Fast-food giant McDonald's Corp. plans to buy the Boston Market restaurants for $173.5 million in cash, and it promises to revitalize the struggling chain even as it expands its own new food-related operations.
The Golden Restaurant Operations Inc. subsidiary of McDonald's will obtain 751 Boston Market restaurants and the franchise rights for an additional 108 restaurants from Boston Chicken Inc., officials of both companies said today.
The sale will not include Boston Chicken's interest in Einstein/Noah Bagel Corp., though it does include some liabilities.
"We're just thrilled to jump-start the concept," McDonald's Chairman Jack Greenberg said, adding that, despite financial difficulties, the chain is now operating in the black.
"They've made a lot of mistakes . . . but there's no question that there's life here," Greenberg said.
Denver-based Boston Chicken sought U.S. Bankruptcy Court protection from its creditors in October 1998 as it attempted to reorganize its finances while continuing to operate.
Greenberg said it's likely that some Boston Market restaurants will be closed or turned into McDonald's outlets or, perhaps more likely, one of Golden Restaurants' other new chains, Chipotle Mexican Grill or Donatos Pizza.
Because Boston Chicken has filed for bankruptcy, McDonald's officials said, they do not have to honor any Boston Market lease if they decide the location is overpriced or undesirable.
"That's a tremendous advantage in terms of the risk we are taking here," Mike Conley, McDonald's chief financial officer, said in a conference call with analysts.
Other fast-food chains offer a combination of products at one site. Tricon Global Restaurants Inc., for example, has begun selling Pizza Hut pizza at its Taco Bell sites. But Greenberg said McDonald's does not plan to employ a similar strategy.
He also said that while this is an effort to diversify, McDonald's restaurants will remain the company's focus.
"I think 99 percent of our efforts still have to be with hamburgers . . . but we also get a brand that already has excellent name recognition," Greenberg said. He said the company plans to add as many as 1,900 McDonald's restaurants worldwide next year.
Between May 1992 and 1996, Boston Chicken grew from 34 locations in the Northeast to 1,143 nationwide before financial problems forced it to begin closing restaurants. Meatloaf and ham were added to the chicken and mashed potatoes on the menu along the way, and the restaurants, originally named Boston Chicken, were rechristened Boston Market in 1995.
The company also invested in the bagel stores.
The sale will be completed as part of Boston Chicken's Chapter 11 reorganization plan, which will be filed this month, officials said. McDonald's expects to complete the acquisition by the middle of next year.
Oak Brook, Ill.-based McDonald's is the world's leading restaurant chain, with more than 25,000 restaurants.
CAPTION: A Boston Market in Chicago, part of the 751-store chain that is being sold.