I’m sure the Vegas odds-makers are already taking action on who'll be the next owner of Carl’s Jr. and Hardee’s, the two main brands in the portfolio of CKE Restaurants. Thomas H. Lee is the favorite, with a deal already on the table to buy it for about $928 million, including debt. Then came word yesterday that Nelson Peltz, the bwana who deftly bagged Wendy’s in 2008, was giving CKE’s slightly bald radials a kick.
They may be the most likely buyers. I keep thinking about who might be the most appropriate buyer, from the standpoint of all parties concerned.It makes me wonder if the big casual-dining companies have the Poppers to reconsider their longstanding pledge never to veer out of that market.
It’s almost a reflex with concerns like Darden, Brinker and OSI (the parents of Red Lobster, Chili’s and Outback Steakhouse, respectively). Ask what new businesses might be a worthwhile acquisition or start-up and they’ll invariably conclude with, “…and of course it’d have to be something in casual dining, since that's where we want to stay.”
Meanwhile, they’re having their turnips mashed by quick-service and fast-casual concepts.
They should consider the bold move of buying a quick-service brand and supercharging it with their casual know-how to create the ultimate fast-casual player—a contender genetically engineered to provide cloth-napkin-caliber service and food, with the value, speed and less-processed foods that have established concepts like Panera and Chipotle as the brands of choice among younger consumers. It’d be the veritable Mike Tyson of the sector.
Carl’s would be the perfect subject for the experiment. It’s been trash-talking for years that it offers a burger comparable to what patrons would find in a casual restaurant, for less than two-thirds of the price. To launch the Six Dollar Burger (it actually sells for under $4), the chain even set up a fake restaurant where patrons were charged $6 for the sandwich. Patrons paid without complaint.
Sure, the acquisition would put those casual-dining giants squarely in franchising, a realm where they’ve at most dabbled before, preferring to grow through corporate development and joint ventures. But their current business models aren’t exactly the envy of the business world. Becoming full-fledged franchisors would really open the valve on cash flow.
Meanwhile, the Carl’s and Hardee’s systems would greatly benefit from the training, research and awesome support services provided by the likes of Darden and Brinker.
It’s a deal casual-dining hunter and quick-service should pursue, especially when you consider that CKE might change hands for just over $1 billion. It’s a buyer’s market, to be sure.
Showing posts with label OSI. Show all posts
Showing posts with label OSI. Show all posts
Friday, March 12, 2010
Thursday, November 19, 2009
Raiding retailers for restaurants' new stars
If recent executive changes are a telltale sign, the restaurant industry is losing faith in its ability to revive sales. Companies determined to crack the formula have looked past the trade’s own talent bench in recent weeks to fill vacancies with code breakers from the world of retailing.
The new CEO of Outback and Carrabba’s parent company was previously focused on selling perfumes, cosmetics and holiday ornaments. Liz Smith, formerly president of Avon Products, seems an unlikely candidate to head OSI Restaurant Partners, a company long led by men who’d worked their way up from restaurant-level jobs. But OSI noted that Smith had experience in running a highly efficient company. They didn’t have to explain that Avon, almost purely a sales company, is light on payroll and structure, heavy on incentive-based performance.
Officials also mentioned that Smith had to keep Avon in touch with customer preferences if its product line was to stay relevant, a skill some say has languished inside OSI’s headquarters in recent years.
A talent for embellishing a brand was similarly one of the characteristics cited by Dunkin’ Brands in explaining why it’d reached outside the industry for its new “chief global customer and marketing officer.” John Costello, a veteran of Home Depot and Sears, “is one of the most talented marketers and brand builders in the retail industry in America," crowed Nigel Travis, CEO of the Dunkin’ Donuts and Baskin-Robbins parent. Indeed, Costello is a member of the Retail Advertising Hall of Fame.
The selection underscores that Dunkin’ is less a restaurant than a to-go bakery with extensive food and beverage options. It’s more of a retail storefront than a place where you’d go for dinner, or at least at present.
Even less of a disconnect is the promotion of supermarket vet Susan Shields to chief marketing officer of Jamba Juice, the smoothie chain. A key component of Jamba’s comeback plan is putting its name on more retail products through licensing deals. Those Jamba-branded items already range from a toy blender to a new line of trail mix that’s about to hit stores. Who better to blaze that new revenue channel than someone who worked at the Safeway grocer chain?
At the same time, dollars are dollars and finance is finance. So why not go outside the industry for your next chief financial officer, as McCormick & Schmick’s did in hiring Michelle Lantow? But it’s no coincidence, the upscale seafood chain said, that she came from a retail apparel manufacturer, Lucy Activewear.
