REGI strikes deal to buy 120 family restaurants – Restaurant Enterprises Group Inc

REGI strikes deal to buy 120 family restaurants – Restaurant Enterprises Group Inc – company profile

Richard Martin

REGI strikes deal to buy 120 family restaurants

IRVINE, Calif. – Restaurant Enterprises Group Inc., in agreeing to pay Marriott Corp. $65 million for 120 Bob’s Big Boy and Allie’s restaurants in California, has charted an ambitious conversion program that would dramatically boost the market penetration of its two hottest restaurant concepts.

The Irvine-based owner of El Torito and hundreds of other dining operations in 26 states intends to expand its Coco’s and Carrows family chains in Southern California by more than 50 percent with make-overs of the 104 Big Boys and 16 Allie’s.

Barry Krantz, president of the Restaurant Enterprises family-restaurant division, said its acquisition-conversion plan would “allow us to become more aggressive marketers” in the intensively competitive region.

Krantz said Coco’s, currently numbering 124 outlets, and Carrows, with 108, would each get about half of the 120 Marriott units following the deal’s expected completion by early summer.

Based on their comparable “double-digit sales increases,” Krantz said, Coco’s and Carrows are the standout performers in Restaurant Enterprise’s diverse, $900 million-a-year portfolio. The two chains now stand to substantially bolster their electronic marketing clout as the reflagged acquisition sites come on stream.

Both chains routinely spend 2 percent of their undisclosed sales on advertising, Krantz said, and the “50-percent increase in critical mass” resulting from the conversions would be especially significant in the densely populous Los Angeles-Orange County broadcast area.

About 90 of the Big Boys are in the Greater Los Angeles TV-radio signal area. The 16 Allie’s units are all in San Diego.

Krantz declined to divulge the anticipated timetable and budgeted costs for the concept changeovers, but he said he and his colleagues are “clearly going to do this as fast as we can.”

However, “we believe at least some of these restaurants will still be operating as [franchised] Big Boys for about two years,” said Tony Michaels, marketing vice president for Elias Bros. Restaurants Inc. of Warren, Mich., a major Big Boy operator and the chain’s franchisor.

Since last month Marriott has been required to pay unspecified royalties to Elias from sales in Marriott-owned Big Boy outlets, a condition spelled out three years ago when Marriott sold Elias the franchising rights to the 900-unit Big Boy system.

In addition to the California outlets being bought by Restaurant Enterprises, Marriott owns about 125 other Big Boys, principally in mid-Atlantic states, and scores of other family restaurants that have all been put up for sale as part of the company’s strategy of divesting all its non-hotel and non-contract operations.

Meanwhile, Elias has vowed to maintain Big Boy’s presence in California, citing contractual commitments with several franchisees to open at least 25 new Big Boys in the next two years.

One such deal is with a local mall-based food chain to expand its new Big Boy Diner concept, whose prototype debuted recently in the Glendale Galleria. That location is near the site of the original Big Boy diner, which was launched in 1936 by chain founder Bob Wian, who sold the then-600-unit system to Marriott in 1967.

Led by its Coco’s concept, Restaurant Enterprise’s family division has scored customer-traffic gains in recent years from successful campaigns to elevate its food specialties in the direction of a market niche that’s somewhere between coffee shops and dinner houses.

“We’ve upgraded the quality and focus of our high-ticket items to the point where people who used to come in and still order a hamburger now order [Coco’s more aggressively priced entrees],” Krantz said. “We sell a lot of fresh fish and prime rib.”

Although $6.95 and $7.95 are the chain’s most utilized price points, Coco’s offers beef dinners as high as $11.45, fish items for up to $8.45 and $9.95 combo platters that command an extra dollar for the option of prime-rib or crab legs.

Krantz expressed uncertainty about whether Restaurant Enterprise’s $65 million purchase offer was the reason the company prevailed over other prospective buyers – including a consortium of chains headed by Sizzler – “or whether we alone were willing to take this big a block of [Marriott’s] restaurants.”

Market-share protection and confidence in his division’s conceptual versatility were prime motivators for his company, Krantz suggested. “If we didn’t [buy the Marriott outlets], somebody else would have,” he said, noting that Big Boy sites very near his existing outlets were nonetheless deemed acceptable because “we have Coco’s next to Carrows, and both do very good business.”

Apart from about 10 rejected Big Boy sites that Marriott will still own in California, Restaurant Enterprises agreed to buy all of Marriott’s restaurant locations in the state.

Krantz said a conversion schedule for the sites is tentative: “The reality is until we start the project we won’t know” how long it will take to complete.

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