Sale of Mimi’s Café may be difficult for Bob Evans

Battling an uncertain climate

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Though much is unknown about the true fiscal impact of the health care mandate, the general consensus is that “the more labor intensive the operation, the higher the cost will be,” said Craig Weichmann of Meyer Metz Capital Partners LLC, a boutique investment bank that specializes in the sale or acquisition of challenged brands. “That alone could cause a potential buyer to say they might have been interested [in Mimi’s], but we need clarity,” he said.

Weichmann contends that Bob Evans overpaid for Mimi’s when it picked up the chain in 2004 for a reported $103 million, including the assumption of about $79 million in debt. “Once they got it, they didn’t know how to manage the asset,” he said.

Mimi’s, however, is still in a “fixable state,” he added, at the very least for its strong locations. “But I think there should be a good audience for that asset as is, as an ongoing brand.”

Weichmann pointed to potential buyers such as American Blue Ribbon Holdings, or ABRH, a subsidiary of Fidelity National Financial Inc., which has acquired a number of troubled casual-dining brands in recent years, including O’Charley’s, Max & Erma’s, Village Inn and Bakers Square. Most recently Fidelity acquired the J. Alexander’s chain in October.

Mimi’s “is definitely in their wheelhouse,” said Weichmann.

A spokesman for ABRH said the company could not comment. But in Fidelity’s most recent earnings call last month, executive chairman William P. Foley II said the company is still looking for upscale casual brands to bring into its restaurant portfolio, which now includes more than 700 restaurants under seven brands with a combined annual revenue of about $1.5 billion, according to securities filings.

Others watching the potential Mimi’s sale pointed to private equity firms that look for turnaround opportunities, like Sun Capital Partners (Real Mex Restaurants, Restaurants Unlimited Inc., Garden Fresh Restaurant Corp., Bar Louie, and more); or Golden Gate Capital (California Pizza Kitchen, On the Border Mexican Grill and Romano’s Macaroni Grill).

Representatives for both Sun Capital and Golden Gate also declined comment.

Wall Street analyst Conrad Lyon of B. Riley & Co. LLC in Los Angeles, agreed with many other industry observers, and said that other public restaurant companies would not likely be interested in Mimi’s. “I doubt potential strategic buyers like Denny’s or DineEquity would step up — too much time, energy and dollars to fix,” said Lyon.

Bob Evans has been working on revitalizing Mimi’s this year. In October, the company opened a new prototype design that aims to bring Mimi’s back to its roots as a French bakery-café and bistro.

Kevin Burke, managing director of advisory firm Trinity Capital, said a menu makeover is the right idea. “Mimi’s has Old World food,” he said. “It would like to be Panera [Bread], but it’s not.”

Like many of the older casual-dining brands, he noted, Mimi’s needs to figure out how to appeal to younger diners, who are not going to jump at the offer of a muffin — one of Mimi’s signature baked goods.

Burke added that Bob Evans might do better if it devotes more resources to the brand before selling. “I would try to turn the chain around first, and then market it,” he said. “For private equity to have interest, there will have to be a discounted price or a renaissance in the works.”

Contact Lisa Jennings at lisa.jennings@penton.com.
Follow her on Twitter: @livetodineout