Lantow was instrumental in revamping Lucy’s e-commerce operations and plotting its move into brick-and-mortar retail locations, the company noted in announcing her appointment. CEO Bill Freeman observed that those qualifications should serve M&S well as “we continue to focus on greater connectivity with our guests.”
One of those efforts, apparently, was the chain’s development of a group-sales program aimed at companies that are embarking on a road show to hawk their goods and services. M&S is pitching its banquet service as a one-stop shop that spares those road warriors the hassle of having to scout out a function room and banquet facilities at each stop of their dog-and-pony tours.
There’s no word yet if a retailing veteran was tapped to head it up. But if you hear someone greeting the guests with a “Welcome to McCormick & Schmick’s,” shoot me an e-mail, okay?
The new CEO of Outback and Carrabba’s parent company was previously focused on selling perfumes, cosmetics and holiday ornaments. Liz Smith, formerly president of Avon Products, seems an unlikely candidate to head OSI Restaurant Partners, a company long led by men who’d worked their way up from restaurant-level jobs. But OSI noted that Smith had experience in running a highly efficient company. They didn’t have to explain that Avon, almost purely a sales company, is light on payroll and structure, heavy on incentive-based performance.
Officials also mentioned that Smith had to keep Avon in touch with customer preferences if its product line was to stay relevant, a skill some say has languished inside OSI’s headquarters in recent years.
A talent for embellishing a brand was similarly one of the characteristics cited by Dunkin’ Brands in explaining why it’d reached outside the industry for its new “chief global customer and marketing officer.” John Costello, a veteran of Home Depot and Sears, “is one of the most talented marketers and brand builders in the retail industry in America," crowed Nigel Travis, CEO of the Dunkin’ Donuts and Baskin-Robbins parent. Indeed, Costello is a member of the Retail Advertising Hall of Fame.
The selection underscores that Dunkin’ is less a restaurant than a to-go bakery with extensive food and beverage options. It’s more of a retail storefront than a place where you’d go for dinner, or at least at present.
Even less of a disconnect is the promotion of supermarket vet Susan Shields to chief marketing officer of Jamba Juice, the smoothie chain. A key component of Jamba’s comeback plan is putting its name on more retail products through licensing deals. Those Jamba-branded items already range from a toy blender to a new line of trail mix that’s about to hit stores. Who better to blaze that new revenue channel than someone who worked at the Safeway grocer chain?
At the same time, dollars are dollars and finance is finance. So why not go outside the industry for your next chief financial officer, as McCormick & Schmick’s did in hiring Michelle Lantow? But it’s no coincidence, the upscale seafood chain said, that she came from a retail apparel manufacturer, Lucy Activewear.
Lantow was instrumental in revamping Lucy’s e-commerce operations and plotting its move into brick-and-mortar retail locations, the company noted in announcing her appointment. CEO Bill Freeman observed that those qualifications should serve M&S well as “we continue to focus on greater connectivity with our guests.”
One of those efforts, apparently, was the chain’s development of a group-sales program aimed at companies that are embarking on a road show to hawk their goods and services. M&S is pitching its banquet service as a one-stop shop that spares those road warriors the hassle of having to scout out a function room and banquet facilities at each stop of their dog-and-pony tours.
There’s no word yet if a retailing veteran was tapped to head it up. But if you hear someone greeting the guests with a “Welcome to McCormick & Schmick’s,” shoot me an e-mail, okay?
Monday, November 16, 2009
Outback's designs on another traffic builder
Studding the menu with lower-priced options hasn’t reversed a traffic fall-off at Outback Steakhouse, but another potential remedy is definitely putting more butts in seats, according to an executive of the chain’s parent company, OSI Restaurant Partners.
CFO Dirk Montgomery told financial analysts today that design tweaks at 50 test outlets are bringing “traffic lifts ranging from the low single digits to the mid single digits, say five, 6%.”
Those increases coincided with a 10.7% drop in Outback’s comps for the third quarter.
Montgomery explained that a variety of alterations to the outside and interior of the steakhouses is being tried. The packages range in cost from $100,000 to $400,000 per store, he added.
He stressed that the various features are still being tested, and that more elements will be tried in the field through 2009 and into next year.
Among the variables yet to be pinned down, he said, is the right level of spending, the correct balance of investment and payback.
The chain also isn’t certain about what features to combine into a renovation package.
“It’s still too early for us to form conclusions about what the ongoing renovations strategy will be in terms of what elements we pick,” he explained.
Montgomery did not cite any specific design features but commented, “consumer perceptions of overall atmosphere have improved significantly.”
