Johnny Rockets’ parent company is considering a sale of the classic Americana-themed burger chain.
Officials confirmed Monday that parent Red Zone Capital Management Co. LLC has hired North Point Advisors to explore a possible sale of the nearly 300-unit casual-dining concept.
Cozette Phifer Koerber, vice president of brand management and communications for The Johnny Rockets Group Inc., based in Aliso Viejo, Calif., said the company could offer no further details on the process.
John Gordon, principal of Pacific Management Consulting Group in San Diego, said he was familiar with the offer and that the company’s asking price was in the range of $100 million to $150 million, which would be about nine to 13 times earnings before interest, taxes, depreciation and amortization, or EBITDA, of about $12 million.
“To get those kinds of numbers, one must demonstrate growth or potential growth,” Gordon said.
Founded in 1986, Johnny Rockets is known for its diner-style burgers, sandwiches, fries served with a ketchup smiley face and milkshakes. Tableside juke boxes play 1950s-era music, and servers are encouraged to dance and sing along.
The 75-percent franchised concept grew rapidly in the 1990s but later became mired in debt. Toward the end of the decade, growth was put on hold while the company closed underperforming locations.
Red Zone bought Johnny Rockets in 2007 from former owners Centre Partners Management LLC and Apax Partners Inc., two private-equity firms that owned the chain along with heirs of late founder Ronn Teitelbaum, who died in 2000. The acquisition price for the chain was not disclosed, though it was described by company officials at the time as “a high single-digit multiple” of corporate cash flow.
Red Zone is the investment vehicle of Daniel Snyder, an owner of the Washington Redskins football team and Six Flags amusement parks.
In recent years, Johnny Rockets has been aggressively building its presence overseas, opening for the first time in Nigeria, for example, where five units are planned over the next seven years. The company has also struck franchise agreements in Colombia, Honduras, Costa Rica, Nicaragua, El Salvador, Guatemala, Pakistan, Indonesia and the Philippines.
Johnny Rockets has restaurants in more than 16 countries. Growth in the U.S., however, has been slow.
For the fiscal year ended April 2012, Johnny Rockets had 223 restaurants in the U.S., including 26 company-operated locations.
The chain had U.S. systemwide sales of $212.7 million, which was virtually flat, or down 0.1 percent, compared with the prior year, the company reported.
In recent years the company has experimented with dual branding and new formats, adding alcohol service to some restaurants.
Last year, a Johnny Rockets franchisee in Phoenix began testing a new fast-casual variant called JR’s Burger Grill, featuring smaller dishes at a lower price point that would compete with the growing number of fast-casual burger concepts that have threatened to eclipse older brands like Johnny Rockets.
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