With much of the sizzle gone from its signature Sizzler steakhouses, Sherman Oaks-based Worldwide Restaurant Concepts Inc. is counting on a San Diego import to boost sales and attract investors to a chain whose stock has been trading below $5 since 1995.
Acquired by Worldwide nearly three years ago, the Pat & Oscar's chain has been expanded from seven units to 19, including two that opened this month in Los Angeles County. Worldwide hopes to increase the number of restaurants by as much as 50% a year for the next several years.
Offering pizza, ribs and chicken, each Pat & Oscar's rings up $3 million a year on average -- double the Sizzler numbers.
"Sizzler is a bit long in the tooth," said David Leibowitz, managing director of Burnham Securities. He added that Sizzler does less well than Pat & Oscar's in attracting repeat diners.
Still, Pat & Oscar's is no panacea for the troubled restaurant chain. Same-store sales at Pat & Oscar's -- a key measure of health -- fell 4.5% in the fiscal third quarter ended Feb. 2. Company executives blamed the drop on the deployment of troops to the Persian Gulf from military bases in San Diego County, where most of the restaurants are located. They also said newer restaurants siphoned customers away from old ones.
Despite the sales drop, the company maintains faith in Pat & Oscar's, which was founded as Oscar's in San Diego in 1991.
"It does $3 million in average volume, which is far more than similar restaurants," said A. Keith Wall, the company's chief financial officer. And because at least half of sales come from catering, takeout and delivery -- far more than Sizzler -- the company can build sites with smaller dining rooms, cutting construction costs.
Wall also noted that pizza and salad are cheaper to serve than "a big slab of beef," lowering food costs.
"The best way to enhance value long term is to grow the Pat & Oscar's brand," said Charles Boppell, Worldwide president and chief executive. "It has great potential."
Overall, Worldwide saw combined net income more than double -- to $836,000, or 3 cents a share, from $373,000, or 1 cent, in the year-ago period, largely fueled by the company's Sizzler and KFC franchised restaurants in Australia. Total revenue rose by 9%, to $89.9 million, up from $82.4 million.
Same-store sales at the 65 domestic Sizzlers owned by the company fell by 3.5%. There are 319 Sizzlers worldwide, including about 250 in the U.S. Most are owned by franchisees.
Sales at company-owned Sizzlers suffered because of the weak economy in Northern California, where many are located, Wall said.
Worldwide shares lost 1 cent on Tuesday, to close at $2.54 in trading on the New York Stock Exchange.
Shares have been depressed since the late 1990s. The company filed for bankruptcy protection in 1996, emerging one year later. In 2000, investors again fled after an E. coli bacteria outbreak at two Wisconsin Sizzlers killed a child and sickened dozens of other diners.
Wall thinks that in a few years, as Pat & Oscar's develops a stronger record, investors will begin to take notice.
"We're beginning to see a fair amount of investor interest in the concept," Wall said. "But we've still got a ways to go."