Buffets Inc. Thursday said it had completed the financial restructuring of its multichain enterprise and emerged from Chapter 11 reorganization, six months after its pre-negotiated filing on January 18.
The parent of the HomeTown Buffet, Old Country Buffet, Ryan’s Grill, Buffet & Bakery, Fire Mountain and Tahoe Joe chains entered bankruptcy with 494 restaurants and exited with 357. The reorganization eliminated all outstanding pre-petition term debt, totaling approximately $255 million, as well as annual interest expenses of more than $35 million, according to the company.
Buffets Inc. is owned by Buffets Holdings Inc., which itself is owned by Buffets Restaurants Holdings Inc. Company officials said the reorganized company’s outstanding stock is wholly owned by multiple pre-petition lenders, none of which has majority control.
In conjunction with its emergence from Chapter 11 bankruptcy, Buffets said it had secured $50 million in exit financing to satisfy its Chapter 11 Plan obligations and provide working capital for ongoing operations.
“We have emerged with significantly less debt, a much improved balance sheet and a sustainable capital structure, all of which will allow us to leverage our strong brands as we make investments in the future success of our restaurants,” Mike Andrews, Buffets’ chief executive, noted in a statement about the company’s exit from bankruptcy, which was announced at strategic planning session with all of its field leadership team members in Atlanta.
The January 2012 bankruptcy was Buffets’ second in four years, as it had filed for bankruptcy in 2008 and exited in 2009. The company has said that its debt woes were tied to its 2006, $876-million merger with Ryan’s Restaurant Group Inc. to create a nationwide, multibrand buffet system of 675 restaurants.
Jason Abelkop, who joined Buffets Inc. as chief marketing officer in February, said some of the exit financing would be used to address deferred maintenance and a “top to bottom” training program for all employees.
Abelkop also said that some of the money would be used for makeovers of 35 to 40 restaurants beginning in September. The new look would be based on a modified “reconcepting” blueprint developed two years ago that added contemporary décor touches and themed food stations to the company’s buffet restaurants. Company officials have said that while ‘reconcepted’ restaurants drew up to 30 percent higher traffic, they also featured additional margin-pressuring complexity.
Abelkop recently told NRN that after some recent consumer research into what Buffets’ customers consider the most important components of food, ambience and service, the company understands "the keys to maintaining the guest satisfaction we got from the early [reconcepted stores] while making it easier to operate them and therefore making them more profitable.”
If the second-generation of reconcepted restaurants perform as anticipated by Buffets, he said, the company will make over an additional 50 to 60 locations a year.
To capitalize on “a very loyal base of folks who want to see us win,” as indicated by consumer research, and to attract new users, Abelkop said the company is taking several steps, including:
• Building the "foundational quality" of its food offerings through such initiatives as The Great Steak Pledge. That ‘pledge’ is a vow by the company — as relayed through website and TV ads, direct mail and point of purchase materials — to serve its “ranchers’ select” sirloin steak every night in every restaurant, a practice that about 40 percent of the system failed to observe in recent years, Abelkop said.
• Increasing trial or frequency of use among non-regular guests by enhancing the "community connection" of the company's chains. For example, the restaurants would offer U.S. military personnel a 15-percent discount and a free meal on their birthday or share proceeds from in-restaurant music CD sales with the Armed Services YMCA.
For the fiscal year ended in June, Buffets Inc.’s operations generated estimated revenue of $1.03 billion, which was down 12.88 percent from the preceding year.