The Restaurant Finance Monitor

Pat & Oscars Disappears

It's tough to kill a restaurant chain. It's even tougher to kill a restaurant chain that franchises. But it's not impossible. To wit: Franchisees of Pat & Oscar's, the San Diego-based fast-casual chicken and rib chain that filed for Chapter 7 last year, have decided to change the concept's name.

Upscale Restaurants Come Back, But Not All The Way

Are you an association or a vendor looking for some easy publicity on the Internet? Develop an index that measures something. The latest in the restaurant industry comes from Open Table, the San Francisco-based company that takes restaurant reservations over the Internet. Our conclusion from its shiny new index: upscale restaurants haven't recovered from the recession.

Biglari Using 'Rope-A-Dope' On Cracker Barrel

For some reason, we weren't invited to the Biglari Holdings annual meeting a month ago, but others did attend, and they took copious notes. While Sardar Biglari and his cohort, Phil Cooley, didn't really say anything surprising, they do provide some additional insight into their views on Cracker Barrel and other issues.

Dean Vlahos Files For Bankruptcy

It's been a long downfall for Dean Vlahos. The Midwestern restaurateur, the brainchild behind Champps Americana and the Redstone American Grill chains, lost millions of dollars to a Ponzi schemer, and earlier this month filed for federal bankruptcy protection. He claimed $11.8 million in liabilities and just $45,812 in assets.

Ignite Has A Nice IPO

Maybe investors like seafood. Ignite Restaurant Group, the parent company of 122-unit Joe's Crab Shack, went public today and saw its stock surge a healthy 22.6 percent on its first day of trading, continuing Wall Street's habit of warmly welcoming restaurant companies.

Quiznos Returns To The Airwaves

This month, Denver-based sandwich chain Quiznos returned to the airwaves following a two-year absence with its first ads under new owners Avenue Capital Partners. I'm not advertising expert, but I can say that the ads, based on its new "Qrave Quiznos" marketing campaign, are an upgrade over its more recent efforts.

Ignite Prices Its Stock At $14

Those of you eagerly anticipating the ability to buy stock in Joe's Crab Shack shall soon get your wish. The chain's parent company, Ignite Restaurant Group, priced its offering today at $14 a share. The company offered nearly 5.6 million shares of stock, raising nearly $78 million.

Stiller Unloads His Krispy Kreme Shares

This hasn't been a good year for Bob Stiller. Last fall, hedge fund manager David Einhorn wrote a now-famous presentation taking apart the business plan of Stiller's company, Green Mountain Coffee Roasters. Green Mountain's stock price has been in freefall ever since. And now it appears Stiller's been forced to sell much of his stock, including his huge stake in Krispy Kreme.

On Biglari, Buffett And Cheap Takeovers

Sardar Biglari, the San Antonio activist investor now trying to gain control of Cracker Barrel, was sighted at the recent annual meeting of Berkshire Hathaway, standing in the managers section along with his co-conspirator, the Trinity University business professor Phil Cooley, after the other managers had gone to lunch.

Burger King Takes Sales From McDonald's

Burger King recently reported that its first-quarter same-store sales grew 4.6 percent. And the Miami-based burger chain said that those numbers have accelerated in the second quarter. Meanwhile, its longtime nemesis, McDonald's, just reported a significant slowdown in U.S. comps sales, to 3.3 percent in April. Coincidence?

Bagel Sale: Einstein Noah 'Reviewing Strategic Alternatives'

Anybody out there who has wanted to own a bagel concept, or four, may now have their chance: Lakewood, Colorado-based Einstein Noah Restaurant Group said this afternoon that it is "reviewing strategic alternatives," including a possible "business combination or a sale."

The Credit Markets Make A Comeback

The next time someone tells you that credit is unavailable in the restaurant industry, tell them the story of The Briad Group. Three years ago the New Jersey-based company, T.G.I. Friday's largest franchisee, was perilously close to bankruptcy. This week it closed on a $195 million credit facility involving a legion of bankers and a low rate.

Ignite Tones Down Its Offering

Ignite Restaurant Group is apparently lowering its expectations for its upcoming IPO. The operator of the 122-unit Joe's Crab Shack chain set the terms for its initial public offering this week, and apparently is planning to raise $75 million—lower than the $100 million it initially said it wanted.

