Crofton Wendy's franchisee to go public to pay down debt

June 19, 1993|By Michael Dresser | Michael Dresser,Staff Writer

DavCo Restaurants Inc., a Crofton-based company that holds exclusive franchise rights for Wendy's fast-food restaurants in the Baltimore-Washington area, plans to go public this summer in a stock offering expected to raise between $31 million and $36.5 million.

Catherine Graham, director of finance, said the primary goal of selling shares was to pay down debt so the company could finance growth internally. The company expects to sell about 2.6 million shares at $12 to $14 a share, she said.

Long-term debt stands at $25.8 million, according to the company's registration statement with the Securities and Exchange Commission. The company had assets of $83.7 million as of March 27.

DavCo, the world's largest franchisee of Wendy's International Inc., is a company with two distinct parts -- a successful chain of 110 restaurants in Baltimore-Washington and a string of 54 financially troubled restaurants in St. Louis. Sales last year at each Baltimore-Washington restaurant averaged $1.1 million,while the St. Louis restaurants averaged only $583,600 each, the company said in its filing.

DavCo sold the St. Louis chain in 1987 but was forced to reacquire it in 1991 to protect itself against defaults on real estate leases for which it remained liable. According to Ms. Graham, the Crofton company was taking steps to restore the St. Louis chain to profitability.

Last year, the company took a writedown of $4.2 million on its Midwestern assets, which reduced 1992 profits to $492,000 on sales of $138.8 million. That compared with income of $1.3 million on sales of $117.5 million in 1991.

Ms. Graham said the company was obligated under its contract with Wendy's to add seven stores in the Baltimore-Washington area each year through 2004. She said DavCo's internal plans call for the addition of about 10 stores a year.

The stock offering would decrease the stake of DavCo's majority stockholder, Citicorp Venture Capital, to about 48 percent from 89 percent, Ms. Graham said.

The next-largest holders are company president Ronald Kirstien and vice president Harvey Rothstein.

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