2003, of which the consolidated financial statements for fiscal 2001, 2002 and 2003 are included elsewhere in this prospectus. The selected historical consolidated financial data for the six months ended June 30, 2003 and 2004 have been derived from our unaudited consolidated financial statements for those periods. The unaudited consolidated financial statements for the six months ended June 30, 2003 and 2004 include all adjustments, consisting of normal recurring adjustments, which, in our opinion, are necessary for a fair presentation of the financial position and results of operations for these periods. The results of operations for the six months ended June 30, 2003 and 2004 are not necessarily indicative of the results to be expected for the full year.

The information in the following table should be read together with our consolidated financial statements as of December 31, 2002 and 2003, for the years ended December 31, 2001, 2002 and 2003, as of June 30, 2004, and for the six months ended June 30, 2003 and 2004 and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” all as included elsewhere in this prospectus. The amounts in the following table reflect rounding adjustments.

Our acquisition of Taco Cabana was completed in late 2000 and, as a result, our financial data as of and for the year ended December 31, 2000 include the results of operations for Taco Cabana since December 20, 2000.


	Year Ended December 31,															Six Months Ended June 30,
	(Restated) 1999 (1)			(Restated) 2000 (1)			(Restated) 2001 (1)			(Restated) 2002			2003			(Restated) 2003			2004
Statements of Operations Data:		(Dollars in thousands, except per share data)
Revenues:
Restaurant sales	$	455,440		$	465,862		$	654,710		$	655,545		$	643,579		$	317,165		$	334,067
Franchise royalty revenues and fees		1,039			1,039			1,579			1,482			1,406			696			756

Total revenues		456,479			466,901			656,289			657,027			644,985			317,861			334,823

Costs and expenses:
Cost of sales		137,279			132,646			189,947			183,976			181,182			87,819			96,001
Restaurant wages and related expenses		134,125			135,787			192,918			196,258			194,315			96,824			99,522
Restaurant rent expense		24,267			24,187			31,207			30,494			31,383			15,350			17,287
Other restaurant operating expenses		59,716			61,500			86,435			87,335			89,880			43,812			44,749
Advertising expense		20,618			20,554			28,830			28,041			27,351			15,005			12,873
General and administrative		23,102			26,403			35,393			36,610			37,135			18,220			20,249
Depreciation and amortization		26,394			31,680			47,388			42,766			43,102			21,824			21,686
Impairment losses		105			135			578			1,285			4,151			645			569
Other expense (income) (2)		—			(1,365	)		8,841			—			—			—			—

Total operating expenses		425,606			431,527			621,537			606,765			608,499			299,499			312,936

Income from operations		30,873			35,374			34,752			50,262			36,486			18,362			21,887
Interest expense		26,844			28,696			40,552			34,955			32,363			16,643			14,901
Loss on extinguishment of debt		1,825			575			—			—			—			—			—

Income (loss) before income taxes		2,204			6,103			(5,800	)		15,307			4,123			1,719			6,986
Provision for income taxes		2,342			3,407			274			5,593			1,767			744			2,557

Net income (loss)	$	(138	)	$	2,696		$	(6,074	)	$	9,714		$	2,356		$	975		$	4,429

Per Share Data:
Basic net income (loss) per share	$	(0.12	)	$	2.36		$	(5.31	)	$	8.49		$	2.06		$	0.85		$	3.87
Diluted net income (loss) per share		(0.12	)		2.28			(5.31	)		7.99			1.92			0.81			3.54

