Case Studies

Restructuring of Casual Dining Franchisee

J.S. Held Acquires Shechter & Everett to Expand Forensic Accounting Capabilities for Family Law Disputes in Florida

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The Situation

Casual dining restaurant franchisee. $191 million in sales. $20 million debt. 73 locations in seven states (IL, FL, MI, IN, MN, WI, and OH).

  • The brand is struggling to find an appropriate strategy or vision.
  • Poor performance was heavily driven by the Restaurant’s reliance on $10 Endless Appetizers promotion (approximately $18 million adverse hit to EBITDA).
  • The Company’s customer traffic and net sales are declining by 5.0% or more year-over-year.
  • The Company's sales decreased by at least 2.3% for 9 straight quarters (with an 8.7% decrease in the last quarter).
  • Certain operating restaurants are so unprofitable that there is no reasonable expectation of a financial turnaround (these 11 restaurants lost $3.3 million of EBITDA over the last twelve months).
  • Twelve restaurants that have excessive rent expense as a percent of net sales should be renegotiated.
  • The Company’s relationship with the Restaurant’s leadership makes franchisor negotiations challenging.
  • Recently, it lost its CFO, and the organization is generally lacking in financial analytics.
  • The Company will start to run tight on the bank’s financial covenants in the next quarter.

How We Advised

Our experts served as the restructuring advisors.

  • Closed 11 significant money-losing restaurants.
  • Renegotiated lease rates at 12 restaurants.
  • Upgraded the CFO position.
  • Investigated restaurants that are outliers for targeted performance improvement.
  • Lobbied the restaurant’s brand to develop a realistic brand vision and strategy.
  • Our team’s solutions to close restaurants and renegotiate select leases will improve EBITDA by $3.4 million in the next fiscal year, which improves valuation by $14 million at a 4 times EBITDA multiple.

Key Contact

Dan F. Dooley, CTP 
Senior Managing Director 
Strategic Advisory Practice 
+1 603 660 8952 
[email protected] 

Related Practice Areas

> Turnaround and Restructuring Services 
Navigating the many challenges confronting a company in transition requires an operationally focused approach that looks beyond the balance sheet to minimize further degradation and build a path to sustainable growth. Drawing upon decades of experience in the turnaround space, we help companies in transition identify practical strategies to improve profitability and liquidity for immediate relief, while concurrently developing and executing a comprehensive turnaround plan for long-term, sustainable value creation. 

 

> Office of the CFO & Corporate Finance Support 
The financial function is a critical partner in value creation in most businesses. We provide unparalleled support to the Office of the CFO to shape organizational strategy and enhance long-term business value. As CFOs and finance leadership across sectors face increasing demands, understaffing, and unprecedented challenges, we deliver guidance regarding financial planning and operations improvement, risk mitigation, and strategic business intelligence. 

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