Frisch's Restaurants Inc. (FRS) finally completed the divesture of all its Golden Corral operations in Ohio, Indiana, Kentucky, West Virginia and Pennsylvania. In March this year, the company inked an asset purchase agreement with NRD Holdings LLC for the sale of 29 Golden Corral restaurants. With this sale, Frisch's added to its kitty $49.8 million, prior to adjustments for the proration of real estate and personal property taxes, total inventory amounts, and other closing adjustments.
Frisch's Restaurants expects to incur a net loss on the transaction despite recording pre-tax earnings in the upcoming fourth quarter of fiscal year 2012. For full-fiscal 2012, Frisch's Restaurants expects to report a profit. The company will now strategically evaluate possible uses of the proceeds from sale.
The company will now only operate the segment Big Boy, a full service chain of family-style restaurants. The company currently operates 95 company-owned and 25 franchised Big Boy restaurants. All Big Boy restaurants are spread across Ohio, Kentucky and Indiana.
Toward the end of last year, Frisch's had engaged an investment banking firm specializing in the restaurant industry to assess the strategic alternatives related to its Golden Corral business segment and optimize the company's assets in that brand so as to bolster shareholder value. The latest deal was the outcome of that engagement.
Last year in August, Frisch’s had shut down six underperforming Golden Corral restaurants. The company is believed to concentrate only on the brand Big Boy, which is much larger brand than Golden Corral.
We believe that Golden Corrals will be handled well by its new owner. NRD Holdings has a proven track record of operating a variety of high-end restaurant brands including Popeyes, Checkers/Rally's and Domino's.
Frisch’s is not the only restaurant to streamline itself. One of its competitors Yum! Brands Inc. (YUM) also divested its sluggish Long John Silver’s and A&W brands to concentrate more on its star performers like KFC, Pizza Hut and Taco Bell. There is also Wendy’s Co. (WEN), which dropped Arby’s from its name so that it can concentrate on its better performing Wendy's hamburger chain.Read the Full Research Report on YUM
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