Today’s big news turns a spotlight on two longtime industry
figures who aren’t often center-stage, despite strong claims to stardom.
Bill Foley is the more familiar of the two, a carry-over
more from his days as the kingpin behind Carl’s Jr., Hardee’s and several other
regional chains, from Taco Bueno to Rally’s. At one point he ran a veritable
restaurant empire, but more remarkable was how he got started.
Carl Karcher, the Carl in Carl’s Jr., ran into trouble
because of some real estate deals. Because the parent of Carl’s Jr. was a
public company, a rescue of the concern’s founder was a dicey business for the
home office. The company’s CEO and Karcher had a very visible struggle for
control of what Carl, a textbook entrepreneur who started with a hotdog cart,
had built through the sweat of himself and his family.
The very public battle
was waged on radio stations and in newspapers within Carl’s stronghold of southern California. Public
sympathy was clearly aligned behind Karcher, but that didn’t bail him out of a
mountain of debt.
Enter Foley, who headed what at the time was believed to be
the nation’s largest title insurance company. Like a white knight on noble steed, Foley provided the money to
rescue Karcher from serious financial difficulties. But, in the process, he slickly ended
up controlling Carl’s Jr. and the concepts it later amassed, including
Hardee’s, Green Burrito and a host of other smaller brands. Karcher was
gradually phased out, and Foley became the burger king.
The purchase of the Hardee’s regional burger chain and the
subsequent acquisition of its largest franchisee, Advantica, mired Foley’s
restaurant diversification in trouble, and, after a 12-year run, he stepped
out.
From the standpoint of the industry, he virtually
disappeared. Indeed, if he was known at all, it was as a supplier to high-end
eateries. He bought a bunch of wineries in Napa and Walla Walla, Wash., and was
reported to be in Montana, enjoying his wealth and wine.
Then he popped up again in 2007 through the purchase of
several small, Montana-based restaurant chains. We’re talking about such powerhouses
as MacKenzie River Pizza Co., Mambo’s, Craggy Range Bar and Grill, and Corner
House Grille. With not much more than a dozen or so units, Foley seemed as if he was
buying a diversion, if not a place where he could have some food with
his wines.
Obscurity briefly returned, with the notable exception of
Foley’s emergence as one of the bidders for Wendy’s.
Now he’s back in remarkable force. Taking advantage of the
industry’s downturn, he snorked up Village Inn, Bakers Square and Max &
Erma’s, all of which had gone bankrupt.
O’Charley’s and its little sisters, the Stony River
Legendary Steaks and Ninety Nine casual chains, followed.
Then, on Friday, his Fidelity National inked a $72-million
deal to buy J. Alexander’s, a polished-casual concept that many have likened to a lower-ticket
Houston’s.
If the deal goes through, according to Fidelity, Foley will
have a portfolio consisting of 674 restaurants and six concepts.
Which brings us to the other figure involved in the
J.Alexander’s deal. With the pending retirement of Ruby Tuesday’s Sandy Beall,
Lonnie Stout II may be the longest serving CEO in casual dining.
He’s definitely been one of the more distinctive. Long
before Warren Buffett made the CEO’s annual letter to shareholders something
that investors actually read, Stout was using that podium to go far beyond the
usual pap.
In one of the more memorable installments, Stout laid
out the travel policies he’d set for himself and the rest of J. Alexander’s
team. This was at a time when CEOs' self-pampering and perks worthy of kings were prompting investors to yelp about too much indulgence.
J. Alexander’s investors needn’t worry, Stout convincingly
argued. When it comes to travel, for instance, budget hotels like Red Roof Inns
were just fine for him and the executive team. And if the company’s leaders
should ever drift away from that frugality, the shareholders were to call him
and snap them back, loud and pointedly.
Stout's post-acquisition fate was not disclosed in the announcement of the purchase. Other strong executives who've been brought into Foley's fold, like O'Charley's CEO David Head and concept chief Marc Buehler, were smartly kept in their posts.
In any case, it'll be fascinating theater, watching these two characters while
they uncharacteristically wear the limelight.
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