Restaurant Enterprises to Receive at Least $200 Million : Irvine Firm to Sell 107 of Its 680 Restaurants

An Irvine-based restaurant firm has agreed to sell 107 of its 680 restaurants to the Riese Organization, a private New York-based company, for between $200 million and $250 million in cash, the companies said this week.

Restaurant Enterprises Group is selling several of its chains, including Houlihan’s, Charley’s Place, Darryl’s and Bristol Bar & Grill. The sale also includes the Buena Vista Cafe in San Francisco.

The restaurants, which composed a division called Gilbert/Robinson, are located in 25 states, including California, and are expected to have total sales of $265 million this year. Present management of the restaurant chains, based in Kansas City, Mo., will remain in place under the agreement.

The restaurants are being purchased by Murray and Irving Riese, New York real estate developers and restaurateurs who started in the dining business as dishwashers in 1936. Today, the brothers own franchises of 25 national chains--including Roy Rogers, Kentucky Fried Chicken, Pizza Hut and Arby’s--as well as 60 other independent operations.

Riese Organization also owns 12 Houlihan’s franchises on the East Coast.

The purchase is part of a massive plan by Riese to expand the company’s empire from more than 600 restaurants to perhaps 1,000 over the next five years, Murray Riese said Tuesday.

For Restaurant Enterprises, the sale will provide capital needed “to reinvest in our restaurant business,” said M. Michael Casey, the company’s executive vice president and chief financial officer.

Restaurant Enterprises was created in late 1986 when W.R. Grace & Co. sold 53% of its 690-unit restaurant division to a management-led group for about $537 million. Grace has retained warrants that allow it to repurchase up to 47% of the restaurant group.

At the time, Restaurant Enterprises took on $775 million in debt, which included existing restaurant division debt.

In exchange, it purchased the restaurants now being sold to the Riese Organization as well as El Torito, Charley Brown’s, Coco’s, Carrows, Reuben’s, Baxter’s and the Gladstone’s 4 Fish restaurant chains. Restaurant Enterprises will retain those chains, as well as the Casa Maria, La Fiesta and RJ’s the Rib Joint restaurants, plus some specialty restaurants, including Las Brisas and Chanteclair.

With the leveraged buyout, “we had intended to keep all of our (restaurants) and run them for the foreseeable future,” Casey said Tuesday. While he said the restaurants--particularly El Torito, Coco’s, Carrows and Houlihan’s--have been successful overall and are performing “as expected . . . we just haven’t had the capital available for expansion.”

In July, the firm was ranked 12th in sales among the nation’s restaurant companies by Restaurants & Institutions, a trade publication. According to Casey, it is--and will remain--the nation’s second largest full-service restaurant company without diversified interests.