The Restaurant Finance Monitor

Can Low Food Costs Hurt A Restaurant Chain?

We've spent a lot of time on this site, covering the various reasons that Sbarro went bankrupt and had to get sold. It had a lot of debt. It also had high lease costs, which combined with falling sales to doom the chain. But here's one, important element to the story we haven't discussed: its low food costs.

Harsha Agadi To Become Quiznos' Chairman

Harsha Agadi's tour of the restaurant industry has landed in Denver. The former CEO at Friendly's has been hired as the new executive chairman at Quiznos, the company announced this afternoon. Greg MacDonald will continue in his role as president and CEO of the troubled sandwich chain.

Big KFC Franchisee Nears A Sale

Kazi Foods is about to get a lot smaller. A yet-unnamed bidder has emerged to buy roughly half of the big KFC operator—one of the largest franchisees of any kind in the U.S.—out of bankruptcy. A deal is expected to be presented to the U.S. Bankruptcy Court in Michigan this week.

Kona Grill Has A People Problem

If I told you that a restaurant chain had two CEOs "resign" in the past year, along with its chief financial officer, and then its chief operating officer, plus another company director, you'd assume that the chain is struggling and in brutal shape. And you'd be wrong, because this odd story is about Kona Grill.

How Much Is Weather Helping Restaurants?

A year ago, the family dining concept Bob Evans blamed bad weather in December and January on the company's disappointing quarterly sales results. So when the chain announced a quarterly sales increase earlier this week, we looked to see if the company gave this winter's nice weather the credit it deserves. We were disappointed.

P.F. Chang's To Take Over True Food

Here's a sentence I didn't quite expect to read when I got up this morning: P.F. Chang's is acquiring another restaurant concept. But that's what's happening. The Arizona-based operator of Asian concepts P.F. Chang's China Bistro and Pei Wei is taking over True Food Kitchen.

Why This Sandwich Chain Is In A Pickle

One of the stranger cases of troubled restaurant franchises we've seen involves a Denver-based sandwich chain. And its name isn't Quiznos. Spicy Pickle, the small, publicly traded sandwich concept, defaulted on its loans earlier this month and abruptly closed six of its seven company owned locations.

Is The Restaurant Buying Boom Over?

The restaurant merger and acquisition market has been so active these past two years that it might be easier listing the restaurants that haven't been bought and sold than it would be to list those that have. Numerous chains, and some big franchisees, changed hands in 2010 and 2011. In 2012, dealmakers might take a break.

The Big Challenge Facing Quiznos' New Owner

Shortly after Quiznos finalized its deal ceding control of the chain to Avenue Capital, at least one knowledgeable observer speculated that it may simply delay the inevitable bankruptcy by a couple of years. We'll reserve that judgment for now, but a conversation we had today with a franchisee illustrated the new owner's major challenge: franchisees' food costs.

CiCi's Spends Big To Expand

Every franchise wants to grow, and CiCi's is no different. Yet the challenging post-recessionary development market has stood in the way. Now, the Texas-based pizza buffet chain is taking a different tact to encourage development: it's becoming a minority investor in franchisees' new stores.

Cosi Inks A Deal With Its Devil

New Cosi-CEO Carin Stutz is proving she she has more sense than her predecessor. The Illinois-based fast-casual restaurant chain said this morning that it is bringing one-time nemesis Brad Blum aboard as a consultant—a move that ends one of the industry's stranger disputes.

Uh Oh? SBA Lending Plummets

Loans backed by the Small Business Administration were once considered a financing as last resort, but since the credit crisis it's become a financing of first resort for many franchise restaurants. So perhaps the following piece of information is cause for alarm: the number and volume of SBA loans plunged in the last three months of 2011.

Investment Funds To Buy Real Mex

A trio of investment funds have pooled their efforts to buy Real Mex Restaurants out of bankruptcy. RM Opco, a company formed by Real Mex debt holders Tennenbaum Capital Partners, JP Morgan Investment Management and Z Capital, won an auction for the California-based Mexican restaurant operator for $49 million in cash.