Published reports indicate that at least some of the interior designs play down the concept’s Australian theme.
CFO Dirk Montgomery told financial analysts today that design tweaks at 50 test outlets are bringing “traffic lifts ranging from the low single digits to the mid single digits, say five, 6%.”
Those increases coincided with a 10.7% drop in Outback’s comps for the third quarter.
Montgomery explained that a variety of alterations to the outside and interior of the steakhouses is being tried. The packages range in cost from $100,000 to $400,000 per store, he added.
He stressed that the various features are still being tested, and that more elements will be tried in the field through 2009 and into next year.
Among the variables yet to be pinned down, he said, is the right level of spending, the correct balance of investment and payback.
The chain also isn’t certain about what features to combine into a renovation package.
“It’s still too early for us to form conclusions about what the ongoing renovations strategy will be in terms of what elements we pick,” he explained.
Montgomery did not cite any specific design features but commented, “consumer perceptions of overall atmosphere have improved significantly.”
Published reports indicate that at least some of the interior designs play down the concept’s Australian theme.
Tuesday, November 3, 2009
News roundup for a Special Edition day
Today’s definitely a high point in the news cycle. The business day is only a few hours old, yet we’ve already seen…
The startling announcement that OSI Restaurant Partners, the troubled parent of Outback Steakhouse and four other casual-dining chains, has reached outside the business to tap the president of Avon as its new CEO. Yes, that’s Avon, as in “ding-dong, Avon calling.” The new hire, Liz Smith, has worked in the food business, but on the grocery side, serving as the president of Kraft Food’s U.S. operations.
Smith will succeed Bill Allen, who will continue as chairman after his retirement from the corner office on Nov. 15. Allen is one of the gems of the business, so its fortunate he’ll still be involved, albeit somewhat at arm’s length.
After nearly two years of trying, and showing how shrewd of a tactician he can be, Tilman Fertitta has succeeded in getting Landry’s Restaurans to let him take it private.
Fertitta, the company’s founder and CEO, already owned 55% of Landry’s stock, so you’d think it would have been a cakewalk. But he’s repeatedly run into complications, including a refusal by the board he chairs to disclose information it regarded as confidential. By that time, the board had accepted one of his offers. But rather than divulge inside stuff about the company’s dealings with lenders, the directors changed their mind in January 2009 and told Fertitta the deal was off.
Throughout the gyrations, the crafty suitor was buying shares on the open market. The combination of those purchases and the slide in restaurant stock prices have enabled him to trim his bid to $14.75 a share, compared with the $23.50 he’d originally offered back in January 2008.
Fertitta also bought a sizeable minority stake in McCormick & Schmick’s, a competitor to Landry’s namesake brand.
Today brought news that two of Chicago’s fine-dining pioneers will be firing down their stoves for the last time. Nick’s Fishmarket, a fixture of the Loop for more than 30 years, couldn’t survive the times. Owner Lee Suckow told the Chicago Sun-Times that business was off 30% from a year ago.
Even longer in the tooth was Don Roth’s Blackhawk, in the suburb of Wheeling. Don Roth, who opened the landmark in 1969, had been the Wolfgang Puck of his time, imbuing the place with a showmanship that made it the place to copy. Roth’s widow, Ann, is still involved in the business at age 90.
In announcing the restaurant’s closing, she noted that none of their children are interested in taking control of the business.
The restaurant will serve its last prime rib on New Year’s Eve.
Smith will succeed Bill Allen, who will continue as chairman after his retirement from the corner office on Nov. 15. Allen is one of the gems of the business, so its fortunate he’ll still be involved, albeit somewhat at arm’s length.
Fertitta, the company’s founder and CEO, already owned 55% of Landry’s stock, so you’d think it would have been a cakewalk. But he’s repeatedly run into complications, including a refusal by the board he chairs to disclose information it regarded as confidential. By that time, the board had accepted one of his offers. But rather than divulge inside stuff about the company’s dealings with lenders, the directors changed their mind in January 2009 and told Fertitta the deal was off.
Throughout the gyrations, the crafty suitor was buying shares on the open market. The combination of those purchases and the slide in restaurant stock prices have enabled him to trim his bid to $14.75 a share, compared with the $23.50 he’d originally offered back in January 2008.
Fertitta also bought a sizeable minority stake in McCormick & Schmick’s, a competitor to Landry’s namesake brand.
Even longer in the tooth was Don Roth’s Blackhawk, in the suburb of Wheeling. Don Roth, who opened the landmark in 1969, had been the Wolfgang Puck of his time, imbuing the place with a showmanship that made it the place to copy. Roth’s widow, Ann, is still involved in the business at age 90.
