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Small-cap restaurants cross their names off stock exchanges

LOS ANGELES —Low trading values for restaurant stocks and a desire to cut costs related to reporting requirements for public entities are prompting a growing number of companies to delist their stocks.

Recently, Grill Concepts Inc., the Woodland Hills, Calif.-based parent of the Daily Grill chain, and uWink Inc., the three-unit technology-driven restaurant concept based in Van Nuys, Calif., announced plans to withdraw their publicly traded stocks. But with so many restaurant companies trading near the $1 mark and the continuing volatility of the public markets depressing stock prices, observers said they expect more to follow suit. —Low trading values for restaurant stocks and a desire to cut costs related to reporting requirements for public entities are prompting a growing number of companies to delist their stocks.

During the past 12 months, the average full-service publicly traded restaurant stock is down 67 percent, said Allan Hickok, managing director of investment bank Houlihan Lokey in Minneapolis. Taking a company private may be the best alternative for many companies going forward, said Hickok. —Low trading values for restaurant stocks and a desire to cut costs related to reporting requirements for public entities are prompting a growing number of companies to delist their stocks.

“It frees them up to do what probably they’ve been doing all along, without the expense of public ownership and without having to broadcast their intentions every quarter,” he said. —Low trading values for restaurant stocks and a desire to cut costs related to reporting requirements for public entities are prompting a growing number of companies to delist their stocks.

“Just because a company isn’t a good stock, does not mean it isn’t a good company,” he added. —Low trading values for restaurant stocks and a desire to cut costs related to reporting requirements for public entities are prompting a growing number of companies to delist their stocks.

Daily Grill said it would take the company private by buying out smaller shareholders to reduce the number of stakeholders to fewer than 300, which would make the company eligible for delisting. uWink planned to buy so-called “odd lot” shares, or blocks of stock of fewer than 100 shares, from such owners as of Dec. 1. —Low trading values for restaurant stocks and a desire to cut costs related to reporting requirements for public entities are prompting a growing number of companies to delist their stocks.

Both companies said they want to cut the significant time and expenses related to meeting the reporting mandates required of public companies. Both are also small-cap companies with stock prices dipping below $1. In this difficult economy, there is little hope of a quick stock price rebound. —Low trading values for restaurant stocks and a desire to cut costs related to reporting requirements for public entities are prompting a growing number of companies to delist their stocks.

“We just don’t see values going up anytime soon,” said Wayne Lipschitz, chief financial officer of Grill Concepts. “For us, it was really a matter of cost-benefit. Why spend three-quarters of a million dollars staying public?” —Low trading values for restaurant stocks and a desire to cut costs related to reporting requirements for public entities are prompting a growing number of companies to delist their stocks.

Houlihan Lokey’s Hickok said other restaurant companies also are likely to find the “time, expense and distraction” of being publicly traded is not worth the benefit. —Low trading values for restaurant stocks and a desire to cut costs related to reporting requirements for public entities are prompting a growing number of companies to delist their stocks.

“You will see a lot more of this in all industries,” he said. —Low trading values for restaurant stocks and a desire to cut costs related to reporting requirements for public entities are prompting a growing number of companies to delist their stocks.

Grill Concepts and uWink are not alone among restaurant companies that have watched their stock prices slide into or near penny stock levels. —Low trading values for restaurant stocks and a desire to cut costs related to reporting requirements for public entities are prompting a growing number of companies to delist their stocks.

Jamba Juice parent Jamba Inc. and Così are among those trading under $1 in December, with Jamba closing below the dollar mark since October. Ruth’s Hospitality Group Inc., owner of the Ruth’s Chris Steak House and Mitchell’s Fish Market brands, saw stock prices reach a low of 90 cents in November. At press time, the stock price was $1.47, down from its 52-week high of $10.84. —Low trading values for restaurant stocks and a desire to cut costs related to reporting requirements for public entities are prompting a growing number of companies to delist their stocks.

Ruby Tuesday’s stock also has dipped below $1. At press time, the stock was trading near $1.38 per share, not far from its year low of 96 cents, and far from its 52-week high of $12.77. —Low trading values for restaurant stocks and a desire to cut costs related to reporting requirements for public entities are prompting a growing number of companies to delist their stocks.

Some, such as NexCen Brands Inc., Granite City Food & Brewery Ltd. and Diedrich Coffee Inc. have received notices from Nasdaq warning of delisting because their toolow stock prices or minimum market values did not meet required levels to be traded on the exchange. —Low trading values for restaurant stocks and a desire to cut costs related to reporting requirements for public entities are prompting a growing number of companies to delist their stocks.

Typically, companies facing delisting have 180 days to regain compliance, but Nasdaq has suspended enforcement of such mandates until Jan. 16, 2009, because of declining market conditions. —Low trading values for restaurant stocks and a desire to cut costs related to reporting requirements for public entities are prompting a growing number of companies to delist their stocks.

Nasdaq compliance was not an issue for Grill Concepts, said Philip Gay, chief executive, though the stock price has hovered below or close to the $1 mark since mid-October. The company’s yearly low at press time was 59 cents. —Low trading values for restaurant stocks and a desire to cut costs related to reporting requirements for public entities are prompting a growing number of companies to delist their stocks.

