MorrisAnderson Identifying $4 million of Annual Savings Opportunities

Restaurants, Hospitality & LeisureLitigation Support

191M

Annual Sales

20M

in Debt

Central Florida Restaurants (CFR)-TGIF, Fremont California

Challenge

Casual dining restaurant franchisee. $191 million sales. $20 million debt. 73 locations in seven states (IL, FL, MI, IN, MN, WI and OH).

  • Brand is struggling to find an appropriate strategy or vision
  • Poor performance was heavily driven by the Restaurant’s reliance on $10 Endless Appetizers promotion (approximately $18 million adverse hit to EBITDA)
  • The Company’s customer traffic and net sales are declining by 5.0% or more year-over-year
  • The Company sales decreased by at least 2.3% for 9 straight quarters (with a 8.7% decrease in last quarter)
  • Certain operating restaurants are so unprofitable that there is no reasonable expectation of a financial turnaround (these 11 restaurants lost $3.3 million of EBITDA over the last twelve months)
  • 12 restaurants that have excessive rent expense as a percent of net sales that should be renegotiated
  • The Company’s relationship with the Restaurant’s leadership makes franchisor negotiations challenging
  • Recently lost its CFO and the organization is generally devoid of financial analytics
  • The Company will start to run tight on the bank’s financial covenants in the next quarter

Solution

  • MorrisAnderson (MA) served as restructuring advisor
  • Close 11 significant money losing restaurants
  • Renegotiate lease rates at 12 restaurants
  • Upgrade the CFO position
  • Investigate restaurants that are outliers for targeted performance improvement
  • Lobby the Restaurant’s brand to develop a realistic brand vision and strategy

Results

  • MA’s solutions to close restaurants and renegotiate select leases will improve EBITDA by $3.4 million in next fiscal year which improves valuation by $14 million at a 4 times EBITDA multiple

Contributors