Restaurant Chain- Interim Management
The Situation
Our client was a well known Japanese fusion style restaurant chain. A weakened economy exposed the chain as more of a collection of restaurants rather than an integrated corporate restaurant chain. Company profits started to erode with the economic downturn. Comparable restaurant sales declined by 8 and 6 percent in FY 2009 and FY 2010, respectively. Net losses totaled $14M – $5.1M in FY2009 and $8.9M in FY 2010. Adjusted EBITDA declined 22% from $35.3M in FY 2009 to $27.7M in FY 2010. The company reached its lowest stock price of $3.08 with a market capitalization of $51M. The chain’s image was declining and the value proposition was damaged by higher prices and lower quality product offerings. Management had lost focus and a new CEO was hired.
Role(s)
- CFO
The Work
We were initially engaged to validate the principles of a “renewal program” launched by the recently hired CEO to improve the guest experience and financial results. We were then named as interim CFO where we helped implement the renewal program. We participated in a review of strategic alternatives for the Board of Directors including a sale process. After conducting a robust process, the sale process was terminated in May 2011 and we commenced a search for a permanent CFO which was completed in August 2011.
The Results
- Six consecutive fiscal quarters with comparable store sales increases
- Net income in FY 2011 was $1.3M versus a loss of $8.9M in FY 2010
- Adjusted EBITDA increased by 22% (from $27.7M in FY 2010 to $33.8M in FY 2011)
- Stock price improved to $10.50 per share in July 2011, with a market capitalization of $175M, an increase of $124M from the beginning of engagement
- On the balance sheet, senior secured debt ($35.2M as of November 2009) was completely paid off solely through operating cash flow and the company was able to place a $30M senior secured line of credit under favorable terms
- Permanent CFO recruited and placed