Hooters Lawsuit Dismissed; Both Sides Declare Victory

We interrupt this restaurant business blog to bring you this piece of vital news from the world of Hooters: The Atlanta-based breastaurant chain this week settled its lawsuit against La Cima, the franchisee of upstart rival chain Twin Peaks started by Hooters' former CEO, Coby Brooks. Yet based on twin releases this week, the dispute is anything but "settled."

Applebee's Unloads More Restaurants

Timothy George must have liked what he saw when he advised IHOP on its purchase of Applebee's back in 2007. California-based DineEquity this morning said it has sold 39 more Applebee's units in Virginia to Potomac Family Dining Group, the company George formed in 2010 to buy 30 Applebee's restaurants in the Washington DC area.

P.F. Chang's To Escape The Public Limelight

Well, that's one way to get your stock price up. P.F. Chang's, the Arizona-based operator of Asian concepts, said this morning that it has agreed to a sale to the New York private equity firm Centerbridge Partners for $1.1 billion—or $51.50 a share, which is 30 percent above the company's closing stock price on Monday.

How Schlotzsky's Solved The Reimage Problem

An awful lot of old restaurants are out there, and old restaurants have a problem: they're old. Customers don't like eating in restaurants that look and feel aged. But franchisees don't like spending money on a remodel after years of depressed sales. And franchisors franchise to get away from that sort of spending. Enter the sandwich chain Schlotzsky's, which may have a solution:

Low Prices Lead To A Franchisee Buying Boom

Are we in the midst of a franchisee acquisition boom? It sure seems like it. Nearly half of all mergers and acquisitions last year involved franchisees, according to the latest Merger and Acquisition Census from the Chicago-based investment banking firm J.H. Chapman, as operators found both financing and deals plentiful—and prices relatively low.

Arcos Dorados And The Struggles Of Being A Public Franchisee

One year ago, Arcos Dorados Holdings, McDonald's giant Latin American franchisee, went public to some stunning results. Its price was initially valued at $13 to $15 a share. It went public at $17 a share to heavy demand, finally opening on April 14, 2011 at $21 a share. Suffice it to say, its stock hasn't quite lived up to those expectations.

Knapp Track Takes A Tumble

Business was looking good for the restaurant industry entering 2012, particularly for casual dining concepts. They'd been on a slow recovery for more than a year, but nice weather and employment growth accelerated that improvement. But the industry has apparently hit a brick wall in March, according to the latest Knapp Track.

Casual Dining Takes A Turn South

Traffic at Dallas-based casual dining chain Chili's grew 3.4 percent in January. In February it grew 1.1 percent. In March, it was up 0.5 percent. That's what the industry refers to as a "slowdown," and in this case it might be an indication that casual dining chains are losing customers again.

Now Biglari Wants Four Cracker Barrel Seats

As we've been predicting for weeks now, Sardar Biglari has restarted his campaign for seats on the Cracker Barrel board. And this time he means business. In a letter to shareholders this morning, the chairman of Biglari Holdings said he wants four seats on the Tennessee-based chain's board—one of which is currently occupied by Michael Woodhouse.

Yum! Brands Puts It All Together

For the past few years, Yum Brands' quarterly reports have read like episodes of Scooby Doo: they've been utterly predictable. Sales in China would explode. They'd be OK in other international countries, and the U.S.—typically relegated to the end of the report—would struggle. But this afternoon, the Kentucky-based franchisor provided us with an actual surprise when it lifted the mask off its first-quarter report.

Another Executive Change At Panera Bread

Panera Bread's late on Tuesday announced that its chief operating officer, John Maguire, has stepped down so he could become the next CEO of Friendly's Ice Cream, the Massachusetts-based chain that only recently emerged from bankruptcy. This is only notable because it's the third major, C-level change at St. Louis-based Panera in recent weeks.

Franchise Lending Is On The Upswing

Franchise lending ground to a halt with the credit crunch in late 2008 and has been coming back painfully slow ever since. But it's definitely coming back. The latest evidence comes from the online lending site BoeFly, which today released its first Franchise Lending Index, along with the International Franchise Association, showing a steady increase in lending over the past year.

Good Times Restaurants Wants Another Concept

Today we check in with Good Times Restaurants, the small burger and custard chain out of Golden, Colorado, which earlier this week released this interesting tidbit: it has hired Heathcote Capital as a financial advisor. Heathcote's job, apparently, will be to analyze potential strategic acquisitions.

