Fast Food’s Godfather Has a New Mission : Eateries: Willy Theisen, who built his reputation on pizza, is out to turn around the struggling Green Burrito chain.

Say “Willy” in Omaha society and just about everyone knows whom you’re talking about.

Willy Theisen was the guy who turned Godfather’s Pizza into a sprawling chain of 900 pizzerias before he turned 40, the man who put Nebraska on the fast-food map. Theisen sold Godfather’s in 1983 and is now running a little Orange County-based chain of Mexican fast-food restaurants called Green Burrito.

Still just “Willy,” he has no official title but controls about 60% of GB Foods’ stock and has--since taking over in November--moved in his own chief operating officer and laid off staff in an effort to trim the expenses of the money-losing operation. He has also adopted an idea of combining Green Burrito restaurants with other kinds of fast-food outlets to offer consumers more choices under one roof.

And investors, who apparently believe Theisen is worth a lot to the chain (which owns 11 restaurants and franchises some 53 others), have bid up the stock from about $3 a share in August to the high-rent neighborhood of $14.50.

But don’t call your broker yet: At $14.50 a share, stock analysts say, GB Foods may be a little steep for a company that isn’t even profitable.

At that price, Green Burrito has a market value of a little more than $100 million. By contrast, the Carl’s Jr. hamburger chain--with 380 company-owned restaurants--has a market value of just $150 million.

Sure, Willy Theisen had a pretty good track record with Godfather’s. After all, knocking together what was then the nation’s third-largest pizza chain in just 10 years is no mean feat.

But when Theisen sold Godfather’s at a $128-million profit, the chain was in trouble: Sales per store were flat; Pizza Hut was crushing it in some cities; the corporation had grown so fast that it often wasn’t managed efficiently, and lighter lunches were just getting to be all the rage, while Godfather’s mainstay was a hefty pizza loaded down with toppings.

“Theisen saw there were problems coming, and that’s what motivated the sale,” said Godfather’s former executive vice president, Richard P. Jeffries, now an Omaha lawyer. “I thought he was crazy to sell Godfather’s. But 12 months after the sale, I was glad it was theirs.

“Willy had a masterful sense of timing.”

Theisen certainly has a more impressive track record than Green Burrito’s management.

Since it went public in 1990, Green Burrito has had a history of not making good on its promises. Two years after raising $3 million in its initial public offering, the company has yet to deliver on a statement that $2 million would be used to increase the nine company-owned outlets to 19. Green Burrito has had five losing quarters in a row.

But hope springs eternal: Twice last year, it gave investors the impression it was going to turn a quarterly profit--only to lose money both times.

Theisen’s coming aboard was applauded by shareholders. Since selling Godfather’s, he has dabbled in investments in real estate and banking and operates a farm for English jumping horses called Jubilee Farms.

Clearly, Green Burrito wanted some of his cash badly, and structured a deal of stock and warrant purchases that gave him ownership of 40%. His initial million shares, bought at $3 each, are now worth about $11 million more than his purchase price.

Theisen bargained hard for his investment. He demanded--and the three top executives agreed--that they turn over complete control of their 20% or so of Green Burrito’s stock to him for the next five years, for 60% control.

The Green Burrito restaurants have two things going for them: They serve very big--if somewhat bland--portions, and they sell them at relatively small prices. “Restaurant food at fast-food prices,” one analyst calls it.

The “Big Ed” burrito, for instance, is a two-pound mix of beef, carnitas, refried beans, rice, lettuce, tomato, guacamole and cheese wrapped in two big tortillas. It goes for about four bucks. As a promotion, the company once made a $1,000 bet with a petite customer who knocked off three in a row that she couldn’t do it again. She did.

On the other hand, Southern California is saturated with fast-food restaurants: Getting a good street corner to yourself is becoming harder and harder. Green Burrito has made do mostly with small restaurants tucked away in strip malls or on less busy streets. This makes it tougher to drum up customers but--theoretically, at least--cheaper to operate.