Gay said the decision to go private was based on a principle of basic economics: The cost of being a public company outweighed the benefits. —Low trading values for restaurant stocks and a desire to cut costs related to reporting requirements for public entities are prompting a growing number of companies to delist their stocks.

Grill Concepts estimates that deregistration would save the company about $750,000 annually through the elimination of public-company reporting mandates. —Low trading values for restaurant stocks and a desire to cut costs related to reporting requirements for public entities are prompting a growing number of companies to delist their stocks.

“In a tough economy, it’s about where else you can make cuts without impacting the guest,” Gay said. —Low trading values for restaurant stocks and a desire to cut costs related to reporting requirements for public entities are prompting a growing number of companies to delist their stocks.

The shift to a private company would also allow management to focus on long-term growth. Grill Concepts operates 31 restaurants under the casual-dining Daily Grill and the higher-end Grill on the Alley brands, as well as one grab-and-go outlet called In Short Order. —Low trading values for restaurant stocks and a desire to cut costs related to reporting requirements for public entities are prompting a growing number of companies to delist their stocks.

Shareholders will be asked to approve the going-private plan at a special meeting to be scheduled in the first quarter of 2009. —Low trading values for restaurant stocks and a desire to cut costs related to reporting requirements for public entities are prompting a growing number of companies to delist their stocks.

The plan includes a reverse-forward stock split that would essentially cash out the smallest shareholders. The company would use a 1-share-to-35-share ratio for the reverse stock split, then purchase the stakes below the 35-share mark for $1.50 each in cash. Stakeholders owning 35 shares or more would retain their number of shares following a subsequent forward stock split, which holds the same 1-to-35 ratio. —Low trading values for restaurant stocks and a desire to cut costs related to reporting requirements for public entities are prompting a growing number of companies to delist their stocks.

Gay said the plan would cost the company between $400,000 and $500,000, but the potential savings far outweigh the one-time cost. —Low trading values for restaurant stocks and a desire to cut costs related to reporting requirements for public entities are prompting a growing number of companies to delist their stocks.

Grill Concepts also is continuing to evaluate strategic options with financial adviser Morgan Joseph & Co., which could alter the going-private plan. In October, the company said it was exploring a possible sale of assets, recapitalization or merger. —Low trading values for restaurant stocks and a desire to cut costs related to reporting requirements for public entities are prompting a growing number of companies to delist their stocks.

UWink, the technology-focused restaurant concept created by Chuck E. Cheese’s founder Nolan Bushnell, also has watched stock prices slide. A stock traded on the over the counter bulletin board, uWink shares have been below the 50-cent mark since early October, far from its latest annual high of $1.85, which it hit in mid-December 2007. At press time, the stock’s latest annual low was 7 cents. —Low trading values for restaurant stocks and a desire to cut costs related to reporting requirements for public entities are prompting a growing number of companies to delist their stocks.

Under the going-private plan, uWink is offering 50 cents per share to buy back the stock owned by holders of fewer than 100 shares. In addition, shareholders will receive an additional $20 to reimburse servicing costs. The deadline to sell is Jan. 15 and the goal is to reduce the number of shareholders to fewer than 500 so the company can delist its stock. —Low trading values for restaurant stocks and a desire to cut costs related to reporting requirements for public entities are prompting a growing number of companies to delist their stocks.

Currently, odd-lot stockholders owning less than 100 shares represent about 66 percent of the record stockholder base, but only about 0.04 percent of shares outstanding. —Low trading values for restaurant stocks and a desire to cut costs related to reporting requirements for public entities are prompting a growing number of companies to delist their stocks.

Company officials declined to comment further. However, they said delisting uWink stock would save the company an estimated $190,000 annually in reporting fees. —Low trading values for restaurant stocks and a desire to cut costs related to reporting requirements for public entities are prompting a growing number of companies to delist their stocks.

Once de-registered, uWink’s stock may be quoted in the Pink Sheets Electronic Quotation System, though officials said they could not predict whether that would occur. —Low trading values for restaurant stocks and a desire to cut costs related to reporting requirements for public entities are prompting a growing number of companies to delist their stocks.

The company’s plan includes the goal of spinning off uWink’s technology division, which licenses the use of its touch-screen hardware and software. —Low trading values for restaurant stocks and a desire to cut costs related to reporting requirements for public entities are prompting a growing number of companies to delist their stocks.

Officials said they could improve prospects of raising growth capital because technology companies and restaurant companies attract different kinds of investors. The move will also help the technology side compete, given that most competitors are private and don’t have the burden of public reporting requirements. —Low trading values for restaurant stocks and a desire to cut costs related to reporting requirements for public entities are prompting a growing number of companies to delist their stocks.

Under the plan to go private, the restaurant operations will remain as a separate entity under uWink Inc., with Bushnell as chief executive. —Low trading values for restaurant stocks and a desire to cut costs related to reporting requirements for public entities are prompting a growing number of companies to delist their stocks.

Currently, uWink operates three full-service, casual-dining restaurants in California featuring its tabletop, touch-screen technology, which allows guests to order, play games and pay at the table. —Low trading values for restaurant stocks and a desire to cut costs related to reporting requirements for public entities are prompting a growing number of companies to delist their stocks.

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