In announcing the restaurant’s closing, she noted that none of their children are interested in taking control of the business.
The restaurant will serve its last prime rib on New Year’s Eve.
Monday, February 23, 2009
$700M loss is just part of Outback parent's woes
Never mind the $506 million that Outback Steakhouse’s parent lost during the last three months of 2008, swelling its red ink for the year to a bloomin’ $739 million. The company is embroiled in enough big-dollar legal and financial complications to change its name to FUBAR.
First there’s the courtroom duel with T-Bird Nevada, a business entity formed by the Outback chain’s franchise operators in California. Outback’s franchisor, the privately held OSI Restaurant Partners LLC, guaranteed a $35-million line of credit for T-Bird, which intended to use the funds for securing sites. Last month, according to an SEC filing, OSI learned that T-Bird couldn’t repay the $33.3 million it had run up on the credit line.
OSI bought the credit note from T-Bird’s lender on Feb. 17 for about face value, then filed suit against the franchise group two days later to recover the $33.3 million.
Last Friday, Feb. 20, T-Bird counter-sued OSI for alleged breaking assurances the franchisor would buy the California stores and, apparently, their debt obligations. T-Bird is asking for $100 million in compensatory and punitive damages.
OSI asserted in the securities filing that the T-Bird suit is without merit and would be contested.
The parties don't even agree on how many Outback units have been opened by T-Bird's constituents. OSI says 41, while T-Bird says 53.
OSI also vowed to contest an arbitor’s ruling that OSI owes roughly $98 million to a single-store Outback franchisee in Argentina, American Restaurants Inc. The arbitor apparently decided that an OSI affiliate had wrongly terminated the development agreement. OSI said it filed an action in a court in Florida on Dec. 29 that challenges the ruling, and indicated it would seek a reversal of the award in the courts of Argentina as well as the United States.
But wait—there’s more.
OSI also has to contend with complications from its investment in a Kentucky track, Kentucky Speedway LLC. The SEC filing notes that the restaurant company owns 22% of Kentucky Speedway, and runs its catering and concession operations. It’s also a partial guarantor of $68 million in bonds that were issued by the speedway. Apparently $17 million still has to be repaid to bondholders, and OSI is on the hook for $2.5 million.
You have to wonder how a restaurant company, and one whose principals prided themselves on the simplicity of their operations, could get so entangled in financial wheelings and dealings.
If OSI had one more complication relating to loans and guarantees, perhaps it would’ve qualified for TARP funds.
First there’s the courtroom duel with T-Bird Nevada, a business entity formed by the Outback chain’s franchise operators in California. Outback’s franchisor, the privately held OSI Restaurant Partners LLC, guaranteed a $35-million line of credit for T-Bird, which intended to use the funds for securing sites. Last month, according to an SEC filing, OSI learned that T-Bird couldn’t repay the $33.3 million it had run up on the credit line.
OSI bought the credit note from T-Bird’s lender on Feb. 17 for about face value, then filed suit against the franchise group two days later to recover the $33.3 million.
Last Friday, Feb. 20, T-Bird counter-sued OSI for alleged breaking assurances the franchisor would buy the California stores and, apparently, their debt obligations. T-Bird is asking for $100 million in compensatory and punitive damages.
OSI asserted in the securities filing that the T-Bird suit is without merit and would be contested.
The parties don't even agree on how many Outback units have been opened by T-Bird's constituents. OSI says 41, while T-Bird says 53.
OSI also vowed to contest an arbitor’s ruling that OSI owes roughly $98 million to a single-store Outback franchisee in Argentina, American Restaurants Inc. The arbitor apparently decided that an OSI affiliate had wrongly terminated the development agreement. OSI said it filed an action in a court in Florida on Dec. 29 that challenges the ruling, and indicated it would seek a reversal of the award in the courts of Argentina as well as the United States.
But wait—there’s more.
OSI also has to contend with complications from its investment in a Kentucky track, Kentucky Speedway LLC. The SEC filing notes that the restaurant company owns 22% of Kentucky Speedway, and runs its catering and concession operations. It’s also a partial guarantor of $68 million in bonds that were issued by the speedway. Apparently $17 million still has to be repaid to bondholders, and OSI is on the hook for $2.5 million.
You have to wonder how a restaurant company, and one whose principals prided themselves on the simplicity of their operations, could get so entangled in financial wheelings and dealings.
If OSI had one more complication relating to loans and guarantees, perhaps it would’ve qualified for TARP funds.
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