Parent company of Fuddruckers, Koo Koo Roo files for Chapter 11 and plans to sell assets
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Magic Brands LLC, the parent company of the burger restaurant brand Fuddruckers Inc., filed for Chapter 11 bankruptcy protection and said it has agreed to sell most of its assets to a private-equity firm for $40 million.
Magic Brands, which also owns the Koo Koo Roo chicken restaurant chain, also said it expected to close 24 of its Fuddruckers locations by month’s end – including one location in Thousand Oaks and another in Lake Forest.
Yet the Austin, Texas-based company said that the vast majority of its 200-plus Fuddruckers restaurants – including 135 that are owned by franchisees – will remain open. (After the closures, there will be 21 Fuddruckers sites and 13 Koo Koo Roo locations open in California.)
The sale to private-investment firm Tavistock Group will let Fuddruckers restructure its finances, remodel its restaurants and unload “burdensome” real estate leases, Magic Brands chief executive Peter Large said in a statement.
The deal comes as the economy shows signs of improvement and corporate takeover financing becomes more accessible. At the same time, sales at casual dining chains, which had slumped as recession-wary Americans cut back on restaurant dining, are no longer sinking as precipitously and in some cases are even beginning to grow. That, in turn, has some investors seeing restaurant chains a potential good buy.
“As demonstrated by the level of interest from potential bidders over the past several weeks, Fuddruckers is a strong brand with a national reputation for quality gourmet burgers in a family-friendly environment,” Large said in a statement.
Magic Brands said it had between $1 million and $10 million in assets, and $10 million to $50 million in liabilities, according to its filing with the U.S. bankruptcy court in Wilmington, Del.
The sale to Tavistock, which requires court approval, is expected to be completed in the next 90 days, according to a statement from Magic Brands.
-- P.J. Huffstutter