So far, though, Green Burrito, which had $8.5 million in sales in 1991, hasn’t been able to run its restaurants very cheaply: Operating income was just 1.6% of sales for the first nine months of 1992. And that was an improvement over the year before, when it was 0.6%. Between 10% and 20%, say stock analysts, is what bigger, more efficient fast-food chains do.

By the time Theisen found it last year--he says he was looking for a Mexican fast-food chain to buy--Green Burrito was in deep trouble.

Just recently, Gary A. McArthur--one of Green Burrito’s founders and biggest shareholders--resigned as president and from the company’s board, saying he was “burned out.” Of Theisen’s cost-cutting moves so far, Chairman Ruben A. Rodriguez says, “He’s finally getting this place under control.” Theisen says Rodriguez will stay on.

But just cutting costs isn’t going to do it for a company that’s been bleeding money.

Theisen said he plans to follow the path of Sherman Oaks-based KFF Management Inc., which owns 60 Arby’s roast beef fast-food restaurants. Trying to figure out how to resuscitate its worst-performing locations, KFF President William Brusslan last year got an idea from the food courts you see in malls everywhere. He decided to purchase a Green Burrito franchise and combine it with one of his anemic Arby’s in Long Beach.

This new combination store, Brusslan says, has doubled sales since it opened in August, all the new business being Green Burrito’s. Best of all, it didn’t cost a lot: The store hasn’t been expanded a single square foot.

Theisen figures he can put a Green Burrito franchise in some of the several thousand Arby’s that are already built, or in lackluster pizza parlors. Or even under-performing hamburger joints like the Anaheim-based Carl’s Jr. chain where, Theisen says, he’s also talking to franchisees. It costs Green Burrito a lot less than opening its own restaurants, and, as the franchiser, it would get as much as 5%--its standard royalty--of the Mexican food sales.

So far, though, the response hasn’t exactly been overwhelming.

KFF, owned by the Japanese company Kyotaru International--operator of the biggest takeout sushi chain in Japan, says it will convert at least five more Arby’s to combos. And a small Seattle chain, Pietro’s Pizza, says it will test one.

Miami-based Arby’s--which would have to give permission to franchisees to convert any more of their 2,300 stores--says it plans to continue kicking around the idea for a few months. The big question is will a fast-food Mexican/roast beef restaurant work elsewhere, “or is this just a Southern California phenomenon?” says Gaylon Smith, Arby’s senior vice president of franchising in Miami. “We don’t know yet.”

Can Theisen work that old fast-food magic again? Will Green Burrito be the wave of the future or another Flakey Jake’s, a chain of hamburger joints for which Theisen sat on the board a while, and which existed all of three years before filing for bankruptcy in 1986?

“I was a kid” in the Godfather’s days, says Theisen, now 47. “I didn’t know anything.

“I’ve matured, I’ve had a rest. I’ve got the desire, the experience, the cash and the contacts to make it work.”

Says Steven M. Bernard, a stock analyst at St. Louis brokerage Pauli & Co.: On one hand, “Theisen adds a lot of credibility to the company”; on the other, this is “definitely not a stock for widows and orphans.”

Times librarian Sheila A. Kern and researcher Dallas M. Jackson contributed to this report.

Story of the Green Burrito

GB Foods began as a private company in 1987. It went public Aug. 21, 1990, by selling 1.3 million shares, netting proceeds of $3.5 million. The big story began this summer when it went from trading in the $2-a-share range to more than six times that amount last week.

Reveue (in millions) 1987: $0.9 1992 (figures through Sept. 30): $8.7

Revenue profile of 1992 1st qtr: $2.4 3rd qtr: $3.3

Profit and Losses (in thousands) 1987: -$25.0 1990: -$233.0 1992 (figures through Sept. 30): -$587.8

Loss profile of 1992 1st qtr: -$246.9 3rd qtr: -$98.9

Stocks Climb

The company’s stock rose 530% from its all-time low in late July, to its all-time high of $25 on Monday.

Closing price July 3: $2.81 Jan. 22: $14.50

Sources: GB Foods Inc., Dow Jones News Retrieval; Researched by DALLAS M. JACKSON and SHEILA A. KERN / Los Angeles Times