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Economy taking toll on restaurant franchisees
07:26 AM CST on Wednesday, December 16, 2009
Slammed by sluggish sales and mired in debt, some of the nation's largest restaurant franchisees are likely to seek bankruptcy protection before spring, a restaurant financing expert predicted Tuesday.
But restaurateurs in the Dallas Fort-Worth area seem to be faring better than their counterparts elsewhere, said John Hamburger, whose company publishes Restaurant Finance Monitor.
Hamburger spoke during a "State of the Restaurant Industry" conference call hosted by Janney Montgomery Scott, an investment banking firm.
"A lot of old-line systems are just in a mode of trying to stay alive," he said. "In January [and] February, you'll see a rush of stores closing. January and February tend to be tough months, especially in the Midwest."
Hamburger said he's seen more than 10 "big" restaurant bankruptcies in 2009, including one of the largest franchisees of Coppell-based CiCi's pizza. Other casualties included Tavern on the Green, a landmark restaurant in New York's Central Park, and Max & Erma's, an Ohio-based hamburger and casual dining chain.
"I would expect about the same number in 2010," he said, though he declined to identify restaurant operators he considers most vulnerable.
The Texas economy, which remains healthier than most of the nation, is helping franchisees here stay afloat, Hamburger said.
"I haven't seen that much [difficulty] in Texas, in the D-FW area," he said.
Some restaurant companies "gorged" on debt before the economy headed south, he said. Many are now turning to discounting to boost traffic, which makes it harder for franchisees to cover costs.
"Discounting is going to hurt those with low volume that are highly leveraged," he said. "I think it's killing them. It's very bad."
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