Other Financial Data:
Cash provided from operating activities	$	39,076		$	50,862		$	47,968		$	55,964		$	48,239		$	21,734		$	28,608
Cash used for investing activities		(49,935	)		(190,818	)		(49,156	)		(55,071	)		(29,472	)		(16,847	)		(7,487	)
Cash provided from (used for) financing activities		4,983			140,767			881			(760	)		(18,891	)		(4,860	)		(20,209	)
Capital expenditures, excluding acquisitions		45,332			36,157			47,575			54,155			30,244			19,517			7,051
EBITDA (3)		57,372			65,824			89,771			94,313			83,739			40,831			44,142
EBITDA margin (4)		12.6	%		14.1	%		13.7	%		14.4	%		13.0	%		12.8	%		13.1	%
Ratio of earnings to fixed charges (5)		1.06	x		1.16	x		—			1.33	x		1.09	x		1.08	x		1.33	x

Operating Statistics:
Total number of restaurants (at end of period)		397			521			532			529			532			530			536
Taco Cabana (6):
Number of restaurants (at end of period)		109			117			120			116			121			119			124
Average number of restaurants		106.0			112.8			120.3			114.6			118.9			117.1			122.5
Revenues:
Restaurant sales	$	159,241		$	170,315		$	177,398		$	174,982		$	181,068		$	88,163		$	97,545
Franchise royalty revenues and fees		359			376			405			429			413			199			214

Total revenues		159,600			170,691			177,803			175,411			181,481			88,362			97,759
Average annual sales per restaurant (7)		1,502			1,510			1,475			1,527			1,523
EBITDA (3)		25,122			25,685			24,467			28,278			24,411			12,202			12,998
EBITDA margin (4)		15.7	%		15.0	%		13.8	%		16.1	%		13.5	%		13.8	%		13.3	%
Change in comparable restaurant sales (8)		5.5	%		3.4	%		1.6	%		(0.2	)%		(3.0	)%		(5.1	)%		(4.9	)%


	Year Ended December 31,															Six Months Ended June 30,
	(Restated) 1999 (1)			(Restated) 2000 (1)			(Restated) 2001 (1)			(Restated) 2002			2003			(Restated) 2003			2004
	(Dollars in thousands, except per share data)
Pollo Tropical:
Number of restaurants (at end of period)		45			49			53			58			60			60			60
Average number of restaurants		41.8			45.6			50.4			55.6			59.4			58.8			60.0
Revenues:
Restaurant sales	$	82,751		$	88,976		$	96,437		$	100,444		$	109,201		$	53,277		$	60,096
Franchise royalty revenues and fees		1,039			1,028			1,174			1,053			993			497			542

Total revenues		83,790			90,004			97,611			101,497			110,194			53,774			60,638
Average annual sales per restaurant (7)		1,980			1,951			1,913			1,807			1,838
EBITDA (3)		18,513			20,963			22,085			22,384			22,553			10,940			14,748
EBITDA margin (4)		22.1	%		23.3	%		22.6	%		22.1	%		20.5	%		20.3	%		24.3	%
Change in comparable restaurant sales (8)…		0.7	%		1.7	%		(0.3	)%		(4.2	)%		2.3	%		(0.8	)%		11.0	%

Burger King:
Number of restaurants (at end of period)		352			355			359			355			351			351			352
Average number of restaurants		344.3			352.1			353.3			355.6			352.2			353.8			351.9
Restaurant sales	$	372,689		$	371,335		$	380,875		$	380,119		$	353,310		$	175,725		$	176,426
Average annual sales per restaurant (7)		1,082			1,055			1,078			1,069			1,003
EBITDA (3)		38,859			43,986			43,219			43,651			36,775			17,689			16,396
EBITDA margin (4)		10.4	%		11.8	%		11.3	%		11.5	%		10.4	%		10.1	%		9.3	%
Change in comparable restaurant sales (8)		(2.5	)%		(2.5	)%		1.3	%		(1.3	)%		(7.2	)%		(9.0	)%		0.7	%

Balance Sheet Data (At Period End):
Total assets	$	373,978		$	558,971		$	552,111		$	547,388		$	486,874					$	467,606
Working capital		(22,835	)		(24,476	)		(34,967	)		(34,975	)		(40,857	)					(44,819	)
Debt:
Senior and senior subordinated debt