Checkers struggles with debt Price wars spur call to investment banker

January 13, 1996|By Timothy J. Mullaney | Timothy J. Mullaney,SUN STAFF

The parent company of the Checkers restaurant chain said yesterday it has retained an investment bank to help it pull out of a sustained dive into red ink sparked by industry price wars.

The "value meal" deals that major chains such as McDonald's, Wendy's and Taco Bell have used to lure customers have wrought havoc upon Checkers Drive-In Restaurants Inc. of Clearwater, Fla., which is too small and financially weak to stay profitable with the lower prices, said analyst David L. Gardner of Legg Mason Inc. in Baltimore.

Checkers said it had retained Raymond James & Associates Inc. of St. Petersburg, Fla., to investigate "alternative financial options," a term broad enough to include such options as refinancing its $41.8 million in debt, selling a piece of the business to new investors or even selling the whole company.

But the company's options may not be very attractive, Mr. Gardner said.

Wall Street seemed to agree, pushing Checkers stock down 25 cents yesterday to $1.375.

"I don't think there's any major company interested in making an investment here," the analyst said. "I don't know how you would address the range of options."

Checkers and its franchisees operate about 500 drive-through restaurants.

Mr. Gardner said sales per store have dropped by about 30 percent over three years, to about $700,000 for each store. Through the first nine months of 1995, Checkers lost $10.2 million, including $7.3 million in the third quarter.

Franchisee La-Van Hawkins' Inner City Foods Inc. owns four Baltimore Checkers restaurants, part of a network the Atlanta firm has built to 23 stores. Inner City Foods sold about 15 other stores in Atlanta back to Checkers last year.

Mr. Hawkins, president and chief executive of Inner City Foods, could not be reached for comment yesterday. His administrative assistant said Mr. Hawkins was in Florida on business, and that his company is not affected by Checkers' announcement.

Mr. Hawkins plans to move his headquarters to Baltimore by next month. He won acclaim as what a 1995 Sun headline called a "Modern-day Robin Hood" for locating stores in black neighborhoods and offering jobs to young people from poor parts of the city.

Another franchisee owns Checkers outlets in Anne Arundel County.

Mr. Gardner said the Inner City stores appear to be stronger than the Checkers chain itself.

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