Fidelity Adds To Its Restaurant Collection

Bill Foley apparently has a thing for underperforming restaurants with wait staff. The chairman of Fidelity National Financial—which, last we checked, was an insurance company—has been gobbling up family and casual dining chains. The latest: O'Charley's, for which Fidelity is offering $9.85 a share in cash.

Surprise! Landry's Closes Some Morton's

One day after its purchase by Landry's was finalized, Morton's The Steakhouse has reportedly closed eight locations around the country, based on various media reports, and fittingly the closings came on Groundhog Day—given that we've heard all of this before.

Chipotle Has A Slight Miss

Imagine that you owned a restaurant chain that just reported full-year comp sales of 11.2 percent, atop an increase the year before; revenue growth of 23.6 percent, and margins at 26 percent, far higher than any of your competitors. You'd be thrilled. But a restaurant chain did just report those numbers—Chipotle—and investors aren't exactly cheering.

Both Lenders, Franchisors Predict Growth

Say what you will about economic uncertainty and the lending climate, but here's a substantive bit of proof that the franchise sector will improve this year: roughly the same percentage of lenders and franchisors said in a recent survey that they're expecting more activity in 2012.

Do We Need Another Publicly Traded Steak Chain?

Tilman Fertitta today said that he has completed his purchase of 92 percent of Morton's Restaurant Group at $6.90 a share, a deal that will remove the company from the equity markets—which should serve as a warning to the company that seeks to take its place, Del Frisco's Restaurant Group.

More Proof That Restaurants Ended The Year Right

Let's take one last moment to note what a good month December was for the restaurant industry. In spite of considerable uncertainty, high unemployment and rising prices, consumers went out to eat. The latest proof comes from the National Restaurant Association, which this morning said that its Restaurant Performance Index was at its highest level in nearly six years.

Facing Competition, Casual Diners Cut Lunch Prices

Fast-casual chains have been getting a big chunk of their customers from casual-dining concepts, and they're mostly getting those customers at lunch time. In response, casual dining concepts have been using lower prices as a way to get those customers to return.

On Wendy's, and QSR's Struggles

Pity the poor QSR. In recent years, consumers found their incomes squeezed, their jobs in danger, their home prices smaller, and they've been less tolerant of wait staff. All of this should be ingredients for the sector's improvement, and yet traditional quick-serves continue to struggle, a fact that the burger chain Wendy's illustrated in its investor presentation today.

Amid Turmoil, Cosi Grows Sales

OK, now I know the economy improved last quarter. Restaurants, in the midst of quarterly-report season, have been releasing mostly strong financials from the fourth quarter of 2011. And that includes the little Illinois-based bakery/cafe chain Cosi, which today said that its sales increased during the quarter despite some corporate turmoil.

Granite City Might Lose Its Listing

Granite City Food & Brewery strange road just got a little more perilous. The small casual dining chain out of Minneapolis, which has been struggling for years, said this afternoon that it could lose its listing on the Nasdaq stock exchange as early as next week because its shareholders' equity is too low.

Former Wideout Buys A Wing Chain

The popularity of chicken wings has exploded in large part due to its association with football, and so it only goes to reason that a partner in the private equity firm that just bought the 32-unit Wild Wing Cafe is none other than Muhsin Muhammad, former wide receiver with the Carolina Panthers and the Chicago Bears.

Quiznos Avoids Bankruptcy

Beleagured, Denver-based sub chain Quiznos said today it has completed its restructuring deal without declaring bankruptcy, a move that handles control of the company over to the hedge fund Avenue Capital, wiping out existing shareholders—including former CEO Rick Schaden—and infusing the chain with $150 million in cash.

Typical McDonald's Day: Strong Sales, Media Flub

Today, McDonald's reported a full-year financial report that was strong even by its standards, including the best domestic same-store sales in eight years. It also had to deal with the aftermath of an embarrassing social media mistake that had people around the world sharing all sorts of ugly stories about McDonald's. Just another day in the life of the world's biggest restaurant chain.

Del Frisco's To Give IPO Another Go

Suddenly, restaurant chains seem a lot friendlier to the public markets than they seemed just 18 months ago. The latest IPO filing came today, from the Texas-based Del Frisco's Restaurant Group, the operator of a trio of upscale restaurant concepts which wants to raise $100 million.

