P.F. Chang's to acquire majority stake in True Food KitchenP.F. Chang's to acquire majority stake in True Food Kitchen

Ron Ruggless

P.F. Chang's China Bistro Inc. said Thursday it had agreed to acquire a majority interest in the four-unit True Food Kitchen concept, converting its 2009 $10 million credit facility into equity.

The deal, expected to be completed in the second quarter of this year, will give P.F. Chang’s a 51-percent majority interest in True Food Kitchen, a health-focused concept first opened in 2008 in Phoenix by Scottsdale, Ariz.-based Fox Restaurant Concepts. P.F. Chang’s retains the option to increase its ownership to 90 percent or more in the future.

True Food Kitchen, which was named an NRN Hot Concept last year, has two units in Arizona and two in California, with an additional two restaurants scheduled to open this year.

Rick Federico, chief executive and chairman of Scottsdale-based P.F. Chang’s, said in a Thursday call with analysts that True Food Kitchen is “aligned with the rising demand for healthier menu options while providing a fun and innovative dining experience. And it provides us with a future growth vehicle where we can employ capital.”

Federico added that unit economics for True Food Kitchen were strong.

“Current average unit volumes are close to $6 million with industry-leading cash margins,” he said. “In fact, they are as good or better than the early performance of [P.F. Chang’s].”

During an investors’ day last November, P.F. Chang’s executives said the four True Food Kitchen restaurants had average unit volumes of $5.9 million, compared with $4.6 million at P.F. Chang’s units. Sales per square foot were $1,120, compared with $660 at P.F. Chang’s, and annual sales per seat were about $25,000, compared with $19,300 at P.F. Chang’s. They also said True Food Kitchen’s cost to build per seat was about $8,200, compared with $14,240 at P.F. Chang’s.

EARLIER: P.F. Chang’s to open new concept

“We will not see any dilution of our management time or attention,” Federico said, adding that all operations and development of True Food would remain with Fox Restaurant Concepts. “Future unit development will be funded through a combination of cash flow at the existing True Food Kitchen restaurants and our cash,” he said.

Sam Fox, founder and chief executive of Fox Restaurant Concepts, created True Food Kitchen with health advocate and author Dr. Andrew Weil and said in a statement that the concept is “well-positioned to capitalize on the current direction of the food industry.”

“We have formed a great relationship with the P.F. Chang’s management team and are extremely pleased by their commitment to continue our partnership,” Fox said.

Fox Restaurant Concepts has 31 restaurants in Arizona, California, Colorado, Kansas and Texas under 12 brands, including Blanco, Bloom, Culinary Dropout, The Greene House, ModernSteak, North, Olive & Ivy, Sauce, Wildflower and Zinburger.

As of Jan. 1, P.F. Chang’s China Bistro had 204 of its namesake casual-dining restaurants and 173 Pei Wei Asian Diners.

Contact Ron Ruggless at [email protected].
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