In an effort to turn a liability into an asset, officials of Butterfield Savings & Loan Assn. said Tuesday that a new president and chief operating officer has been named to head Love’s Enterprises Inc., the restaurant subsidiary that contributed to Butterfield’s collapse last month.
The appointment of Ronald C. Mesker to head Love’s reunites the barbecue chain with the man who rescued it a decade ago. It also marks one of the first visible moves that Butterfield’s new directors have taken to beef up the Santa Ana company’s management.
Butterfield S&L;, seized by federal regulators Aug. 7, was reconstituted as a federal mutual association under the direction of a government-appointed board of directors.
Long before the Federal Home Loan Bank Board declared Butterfield insolvent, however, Board Chairman Edwin Gray complained that the S&L; had wandered far from its field of expertise by purchasing the Love’s chain and a large Wendy’s hamburger restaurant franchise territory.
Altogether, the two restaurant operations lost about $6 million in the 32 months they were owned by Butterfield.
The Wendy’s operation had returned to profitability by the time Butterfield was seized, but the Love’s chain continued to drag down the S&L;'s capital.
Besides being a money loser, Love’s faces an uprising from a group of franchise holders who are refusing to pay royalty fees to the S&L.; The franchise operators claim that Butterfield has not provided them with contracted services.
Hopes to Revive Chain
To solve these problems, Gerald McQuarrie, Butterfield’s new president and chief executive officer, has turned to Mesker.
The 49-year-old restaurateur who engineered a financial turnaround for Love’s Enterprises Inc. a decade ago when he was executive vice president and chief operating officer of the company said he has returned in the hope of again reviving the 30-restaurant chain.
Mesker, who assumed his new postion Sept. 1, said he wants to “rebuild a winning (management) team,” refocus the company’s marketing and advertising efforts and improve the company’s relations with its franchises.
He said he plans to launch a more detailed business strategy for the restaurant chain within the next 90 days.
Mesker replaces James Lynch, who left the company Aug. 22. Lynch in turn succeeded Raymond Johnston, who was fired last May and who has filed a wrongful termination suit against Butterfield Equities Corp., which was the holding company for Butterfield S&L; until the Aug. 7 federal takeover.
Mesker, who has been a restaurant industry consultant for the last five years, had worked for Love’s when the restaurant chain was a division of the International House of Pancakes. Butterfield acquired Love’s from North Hollywood-based IHOP Corp. in September of 1983.
Turned a Profit
Mesker recalled Tuesday that during his first stint with Love’s, from 1973 to 1979, it turned around “from a substantially nonprofitable to a substantially profitable company.” In that time, the chain averaged annual sales volume increases of 18%.
Part of the 1970s sales boom was attributed to a radio and television advertising campaign that introduced the slogan, “When you’re in Love’s, the whole world’s delicious.” In recognition of the chain’s success, Mesker received the American Marketing Assn.'s Marketing Success of the Year Award in 1978.
Mesker would not disclose Love’s Enterprises’ financial figures but said that since 1979, average annual sales per outlet have fallen from $750,000 to $600,000--despite inflation. He said he believes that the restaurant chain’s concept and menu offerings are basically sound and that the chain’s problems stem primarily from poor management.
Mesker said one of his priorities will be to improve the company’s relationship with its franchises. As a first step, he said, he has rehired as franchise field consultants three men who were part of his operations management team in the ‘70s. The three, he said, are Steve Ousdahl, Bill Patton and Jim Camp.
“They are people familiar with the operators (of the restaurants) and familiar with the system at a point in time when we were very successful,” Mesker said.