Associated Hosts to Take Loss, Shut 17 of Its Restaurants
Associated Hosts Inc. of Beverly Hills announced Wednesday that it is closing 17 unprofitable restaurants in 10 states, for a $7.5-million pretax loss, and will report a third-quarter net loss of $3.5 million to $4 million.
The 17 restaurants, some of which are already closed, were losing a total of $2 million a year before taxes, or about $1.1 million after taxes, the company said. One of the 17 restaurants is in California: the Smuggler’s Inn in Fresno.
Associated Hosts also owns the Beverly Hillcrest Hotel in Beverly Hills, manages two Los Angeles hotels and operates 57 other restaurants in 23 states. The publicly held company said in a statement that it would concentrate on expanding its casual restaurants known as the Bombay Bicycle Club and Julie’s Place.
Caused Undue Burden
Joseph Bulasky, Associated’s chairman, said in a statement that “the company is taking this action because these restaurants, which are generally in locations now considered poor, have placed and would have continued to place an undue burden on our other restaurants.
“Equally important, a disproportionate amount of management’s attention and efforts have been devoted to these unprofitable units. We feel that our efforts should be centered on building on the strengths of our profitable units and on developing new features for our restaurants,” he said.
“With our solid financial base, we expect to enhance the operations of our already profitable stores and acquire new locations,” Bulasky added.
Associated also announced that it was retaining Montgomery Securities of San Francisco to help assess any offers to purchase Associated. Associated hired Montgomery Securities last year after the restaurant company received some offers, said Craig Long, a company spokesman.
In the first half of the year, Associated Hosts reported a drop in sales and earnings. For the six months ended March 27, the company reported sales of $42.3 million and net income of $481,000, or 11 cents a share.
Figures for the same period in 1985 were $45.4 million in sales and $1.4 million in net income, or 32 cents per share.
The $7.5-million pretax charge for the third quarter will amount to about $4 million after taxes and will be reflected in a loss of $3.5 million to $4 million for the quarter that ended June 26, Long said.
Long said Associated Hosts may sell some of the closed restaurants or sublet the property. The restaurants operate under a variety of names and formats, including steak houses, he said.
