Shoney's ousts pair, narrows focus

January 17, 1995|By Bloomberg Business News

NASHVILLE, Tenn. -- Shoney's Inc., struggling amid intense restaurant competition and management turmoil, is replacing its top executives and selling off peripheral operations to focus on its namesake chain.

The presidents of both Shoney's Inc. and its Shoney's restaurants unit resigned yesterday, and the company has launched a search for a new Shoney's Inc. chief executive. Taylor Henry, Shoney's Inc.'s present chairman and chief executive, said he would resign at the end of the year.

"This is clearly an admission by the company's board that things need to improve and that in their opinion in order for things to improve they need to refresh the face of the executive team," said Mark Sheridan, an analyst with Johnson Rice & Co.

Shoney's is one of the country's largest restaurant companies, with more than 1,800 restaurants and revenue of $1.17 billion in the year ended last October. Its revenue and profits have been sluggish, however, and newer restaurant companies with fresh formats continue to make inroads against it. The company has 16 Shoney's in the Baltimore region, three Pargo's and one Captain D's.

Shoney's said it would sell off businesses accounting for 12 percent of total company revenue last year to concentrate on its Shoney's restaurants and its Captain D's seafood chain as well as a newer steakhouse chain called BarbedWire.

The businesses to be sold over the next six to 12 months are restaurant chains Lee's Famous Recipe, Pargo's, Fifth Quarter Steakhouse and Mike Rose Foods, a food service company. The mainstay Shoney's chain now accounts for about half of total revenue.

Some type of restructuring had been expected, following Shoney's hiring of consultants McKinsey & Co. in August to advise it on improving performance and stock price.

Nashville, Tenn.-based Shoney's plans to use proceeds to improve Shoney's restaurants, retire bank debt and possibly repurchase the company's stock, which its debt covenants currently prohibit. It said it hired Salomon Brothers to handle the sale of these units, and that it will keep McKinsey on during the restructuring.

After one-time charges related to the restructuring, Shoney's expects to post a gain on the divestitures. The company said it plans to "invest significantly" to improve operations, which may result in a decline in per-share earnings for fiscal 1995.

Shoney's shares rose 62.5 cents a share yesterday to close at $13.50.

Resigning in the management shake-up yesterday were Jim Arnett, 45, Shoney's Inc. president and chief operating officer, and Jim Grout, president of the Shoney's Restaurants unit.

Charles Porter, president of the Captain D's division, will replace Mr. Arnett as president of Shoney's Inc.

Industry observers said Shoney's, which went through a recapitalization in 1988, was badly in need of another turnaround.

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