Sources: Bob Evans may explore sale of Mimi's Café

Bob Evans Farms Inc. is looking to sell the Mimi’s Café casual-dining chain, according to a recent report in online finance journal dealReporter.

A Wall Street securities analyst and a source involved in restaurant industry merger-and-acquisition activity, who both asked not to be named because they were not authorized to speak for Bob Evans or Mimi’s, told Nation’s Restaurant News they believe Mimi’s has been shopped on and off by Bob Evans for a year or more. A renewed sales effort at this time may be a result of last week’s successful sale of the Yard House casual-dining chain to Darden Restaurants Inc.

The dealReporter, which sent its story to Nation’s Restaurant News, but does not make its subscriber content available online, said their unnamed sources expect a sale multiple of around seven times Mimi’s earnings before interest, taxes, depreciation and amortization, or EBITDA. The article also said private equity firms are the primary suitors.

A spokeswoman for the Columbus, Ohio-based Bob Evans told Nation’s Restaurant News the company does not comment on rumors.

According to securities analyst Chris O’Cull at Keybanc Capital Markets, Mimi’s booked fiscal 2012 EBITDA of $24.5 million. There is a case for Bob Evans to sell Mimi’s, he said, in a July research note.

“The long-struggling Mimi’s Café concept has only produced positive [same-store sales] once in the past 60 months; we estimate cumulative guest counts are down roughly 35 percent over the past four years as average unit volume has fallen from $3.3 million to $2.5 million,” O’Cull stated. “We believe a Mimi’s turnaround would require store closures, additional capital to refurbish existing stores and the buildout of under-penetrated markets (88 units are spread across 23 states).”

O’Cull noted that a private equity firm is the most likely candidate, and a deal may fetch about $110 million.

“The likely buyer of Mimi’s is a private equity firm that owns other brands that could use Mimi’s real estate for conversions,” O’Cull stated. “Based on our analysis, we believe a firm could pay roughly $110 million (or 4.5x FY12 EBITDA of $24.5 million) and earn a mid-teens [internal rate of return].”

Keybanc’s O’Cull initiated coverage of Bob Evans this month with a Hold rating.

Irvine, Calif.-based Mimi’s Café was acquired by Bob Evans in 2004 for a reported $103 million, in a deal that included the assumption of about $79 million in debt.

The chain was founded in 1978 by Thomas Simms, whose restaurateur father Arthur Simms was inspired by French cafes while serving as an airman during World War II. Mimi was the name of a French woman who captured the elder Simms’ affections.

Last year, Bob Evans tried to refocus marketing efforts on the chain’s French theme with the tagline: “Come Enjoy A Taste of France.”

Sales at Mimi’s, however, have suffered in recent years. Mimi’s reported revenue of about $366 million in fiscal 2012, a decline of about 4 percent from the prior year. Same-store sales dropped 4 percent, despite a menu price hike of about 3.4 percent during the year, the company said.

In a recent analyst presentation, Steve Davis, Bob Evans Farms’ chair and chief executive, said the company has been working to rebuild the Mimi’s brand, adding a full bar to almost all locations with the goal of building alcohol sales. Currently bar sales account for about 4.5 percent of sales, and Davis said he hopes to increase that to about 10 percent, an average that's more typical for casual-dining restaurants.

Mimi’s locations average about $2.5 million in annual sales overall. The average dine-in check is about $11.75 and the carryout check average is about $20.34.

In the next quarter, Mimi’s is expected to unveil a new remodeled location, one of three to be remodeled as part of a test this year. Borrowing elements from the recent remodel of Bob Evans locations, the new-and-improved Mimi’s will showcase an area for carryout pickup with an expanded bakery case and coffee and espresso offerings. The remodeled locations will also feature an elevated bar to focus more attention on the expanded alcohol and cocktail offerings, Davis said.

The company has also been working on streamlining the extensive Mimi’s menu, borrowing other aspects from Bob Evans. New items include a three-course sirloin steak meal for $9.99 with a $2 shrimp add on, as well as soups to go and a family to-go meal program that includes about 10 meals and serves four to five people for under $25.

In its outlook for fiscal 2013, the company has projected that same-store sales for Mimi’s this year will fall somewhere between a decrease of 2 percent and an increase of 1 percent, supported by a $1 million investment in increased marketing.

Mergers and acquisitions have been heating up in the restaurant space. In addition to the recent Yard House sale, earlier this month, private-equity firm Centerbridge Partners LP completed its $1.1 billion acquisition of P.F. Chang’s China Bistro Inc.

Last month, J. Alexander's Corp. agreed to a merger with American Blue Ribbon Holdings. In addition, Houlihan’s Restaurants Inc. has hired a financial advisor to explore a possible sale. And several chains have filed for an initial public offering, including the respective parents to the Outback Steakhouse, Joe’s Crab Shack and Del Frisco’s Double Eagle Steakhouse chains.

Sarah E. Lockyer contributed to this report.

Contact Lisa Jennings at lisa.jennings@penton.com.
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