Restaurant Chain Says It’s in Violation of Loan Agreements : Victoria Station Posts More Losses
Derailed from its successes of two decades ago, Victoria Station, the railroad-themed restaurant chain, said Thursday that, because of deepening losses and mass closures of its restaurants, it is in violation of its bank loan agreements.
The action by the Larkspur, Calif.-based chain that never abandoned its steak-and-potatoes menu was announced as the company reported losses of $19.1 million for the third quarter ended Jan. 5. That compares to losses of $1.3 million for the year-ago period.
The latest quarterly loss includes a $17.6-million charge for the closing of an unspecified number of its restaurants.
Company executives did not return phone calls from The Times, and the company’s statement did not indicate how many more restaurants it plans to close. As of May, 1985, the end of its most recent fiscal year, Victoria Station operated 91 restaurants.
In the latest quarter, revenue dropped 21% to $22.3 million from $28.3 million during the year-earlier period. For the nine months, Victoria suffered losses of $24.3 million, compared to losses of $3.7 million a year earlier. Revenue fell 16.6% to $62.9 million from $75.4 million.
The company said it plans to “significantly contract the size of its operations,” leaving just the “most viable restaurants,” which generated an operating profit of $3.3 million in the latest nine months. Victoria Station is attempting to restructure itself as an “upscale” hamburger chain.
The restructuring has placed it in violation of loan agreements with its banks, but details of those violations were not made public.
In March, 1985, Woodside Co., a British Virgin Islands company, agreed to provide $5 million in new financing to Victoria Station. But the pact was contingent on Victoria Station’s refinancing of its $10.5-million sale/lease-back debt with two banks and restructuring of its $22-million debt with seven lenders.
But Victoria Station’s problems have continued to mount. During the third quarter, the company closed 29 units, four of which were converted into 1950s-style gourmet hamburger operations called Bonkers.
Industry analysts generally remain skeptical that Victoria Station will be able to turn itself around. Twenty years ago, Victoria Station was among the first restaurant chains to place as much emphasis on atmosphere as entrees. But its boxcar design--and menu laden with meat dishes--have generally fallen from public favor as consumers now want lighter meals and brighter settings.
“It had its day,” said Edward B. Keaney, analyst at Burns, Pauli & Co., a St. Louis-based brokerage house. “That day went away with miniskirts.”
Victoria Station’s executives, however, hope that the latest gourmet hamburger restaurants can succeed where Victoria Stations failed. But analysts point to the shrinking markets that upscale hamburger chains such as Flakey Jake’s and Fuddruckers Inc. are seeing.
Consumers today are more interested in ethnic foods and lighter meals, said Dennis Forst, analyst at Seidler Amdec Securities in Los Angeles. “The market goes in long-term cycles,” he said. It could be another 20 years, he said, before the concept of heavy meals and dark atmospheres are popular again.
