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November 2006 |
Volume 7, Issue 11, Part 2 |
 Atlanta-based Focus Brands Inc. has purchased Schlotzsky's Ltd. for an undisclosed amount. Focus Brands, which franchises and operates nearly 1,400 ice cream stores, bakeries and cafes in the U.S., Puerto Rico, and 31 foreign countries, is the food service franchising affiliate of Roark Capital Group, also of Atlanta. Now a wholly owned subsidiary of Focus Brands, Schlotzky's was purchased out of bankruptcy court by Fort-Worth based Bobby Cox Cos. Inc. in 2004 for $28.5 million. As part of the new deal, Cox will join Focus Brands' board of directors and re-invest a portion of his proceeds in the stock of Focus Brands. According to Focus Brands, all of Schlotzsky's 580 employees have been offered jobs with Focus, and the brand headquarters will remain in Austin.
Roark Capital group has acquired 11 franchise brands representing more than 3,300 locations, 1,700 franchisees and $2.3 billion in systemwide revenues in the U.S. and 33 countries. Roark also owns four direct marketing companies and two financial services firms. Focus Brands franchises and operates brands including Carvel and Cinnabon and is the franchisor of Seattle's Best Coffee on military bases and in certain international markets. The company also includes Celebration Foods, the marketer, manufacturer and distributor of frozen desserts, including Carvel Ice Cream products. (Austin Business Journal, 11/20/06)
Wendy's Interim CEO Permanent
 Wendy's International Inc. announced this month that interim Chief Executive Kerrii Anderson has been chosen as the permanent CEO and president of the nation's third largest hamburger chain. Anderson replaces Jack Schuessler who abruptly retired as chairman and CEO in April. Since Anderson took over, the hamburger chain has completed the spinoff of the Tim Hortons coffee and doughnut chain, sold its money-losing Baja Fresh Mexican Grill chain and cut 355 corporate jobs. The company has also introduced a new line of deli sandwiches that it has credited with turning around sagging sales. (The Cincinnati Enquirer, 11/10/06)
From wasabi and smoked salmon pizza to spicy Quarter Pounder hamburgers, U.S. fast food is undergoing major changes in China as restaurant titans like Yum Brands and McDonald's Corp. vie to dominate a market they say could approach or exceed business at home. For nearly 20 years, McDonald's and Yum Brands Inc.'s KFC chain have been selling burgers and fried chicken in China, the world's most populous nation. In the last four years, however, China's economic growth has skyrocketed - to over 10 percent a year - and its citizens are enjoying much greater spending power. Add to that cheap food costs and low wages, and U.S. chains say they will be able to open dozens of stores a year and enjoy strong sales as well as profit increases in China for years to come.
But there are still many challenges facing U.S. restaurant chains in China such as the difficulty of transporting goods in areas without adequate road systems, a tightened labor market and the fact that many Chinese consumers still cannot afford to eat out all the time. Chains said they also must be vigilant about what they charge for food in China, where incomes are modest compared with the United States. Additionally, McDonald’s and KFC restaurants in China tend to be more spacious than their U.S. counterparts because Chinese consumers prefer eating in to take-away. To create a more welcoming atmosphere, many older restaurants are being remodeled with sleek, modern décor and bright, shiny displays and menu boards. Most restaurants also aim to cater to local tastes. A McDonald’s Quarter Pounder in China, for example, comes with cucumbers and a spicy sauce while Pizza Hut serves a wasabi and smoked salmon pizza topped with octopus and other seafood.
(Reuters, 11/21/06)
 The pending $600-million plus buyout of Lone Star Steak House & Saloon Inc. took several more twists and turns last week as an independent observer advised shareholders to vote against the deal, and the would be buyer was indicted overseas for alleged stock manipulation related to a 2003 acquisition in South Korea. Lone Star Steak House had agreed to be acquired by Dallas-based Lone Star Funds in August at a price of $27.10 per share or $613.7 million in total, which quickly drew the ire of some shareholders. An investor group holding a 9.5 percent stake in the Wichita, Kan-based operator or franchisor of 278 steakhouses has stated that it would vote against the acquisition during a shareholder meeting Nov 30.
The investor group, which is led by New York-based Barington Companies Equity Partners LP, claims the purchase price undervalues the company and its real-estate holdings and that the sale process was not thorough. Lone Star Steak House has called certain of the objections “disingenuous” and insisted the sale process and eventual acquisition agreement were comprehensive and carefully negotiated. In addition to Barington, two other institutional shareholders, Deutsche Bank AG and Millennium Management LLC, have raised doubts about the acquisition and have both stated they may vote against the merger or seek appraisal rights.
(Nation’s Restaurant News, 11/27/06)
 The Sbarro family has agreed to sell its 1,000 unit namesake pizzeria chain to the private equity firm that owns Jenny Craig diet foods business, MidOcean Partners. The purchase price was not disclosed. But MidOcean, which has offices in New York and London, said it would retain Sbarro chief executive Peter Beaudrault and his entire management team after the deal closes. Neither it nor Sbarro has revealed a completion-date target. MidOcean's other holdings include the LA Fitness gym chain and the 1,000-unit Spirit Group pub chain, both of which operate in the United Kingdom. Melville, NY-based Sbarro was founded 50 years ago by the Sbarro family and operates today in 34 countries. (Nation's Restaurant News, 11/27/06)
 According to panelists at the American Hotel & Lodging Association Fall Conference, truly successful hotel design trends need to stay about five years ahead of the curve in order to stay relevant. Modern luxury, clean lines, regional customization and accessibility for travelers are the key trends influencing all hotel segments, no matter whether the hotel is economy or luxury. Many panelists from the hotel industry also agreed that the current focus at hotels is giving the customers a great experience.
For example, in an effort to reposition the Wyndham brand, the company partnered with architect and designer Michael Graves to develop a new design, look and feel for Wyndham properties that still retains “the core DNA of Wyndham and its brand values.” The new designs will have expanded living room, lounge spaces and welcome centers, as well as updated guestrooms and bathrooms with Michael Graves products. The company plans regional variations to influence both public space and guestroom art as well. Other trends discussed at the conference included the green movement in the hotel industry which means more organic elements at properties and going with natural over synthetics for building materials, FF&E and fabrics.
(Hotel & Motel Management, 11/13/06)
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