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Cara’s brands include Swiss Chalet and Harvey’s.Kevin Van Paassen/The Globe and Mail

Cara Operations Ltd.'s $58.9-million deal to buy Prime Restaurants Inc. – owner of Casey's and East Side Mario's – is the latest move in the consolidation of Canada's fragmented restaurant industry.

The agreement to buy Prime will help boost Vaughan, Ont.-based Cara's position in a sector that faces challenges finding avenues of growth in a maturing Canadian market.

Cara's brands include Swiss Chalet and Harvey's.

The major players in the full-service segment, including Boston Pizza, are "literally stealing market share from their competitors" in search of growth, and acquisitions of well-known brands are an efficient way to do that, said Robert Carter, executive director at NPD Group in Toronto.

For Cara, the acquisition both expands and diversifies its portfolio, said president and chief executive officer Don Robinson.

East Side Mario's, for example, adds a welcome Italian restaurant element, he said. Also part of the Prime Restaurants acquisition are Prime Pubs, with such brands as Fionn MacCool's, D'Arcy McGee's and Paddy Flaherty's.

The deal boosts Cara's store count to about 830 from 673.

"This industry is consolidating and you've got chains taking a greater share of the business from independents. At the same time, the big chains are getting bigger through acquisitions and further growth," said Mr. Robinson.

Care will take some time to digest the Prime acquisition but could well be on the hunt for more deals once it has done so, he added.

The fast-food sector has also seen some consolidation. MTY Food Group Inc. recently swallowed the Ontario-based 335-outlet Mr. Sub sandwich chain in a $23-million deal.

Adding to the pressure to consolidate and bulk up are the inroads into Canada being made by U.S. chains.

Five Guys Burgers and Fries, Chipotle, Panera Bread and Moe's Southwest Grill are among the brands that have set up shop north of the border.

Meanwhile, fast-food operators such as McDonald's, A&W, Burger King and Wendy's are upgrading their ambience and offering more premium menu items in a bid to win over customers from the casual-dining segment.

There is still lots of room for growth by acquisition, however, said Mr. Carter, as independents far outnumber chains.

Mr. Robinson says the independents will feel the heat as expansion continues and the chains increasingly seek growth. "When you get chains banding together, the scale effect can pressure the indies," he said.

Prime reported total system sales of $340.5-million for the year ended July 3. The Prime deal will make Cara Canada's third-largest restaurant operator in Canada, said Mr. Carter.

The Prime acquisition, however, is contingent on Cara raising $75-million by selling bonds in a Canadian high-yield bond market that has been basically shut since mid-summer as investors shun risk. There hasn't been a sale of new high-yield bonds in the Canadian market since July, according to a report Monday from BMO Nesbitt Burns.

Cara's credit rating is three notches below investment grade according to Standard & Poor's, and five notches below investment grade according to DBRS.

With a file from reporter Boyd Erman

Editor's note: Prime Restaurants Inc. reported total system sales of $340-million last year. An earlier version of this story incorrectly referred to Cara Operations Ltd., which is purchasing Prime. This version has been corrected.