Coco’s, Carrows Up for Sale as Firm Cuts Staff

Advantica Restaurant Group Inc. said Thursday that it is putting its Irvine-based Coco’s and Carrows chains up for sale so that it can focus on its more profitable Denny’s restaurants.

Advantica on Thursday also reported deep losses for the fourth quarter and the year, and said it is laying off 90 employees--about 20% of its work force--at its headquarters in Spartanburg, S.C.

Advantica bought Coco’s and Carrows in 1996 for $306 million. But the two chains, with a total of about 630 company-owned and franchised restaurants, many in California, have dragged down the company’s overall financial results.

The company did not identify potential buyers or discuss a sale price, but restaurant industry experts predicted that the unprofitable chains will be a tough sell and that Advantica would likely have trouble recouping its initial investment.

“My sense is that it may be worth less than they paid for it simply because they haven’t been able to add value to it,” Irvine restaurant consultant Randall Hiatt said.

The move to sell Coco’s and Carrows reflects Advantica’s shift in strategy to concentrate on its more than 1,700 Denny’s diners, the nation’s largest chain of full-service restaurants.

Advantica, which recently sold the El Pollo Loco fast-food chain for $114 million, plans to change its name to Denny’s.

The Coco’s and Carrows chains have been money-losers for some time. In fourth-quarter earnings released Thursday, Coco’s said its same-store sales dropped by 6.5%. Coco’s quarterly revenue fell 11% to $57.1 million. Carrows had a 2.9% decline in same-store sales and its revenue declined by 11% to $40.4 million. By comparison, Denny’s experienced a slight increase of same-store sales, although its fourth-quarter revenue was down 3%, to $289.6 million.

Advantica reported a fourth-quarter loss of $233.8 million, much of that related to remaking some of its restaurants and costs connected to a company reorganization in 1998, the company said. That compared with a loss of $48.5 million in the fourth quarter of 1998.

Advantica’s stock rose 6 cents to close Thursday at $1.69 per share in Nasdaq trading.