Closing Restaurants Improves Sale Value

Restaurants, Hospitality & LeisurePerformance ImprovementTurnarounds & Restructuring

150M

Annual Sales

22M

Debt

Summit Restaurant Group, Boulder, CO

Challenge

  • Long-term Hardee’s Franchisee had 145 restaurants with approximately 50 restaurants losing money
  • Franchisor blocking closure of poor-performing restaurants
  • Hardee’s brand running negative same store sales comps
  • Franchisor requiring remodels on almost all restaurants, which would require $15 million of Capital Expenditures
  • Owners wanted to exit this Franchisee operation
  • Owners had a separate and legally unconnected 100-restaurant Hardee’s Franchise operation that was operating profitably
  • Secured Lender was facing virtually a zero baseline recovery on its $22 million debt

Solution

  • MorrisAnderson engaged to negotiate with Brand on store closures and sale of Franchisee Business
  • MorrisAnderson facilitated engagement of a Real Estate Consultant to negotiate rent reductions as appropriate
  • MorrisAnderson facilitated engagement of an Investment Banker to market the Company for sale

Results

  • Franchisor consented to the closure of over 40 restaurants, which improved EBITDA by $4 million
  • Real Estate Consultant saved almost $1 million in annual rents in negotiations
  • Investment Banker secured a Stalking Horse buyer
  • Company filed Chapter 11 and was sold and secured lender’s recovery was over 70%; a $16 million improvement over the baseline recovery
  • Owners continued to operate profitable Hardee’s business

Contributors