On The Comeback Trail?

Is the recovery in the casual dining sector speeding up? It sure looks like it. The sector had its best month of the year in December, according to the Knapp Track index of casual dining sales. Sales for the segment were up 2.9 percent for the month. More importantly, traffic was up 0.4 percent.

NPC International Gets Even Bigger

Some day Pizza Hut will have one franchisee and it will be NPC International. The big Kansas operation, the largest franchisee of any kind in the U.S., today announced that it has bought 36 more units from Pizza Hut for $18.8 million. The restaurants are near Jacksonville, Florida.

Burger King's Puerto Rico Franchisee Is Struggling

Burger King's 177-unit Puerto Rico franchisee, Caribbean Restaurants LLC, said today that it is exploring options to refinance its debt. In a terse, one-paragraph announcement, the company, owned by the past eight years by the private equity firm Castle Harlan, said it expects to begin talking to "third parties" about potential transactions "in the near term."

Surprise! Buffets Inc. Files For Bankruptcy

How is bankruptcy at Buffets Inc. like the presidential election, Leap Year and the Olympics? You can expect it every four years. The Minnesota-based operator of buffet concepts, including Ryan's and Old Country Buffet, filed a prepackaged bankruptcy today—nearly four years to the day since the last time it filed.

Where Do Fast Casual Customers Come From?

During his presentation at the ICR XChange investors' conference last week, Smashburger CEO Dave Prokupek discussed the results of a survey the burger chain did of its customers—specifically, where they would have gone had they not gone to Smashburger. The results were revealing.

A&W's Surprising International Development

In recent interviews, new A&W Chairman Dale Mulder was careful to avoid any criticism of the chain's previous owners, Yum! Brands, which is common following such deals. Yet he couldn't hide his disdain for Yum regarding one topic: international development, or the lack thereof.

How Costco Could Make Life Miserable For Restaurants

Arne Haak, the CFO of upscale restaurant operator Ruth's Chris, said at the ICR XChange this week that he expects beef prices to go up 5 to 8 percent but, he admitted, that's just a guess. "It's real volatile," he said. One big reason for that volatility: Costco.

Expect More Activists This Year

Restaurants fended off numerous activist investors last year, either through negotiation (Ruby Tuesday) or a proxy win (Cracker Barrel). But don't expect that these investors will simply go away. Indeed, some experts believe activism will be on the upswing this year.

How Yelp Can Be A Good Customer Survey Tool

The healthy QSR concept Freshii had been on a pretty good run in its first few years of existence, until a year ago when it noticed that its stores in new markets had been performing poorly. So its CEO, Matthew Corrin, did what any other young executive would do: he looked his concept up on the Internet.

Is Yum! Brands Leaving Money On The Table?

Try this: Go ask a bunch of people not closely associated or interested in the restaurant industry and ask them about Yum! Brands. It's a good bet that most people won't know what the heck you're talking about. While it may not seem like a big deal whether consumers know the name of a holding company or not, it does hurt the company's market value, according to a branding expert.

Sardar Biglari Isn't Giving Up

Sardar Biglari not only lost his proxy fight with Cracker Barrel last month, he lost it by a big margin, receiving half as many votes as board member Charles Jones, the next lowest vote getter. But that doesn't mean he's giving up. Biglari Holdings has been buying up hundreds of thousands of shares in the family dining chain this month.

Franchise Development Incentives Keep Coming

Papa John's not only gives discounts to customers. It's giving discounts to franchisees. The Kentucky-based pizza chain this morning announced a new batch of incentives, including a royalty waiver for up to 18 months, designed to encourage operators to build new units this year.

Can Dunkin' Donuts Double In Size?

A press release this morning announcing Dunkin' Donuts' distribution deal with its new, nationwide franchisee-owned co-op included a modest nugget saying that Dunkin' wants to double its unit count in 20 years. That tiny nugget got a lot of press, never mind that the plan is not new, and that such stated, long-term goals aren't worth diddly. Twenty years is a long time, after all.