Net income at the Austin-based quick-service restaurant chain was $489,000 or seven cents per share on revenues of $15.9 million. That compares with net income of $751,000 or 10 cents per share on revenues of $16.1 million in the 2001 second quarter.

In an earnings release, the company blamed the drop-off to weak economies in key markets, less national advertising and comparison to a record 2001 second quarter. John Wooley, Schlotzsky's president and CEO, said the company will continue to invest in its brand, including adapting restaurant layouts. "We're making improvements to new restaurant designs, both for franchisees who prefer shopping center spaces as well as for our company-owned restaurants, for which we are developing a larger bakery/cafe format," he said in the statement.

The company has 671 restaurants in the US and nine foreign countries. That's down from 701 restaurants in the 2001 second quarter. The company owns and operates 35 restaurants directly and is due to purchase its largest area developer territory later this month.