Would Burger King Be Better Off With Fewer Stores?

Burger King's average unit volumes are $1.25 million, 17 percent less than those of Wendy's, 57 percent less than those of McDonald's. In the coming edition of The Monitor, we discuss how these volumes create considerable challenges for Bill Ackman's newest toy. Here's something we didn't get to: it might be better off if many of its restaurants simply shut down.

QSRs About To Overtake Full-Service Restaurants

Are Americans rejecting wait staff? It sure seems that way. Quick-service restaurants, which have been steadily gaining market share on their full-service restaurant cousins for several decades, finally look poised to take the market share lead this year, at least according to information in GE Capital's annual Chain Restaurant Industry Review.

Here Comes The Cracker Barrel-Biglari Fight, Part Two

When Cracker Barrel shareholders overwhelmingly voted against the board candidacy of activist investor Sardar Biglari in December, some analysts thought he would sell off and go away. Instead, he has bought up even more stock, and now the Tennessee-based chain's board has swallowed a poison pill, reigniting its fight with the chairman of Biglari Holdings.

Outback's Parent Bets Against Independents

As we've said several times on this blog, the recession hasn't been kind to the independent restaurant. Independents have lost 2 billion in traffic since 2008, and thousands of total restaurants. And at least one chain restaurant operator doesn't think it'll get any easier for them, in large part because of health care reform.

Ruby Tuesday Decides To Buy Lime Fresh

That experiment didn't last long. Ruby Tuesday, the Tennessee-based casual dining chain, decided to buy Florida-based fast-casual Mexican chain Lime Fresh Mexican Grill after all—ending the company's short-lived tenure as a franchisee of the up-and-coming concept.

Bill Ackman Still Has A Thing For McDonald's

At times during his 90-minute conference call this morning on his investment in Burger King, the activist investor Bill Ackman sounded more like a jilted lover who just got a new girlfriend, but who can't quite let go of his old flame. We're speaking of McDonald's, the Illinois-based burger chain on which Ackman spent two years agitating.

Burger King Stakes Its Future On Joint Ventures

Now Burger King's deal with Carrols Restaurant Group makes sense. Late yesterday, the Miami-based burger chain announced a deal with an investment group, including noted activist investor Bill Ackman, to take the company public through the back door in about a month. The Carrols deal helps pretty the chain up for its return to the public sphere.

Could Obamacare Hurt Franchise Financing?

Franchise systems are doing more now to help their franchisees get financing than they have in years. They're talking with lenders, sometimes making personal visits to the banks, developing their own loan programs and guaranteeing debt. Now they may need to do one more thing: predict future health care costs.

Activists Appeal To J. Alexander's Independent Directors

The activist investors targeting Nashville, Tennessee-based casual dining chain J. Alexander's aren't just reserving their appeals to the company's shareholders. Late yesterday, the Privet Fund released a letter in which it appealed to a different group: the chain's three independent directors.

Bryan Elliott Is Pessimistic About The Recovery

There's been a growing consensus that the recent sales gains at restaurants are sustainable, because they coincide with employment improvement and a bolstered consumer confidence. But Bryan Elliott, analyst at Raymond James, doesn't buy into that. This morning, he downgraded several restaurant chains on his coverage list.

Consumers Spend, And Restaurants Benefit

Consumer spending rose 0.8 percent in February, following a 0.4-percent increase in January, which helps explain this: the National Restaurant Association's monthly Restaurant Performance Index rose in February and was above the group's key expansion threshold for a fourth straight month.

Dunkin' Shareholders Unloading More Stock

It's safe to say that the three-headed private-equity monster that bought Dunkin' Brands in 2005 has recouped its investment. Indeed, this morning, Dunkin' announced that Bain Capital, the Carlyle Group and Thomas H. Lee Partners will be selling even more stock in a secondary offering that should raise $780 million.

Buffalo Wild Wings Wants To Try Something Else

Buffalo Wild Wings presented at a consumer conference this morning and, amid talk of its fundamental strength and its significant growth prospects, included this little nugget that investors would almost certainly consider juicy: that its future growth options includes another concept.

Beware Franchisors' Right Of First Refusal

Last week's decision by Raleigh, North Carolina-based Golden Corral to exercise its right of first refusal to buy 28 restaurants from franchisee Frisch's Restaurants should serve as a lesson to any investor looking to buy out franchisee-owned locations: beware the franchisor.