Perkins & Marie Callender’s reportedly weighing bankruptcy

The company is trying to find a buyer, demonstrating the challenges legacy family dining chains are having in the current market, says RB’s The Bottom Line.
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the bottom line

The parent company of Perkins & Marie Callender’s is for sale and might have to file for bankruptcy protection to get it done.

That, at least, is according to a report today in Debtwire, which said that the company is considering options for a sale, including an auction that would be done through a bankruptcy filing.

Sources have confirmed to Restaurant Business that the company has been on the market for some time, but concerns about the chains’ lack of growth have kept buyers from taking a run. A bankruptcy filing would enable the company to remove debt from the books and close more unprofitable locations.

Vivian Brooks, a spokeswoman for Perkins and Marie Callender’s, confirmed in an email late on Friday that the company is for sale and that a bankruptcy filing is possible as part of the process. But she noted that Perkins’ same-store sales to date is up 5.1%, with 3.9% traffic, while Marie Callender’s same-store sales are up 6.9% with traffic up 5.4%.

“We are aware and proud of the fact that these results are at the top of industry metrics,” Brooks said.

Nevertheless, selling a legacy family-dining chain in today’s market is easier said than done and speaks to the challenges of the current market for mergers and acquisitions: There just isn’t a market for many companies, certainly at the price many sellers hope to receive.

It also reveals the odd bifurcation in the family-dining market: While breakfast is popular and the sector has enjoyed a renaissance of late, there is still a generation of legacy concepts that struggle to maintain consumer and investor enthusiasm.

This would be the second go-round in bankruptcy court for the Memphis, Tenn.-based company, if it does go that route.

Perkins & Marie Callender’s filed for credit protection in 2011, emerging later that year with reduced debt under the ownership of a group of investment funds led by Wayzata Investment Partners.

The company closed dozens of locations during that process, emerging with nearly 600 locations in the two brands, including 474 company-owned and franchised Perkins restaurants and 122 company-owned and franchised Marie Callender’s.

Both have seen steady declines in the years since, based mostly on closing units.

Perkins’ U.S. system sales increased in 2015, when the chain’s sales peaked at $644 million, but have declined each of the past three years, including 3.7% last year, according to data from Restaurant Business sister company Technomic.

U.S. unit count has declined steadily, from 391 in 2014 to 355 last year, according to Technomic. The company says it operates 400 restaurants in the U.S. and Canada.

Marie Callender’s decline has been even more precipitous. System sales fell 8% last year, and unit count declined by 10.5%. The chain now operates 51 locations in the U.S., a decline from 75 in 2013.

That sort of decline makes it difficult to find buyers. The Debtwire report suggested the lack of growth is hurting the sale process—an issue that affected the sale of other chains, notably fast-food concept Jack in the Box.

Legacy family-dining chains face broadscale challenges. Consumers are less likely to dine out at concepts with waitstaff, shifting their dining visits to convenience-oriented fare.

Breakfast is highly popular, however, and family-dining sales actually fared well last year, up 2.2% for the sector as a whole, according to Technomic. But much of that has been concentrated among either larger national chains with big budgets, such as IHOP and Denny’s, or aggressive upstarts.

California family-dining chain Black Bear Diner has been growing, as have a generation of breakfast-and-lunch chains led by First Watch, which grew 32% last year, and Snooze, an A.M. Eatery, up 29%, according to Technomic.

Legacy concepts have not been fully able to cash in on this popularity, and many are closing locations: The typical family-dining chain saw unit count fall by 1.4% last year, based on an analysis of Technomic data.

Friendly’s, for instance, has closed a quarter of its locations since 2017, including 23 in April. California chains Coco’s and Carrows were quietly sold last year after multiple owners could not turn them around.

Larger chains such as Bob Evans (system sales down 6.7% last year), Bakers Square (down 4.2%) and Shoney’s (down 5.7%) have also struggled.

Interestingly, many of these companies have become more valuable in the retail section than they have in the restaurant business.

In 2017, for instance, Bob Evans Farms sold off its namesake restaurant chain to Golden Gate Capital, opting to focus on its more valuable retail consumer product business.

In 2016, Friendly’s sold its popular ice cream business to Dean’s Foods.

Conagra Foods bought the trademarks for Marie Callender’s back in 2011.

UPDATE: This story has been updated to include comment from Perkins & Marie Callender’s.

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