MIAMI -- In restaurant news from the
Chain Operators Exchange Conference
here, it looks like
may be a step closer to divesting its casual-dining business -- a strategy it announced in September.
While the privately held
Wilshire Restaurant Group
, owner of the
chain, snapped up
East Side Mario's
last week, PepsiCo still must unload
California Pizza Kitchen
Chevy's Fresh Mex
According to two industry sources here, a buyer may be sniffing around the 74-unit, San Francisco-based Chevy's. The suitor is none other than John Martin, chairman and chief executive of PepsiCo's casual-dining division. He'll be out of a job when PepsiCo finishes the dismemberment, which is separate from the proposed spinoff of its larger fast-food division that encompasses
As the former head of Taco Bell, Martin was responsible for that chain's growth. But he also engineered the Border Lights flop, which was one factor contributing to his reassignment last year. That campaign to sell lower-fat items fell well short of expectations.
Scott Bergren, chairman and chief executive of Chevy's, says a number of prospective buyers, including several New York institutional equity investors, have contacted him. "If you want to know whether John's interested, you'll have to ask him," he says.
Martin could not be reached for comment.
Like a patron who's had one too many helpings of pot roast and mashed potatoes at one of its all-you-can-eat restaurants,
is suffering from indigestion after a big merger last year.
The company is taking its dose of
in the form of unit remodels and a new menu, according to Buffets President Kerry Kramp. In an interview with
here at the Chain Operators Exchange Conference, Kramp says a series of renovations and other initiatives will help return Buffets to fighting form. Hopefully not
Sugar Ray Leonard
-esque fighting form.
"It's too soon to call a turnaround," Kramp admits. "Our goal this year is to stabilize sales and stop the decline."
In September, 110-unit
joined with 250-unit
Old Country Buffet
to create Eden Prairie, Minn.-based Buffets. The company also operates three
While Wall Street originally praised the merger for the synergy the combined company would possess, it soured on the deal when Buffets warned that its fourth-quarter numbers would be below analysts' expectations, primarily due to higher food, labor and fixed costs associated with the deal.
For the fourth quarter, ended Jan. 1, Buffets' net income plummeted 63% to $2.7 million, or 6 cents a share, from $7.4 million, or 16 cents, last year. Sales grew 3.5% to $170 million, compared with $164 million a year ago.
Buffets' stock closed Tuesday at 6 31/32, hitting a 52-week low. It traded as high as 15 3/4 last summer. Since that time, comparable sales at units open at least a year, a crucial measure of retailing health, declined by as much as 3.4% at some stores.
"The merger diverted management's focus," Kramp says. "We weren't spending as much time concentrating on the food and the customer."
To that end, Buffets is remodeling some 25 units this year. The makeovers range from new signs to full cosmetic surgery. And initial results are promising. Kramp says after the fix-up, units will see a 20% to 40% sales bump.
And a new menu, designed to cull the best items from Old Country and HomeTown, is expected to boost sales as well, though Kramp says it's too soon to gauge the results.
Analyst Dean Haskell with
in Chicago says he's "cautiously optimistic that they'll get their act together." He rates the company market perform; his firm hasn't done any underwriting for Buffets.
While the company has few hard numbers to support its turnaround promise, it may have two secret weapons. Dennis Scott, founder of HomeTown Buffet and considered by many to be the father of all-you-can-eat dining -- you betcha, the grazing guru -- has remained with the company as chairman.
And Scott has prior experience patching up ailing companies. In the 1980s, he turned around
International Kings Table
, a now-defunct smorgasbord chain.
Also, Buffets, with its bottomless portions, reasonable prices and family atmosphere, plays to the aging baby-boom generation, one of the largest population segments.
"We couldn't be any better positioned to take advantage of that group," Kramp says. He describes a recent Valentine's Day promotion that wooed senior citizens married for at least 50 years.
Kramp says the seniors jammed the restaurants. But there was still plenty of room for other, younger customers. "All the seniors came before 5 p.m.," he says.
By Suzanne Kapner