The owner of the Fuddruckers hamburger restaurant chain has taken control of its Washington-area franchisee in a transaction that likely will revive the chain's ambitious local expansion plans.
As part of the refinancing and restructuring of Atlantic Restaurant Ventures Inc., the local franchiser will sell another of its operations, Washington's homegrown Little Tavern Shops hamburger chain, to one of Atlantic Restaurant Ventures' founders, Roger Kisiel.
The moves provide a shot in the arm for Atlantic Restaurant, which had planned to open several Fuddruckers restaurants in the area but stalled after six because of problems raising money for the expansion.
After repeated delays, the company plans to open an outlet on Rockville Pike in a few days and another in Herndon next month, but executives said the new ownership arrangement would enable Atlantic Restaurant Ventures to open two or three more Fuddruckers a year.
Although it has had problems brought on by overexpansion and the collapse of the economy in its home base of Texas, Fuddruckers has been one of the hottest and most imitated restaurant concepts of the past few years. It offers gourmet burgers in a casual setting in which boxes of ketchup, beer and other supplies are stacked around the restaurant, meat is freshly ground and buns are baked on the premises.
In the transaction announced yesterday, Daka International Inc., the Wakefield, Mass.-based food service company that operates the 122-restaurant Fuddruckers franchise, paid $820,000 for 2 million shares of Atlantic Restaurant Ventures, a roughly one-third stake in the Clinton-based company. It also received voting rights to shares held by two major stockholders, Kisiel and Joseph R. O'Brien, who will replace Kisiel as the firm's president. Altogether, that gives Daka control of more than 50 percent of the company's stock.
Daka also will assume several administrative functions for the company, including accounting, marketing and construction administration, and Atlantic Restaurant's headquarters will be moved to Rockville from Clinton. The company had about 500 employees prior to the transaction.
Meanwhile, Kisiel will pay Atlantic Restaurant Ventures $1.6 million for the 19-location Little Tavern chain and two Fuddruckers owned by Atlantic Restaurant Ventures in Richmond and Virginia Beach.
O'Brien said the moves would provide Atlantic Restaurant Ventures with a much-needed capital infusion while reducing costs.
The removal of Little Tavern, which needed capital investment for repositioning from its greasy-spatula past to a more streamlined 1990s image, also will reduce the financial demands on the company, O'Brien said.
The transactions are expected to reduce Atlantic Restaurant Ventures's debt and current liabilities by $1.5 million while increasing working capital by $1 million. O'Brien said he expected the moves to bolster the value of the company's stock, which trades thinly over the counter and had a recent price of 37 1/2 cents a share. Daka paid 41 cents a share for its stake.