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Five years into the Prem Watsa era at Cara Operations Ltd., the company is turning to a new chief executive – one who happens to be a turnaround specialist.

Coupled with Cara’s acquisition of Keg Restaurants Ltd. in January, the appointment of Frank Hennessey signals a new chapter in the restaurant owner’s attempted rebound.

Mr. Watsa acquired Cara in 2013 through his Fairfax Financial Holdings Ltd. At the time, Cara was a struggling owner of fast food and restaurant chains such as Harvey’s and Swiss Chalet. Seeing value, Mr. Watsa merged it with Prime Restaurants (the owner of East Side Mario’s, Casey’s and other chains) and recruited a new CEO to take charge.

Almost immediately, that new leader, Bill Gregson, slashed costs and set a roll-up play in motion, acquiring a host of other restaurants to create scale. By 2015, the company was ready to go public. When it did, Cara’s stock soared, climbing almost 60 per cent in its first few months of trading.

Lately, however, the acquisition game has lost some steam and investors have started to worry about anemic sales growth from existing restaurants, making Cara’s shares more volatile. Last September, they fell below their original $23 IPO price, though they’ve staged a recovery of late and closed last week at $27.62

Fairfax has always expressed confidence in Cara, but this year’s developments suggest Mr. Watsa realized some changes were necessary. Cara’s sales growth at established restaurants (so-called “same restaurant sales”) was just 0.7 per cent last year. Fairfax already owned a majority stake in The Keg, whose sales growth has been better. By merging it with Cara, The Keg can help boost the numbers of the publicly traded company.

As for Mr. Hennessey, he is known as a turnaround champion in the restaurant industry, particularly for his latest victory at Imvescor Restaurant Group, which owned chains such as Baton Rouge. Imvescor was sold to MTY Food Group Inc. early this year after more than doubling its stock price under Mr. Hennessey’s watch.

Mr. Gregson will remain with Cara as executive chairman.

Cara’s stock had started to rebound before these decisions were made, but the changes suggest the company is entering a new phase – and the original turnaround strategy, one focused on acquisitions, may have to shift. Cara did not return a request for comment.

Mr. Hennessey is known for a particular playbook, one that is focused on the diner’s experience. “Ambience is so important in this business and we have been blunt about why we need to improve on that measure,” he said on an Imvescor conference call shortly after joining the company in 2014.

The “key to franchisee profitability is actually putting more guests through our restaurants,” he said on a conference call in December − which is why he focused on rejuvenating outlets, until Imvescor was sold.

Cara reports earnings on Thursday, and Mr. Hennessey may shed some light on his expected strategy for getting more traffic.

Until now, the company has largely targeted acquisitions such as St-Hubert and The Pickle Barrel to deliver growth – and it touted the way they boosted sales.

“Our 2017 results are the highest we have reported since our 2015 IPO,” Mr. Gregson said on a conference call in March when Cara reported its annual earnings. “In the three years since 2014, we have increased our total system sales by $1.1-billion or 64.3 per cent.”

What he left out, however, was that this mostly came from buying other chains’ sales, rather than boosting revenues at restaurants it already owned.

Cara’s stock has been rebounding in 2018 partly because its organic sales growth turned positive for the second straight quarter. But the most recent boost came mostly from hiking prices, rather than getting more customers through its doors.

As CIBC World Markets analyst Mark Petrie has noted, casual-dining restaurants, in their current form, face challenges winning over a younger demographic. Cara continues to stress that its balance sheet can handle more deals. But that can get the company only so far. It will likely be Mr. Hennessey’s job to transform Cara’s restaurants into more appealing places to spend money, the way he has in the past.

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