LAKE FOREST CALIF. Johnny Rockets concept foresee a streamlined express variant becoming a keystone to a new phase of rapid growth for the 1940s-malt-shop-style chain of full-service burger specialty restaurants. —The NFL team owners who are buying the 205-unit
Under the acquisition, expected to be completed in March, Johnny Rockets would become the first foodservice holding of the private-equity firm RedZone Capital GP LLC, a Tysons Corner, Va.-based outfit created by Washington Redskins co-owners Daniel Snyder and Dwight Schar. —The NFL team owners who are buying the 205-unit
Snyder, who also is chairman of amusement park parent Six Flags Inc., disclosed the deal to buy Lake Forest-based Johnny Rockets Group last month. The price for the 75-percent franchised chain was not stated, but officials described it as “a high single-digit multiple [of corporate cash flow].” —The NFL team owners who are buying the 205-unit
“There’s no reason why we shouldn’t see 1,000 Johnny Rockets locations within the next five years,” Snyder said in describing his outlook for the 20-year-old brand’s growth potential. —The NFL team owners who are buying the 205-unit
Chris Ainley, the RedZone managing partner who is slated to lead Johnny Rockets’ board once the deal is completed, said: “Johnny Rockets has all the ingredients necessary to take it to the next level. It’s a global consumer brand with the name recognition of a company five times its size.” —The NFL team owners who are buying the 205-unit
The new owners are expected to keep in place the chain’s current management team, led by chief executive Mike Shumsky. Johnny Rockets now operates in 28 states, Puerto Rico and seven foreign countries. Ainley indicated that the chain’s current ratio of about 25 percent company-owned restaurants to 75 percent franchised units was expected to continue. —The NFL team owners who are buying the 205-unit
One of the first steps the new owners want to take is the creation of a series of smaller Johnny Rockets Express outlets offering the chain’s same, simple menu in a smaller space and with counter service instead of full service. —The NFL team owners who are buying the 205-unit
The express concept, with a targeted size of 700 to 800 square feet, is envisioned as a $300,000-per-location capital expense, compared with $750,000 for the full-service restaurants, which are typically about 2,200 square feet. —The NFL team owners who are buying the 205-unit
Ainley said the company is in discussions with an as-yet-unnamed operational partner that would help the brand gain entry to airports across the country. —The NFL team owners who are buying the 205-unit
Expansion into stadiums, such as FedEx Field, where the Redskins play, is another target, as are the 28 theme parks of Dallas-based Six Flags. —The NFL team owners who are buying the 205-unit
The sellers of Johnny Rockets include Centre Partners Management and Apax Partners Inc., two private-equity firms that bought control in 1995 and together control about two-thirds of the company. The other owners include heirs of the chain’s late founder, Ronn Teitelbaum, who died in 2000, and restaurant consultant Max Pine, a former interim chief executive of Johnny Rockets and three-year member of its board. —The NFL team owners who are buying the 205-unit
Teitelbaum launched Johnny Rockets on Melrose Avenue in Los Angeles in 1986. The concept was designed around high-quality hamburgers, old-time tabletop juke-boxes and servers who occasionally sang and danced to the nickel-a-song play-list. Teitelbaum grew the chain to 60 locations before selling the company for $35 million in 1995 to an investor group headed by Centre Partners and Patricof & Co., later known as Apax. —The NFL team owners who are buying the 205-unit
Through the late 1990s, the chain more than doubled in size and fell on hard times, sinking deeply in debt. When Shumsky joined the company seven years ago, he halted all growth for several years to stabilize what was then a struggling concept that he felt had grown too fast. About 20 low-performing branches were closed. The simple one-page menu was revamped, primarily to upgrade the lineup of burgers, fries and hand-dipped shakes. —The NFL team owners who are buying the 205-unit
By 2002, Shumsky relaunched franchising. The chain has since grown each year by what it says is a 20-percent rate, which would include international and nontraditional expansion, including outlets on cruise ships. Shumsky says Johnny Rockets is now debt-free. —The NFL team owners who are buying the 205-unit
The chain said its systemwide sales last year were about $250 million, including foreign results. —The NFL team owners who are buying the 205-unit
U.S. sales for the fiscal year ended last May were $199.2 million, up 12.5 percent from the prior year, according to Nation’s Restaurant News research, which indicated that Johnny Rockets’ domestic store count had risen by a net five units for the year to 166 U.S. outlets, including 120 franchised branches. —The NFL team owners who are buying the 205-unit
Shumsky said the company has spent the past three years putting various systems into place—from a computer-based intranet for administrative services to decentralized training systems—that would let Johnny Rockets “lever up on our business as we grow.” —The NFL team owners who are buying the 205-unit
While domestic growth would be the primary focus of the express concept, the brand also offers potential for increased international expansion, Ainley said. —The NFL team owners who are buying the 205-unit
Johnny Rockets already is known for its variety of nontraditional locations in mall food courts, casinos and Royal Caribbean cruise ships. Smaller units in food courts, for example, have notched average annual unit volumes similar to the $1.2 million seen at the chain’s larger full-service restaurants, Ainley noted. —The NFL team owners who are buying the 205-unit
The chain last year signed a franchise pact with the Dallas-based Army & Air Force Exchange Services to open a unit at Ramstein Air Base in Germany, which could lead to more military outlet opportunities, Shumsky said. —The NFL team owners who are buying the 205-unit
Ainley said RedZone has the marketing and real estate expertise to take the brand to the next level. Schar, for example, is chairman of Reston, Va.-based NVR Inc., one of the nation’s largest homebuilders. —The NFL team owners who are buying the 205-unit
Snyder, who reportedly was a self-made millionaire by 19 after founding an advertising firm that he later sold, was widely criticized for paying $800 million to buy the Redskins in 1999. Since then, however, the team has “doubled in value and tripled in profit,” making it one of the most profitable sports franchises in the world, Ainley said. —The NFL team owners who are buying the 205-unit
RedZone’s first investment, in 2004, bought it a 12-percent stake in then-troubled Six Flags. After a proxy battle, a RedZone-endorsed management team was installed to tackle a turnaround strategy. —The NFL team owners who are buying the 205-unit
Former Johnny Rockets chief executive and selling shareholder Pine, who is president of Aries Associates in New York, said: “The growth potential is there, but it’s not like falling off a log. You have to have the knowledge of real estate site selection, and you have to have the infrastructure. Now Johnny Rockets is closer to that than it’s ever been before.” —The NFL team owners who are buying the 205-unit