Restaurant Holding Company

Restaurant Holding Company

Roles
Financial Advisor
  • Retained key employees  during bankruptcy 
  • Lender increased DIP-loan funding 
  • All banners were sold and remained open

The restaurant holding company of three banners with 86 locations sought brand revitalization after efforts by management were unable to offset the lingering negative impact of former executives’ harmful actions. Guest count, revenue, and cash flow declined; over 20 locations had negative four-wall EBITDA in the trailing 12 months; accounts payable were stretched thin and the vendor base became increasingly restive. CR3 professionals were engaged to model the projected profitability of each location. The team managed the bankruptcy process, controlled cash flow, stabilized operations, and provided due-diligence support to investment bankers, who brought multiple interested parties to the table. All three banners were sold to financial buyers with nearly all locations remaining open post-transaction.

The Situation

  • Restaurant holding company of three banners with 86 locations in the Northeastern U.S.
  • Management made significant efforts to revitalize brands with updated menu options, improved food quality and increased capital investment in selected locations
  • Efforts did not offset the lingering negative impact of the previous management team’s underinvestment in business and, in the case of two former executives, criminal activity
  • Guest count, revenue, and cash flow declined; over 20 locations had negative four-wall EBITDA in the trailing 12 months; accounts payable were stretched thin and the vendor base became increasingly restive
  • Investment banker was hired to sell the three banners to separate purchasers, but absent a bankruptcy filing, most potential buyers decided not to take the risk of investing additional capital into the company

The Work

  • Engaged by company to model the projected profitability of each location
  • Managed cash-flow, which became increasingly challenging as vendors negotiated shorter payment terms and inventory was at risk
  • As bankruptcy quickly became best option, the engagement team prepared for filing and negotiated a DIP loan with company’s senior lender
  • Closed 37 stores immediately before the bankruptcy filing and debtor preserved the right to sell the liquor licenses from the closed stores to generate distributions for constituents
  • Managed the bankruptcy process, controlled cash flow, stabilized operations, and provided due-diligence support to investment bankers, who brought multiple interested parties to the table

The Results

  • Key employees remained with company during bankruptcy and critical vendors continued shipping on time and in full
  • Senior lender increased DIP-loan funding to fund negative cash flow while assets were being marketed
  • All three banners were sold to financial buyers with nearly all locations remaining open post-transaction
  • Gained additional asset recoveries for constituents by selling multiple liquor licenses from closed stores in New Jersey, Pennsylvania, and Massachusetts
  • Negotiated restitutions to the estate from two members of the previous management team

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