Silver Diner receives a $14.2 million boost To go: Working for investors in Massachusetts, the man who recognized the potential of Boston Chicken has picked Rockville-based Silver Diner as the next gem for national expansion.

March 28, 1996|By Michael Dresser | Michael Dresser,SUN STAFF

Robert Giaimo has just realized what he calls "every entrepreneur's dream."

An investor who dropped in unannounced one evening handed Mr. Giaimo's company a check for $14.2 million yesterday for a stake in his company. In return, he will not have to sell his soul or cede control. Rather, he will become chief executive of a publicly traded company with a mandate to expand the Silver Diner, the popular Rockville-based restaurant chain he co-founded in 1988.

"You usually don't have Prince Charming come along and offer you the slipper," said Mr. Giaimo, 44, who now operates six Silver Diners in Maryland and Virginia, including one at Towson Town Center.

Prince Charming in this case is George Naddaff, the canny multimillionaire who spotted Boston Chicken when it was a single restaurant. Recognizing the potential of the concept, he bought the company and turned it into a powerhouse that would make Wall Street history in September 1993 by recording the largest single-day gain by an initial public offering.

The events that brought Mr. Giaimo and Mr. Naddaff together read like a Hollywood script. But in the movies, the benefactor usually turns out to be an angel, and that wasn't Gabriel scarfing down banana cream pie at 11 p.m. at the Silver Diner in Laurel one night last week.

It was a road-weary but animated 66-year-old businessman, spinning the tale of how he went out looking for a "jewel" and found silver instead.

Mr. Naddaff said that when he left the management of Boston Chicken after the company went on the stock market, he was approached by GKN Securities, an investment firm that said it would raise $15 million from wealthy investors who were willing to bet he could find the "next Boston Chicken." When he accepted, GKN formed a specified purpose acquisition corporation in Newton, Mass., named Food Trends Acquisition Corp., and began selling shares over the Nasdaq system.

"The mandate was clear: They raised $15 million and said you have 18 months to find this acquisition," Mr. Naddaff said. If he didn't find a concept that 80 percent of the investors would approve, the money would go back where it came from.

When Mr. Naddaff embarked upon a well-publicized quest for the next big winner, the phone calls poured in.

To screen the losers, he set one basic qualification: the existing restaurants had to be profitable at the operating level.

Mr. Naddaff said his search took him from Vancouver to Florida and most points in between. He looked at steakhouses, Chinese restaurants, Japanese restaurants, Lebanese restaurants, bagel houses with or without holes and coffee shops. Ninety percent of what he looked at were "me-too concepts," were unprofitable or had management problems, he said.

"I was really looking for something completely different," he said.

Discovery last year

Then, one spring day in 1995, about five months into his search, Mr. Naddaff was in Maryland, where a friend was showing him some restaurant concepts in the Washington suburbs. They were driving along Rockville Pike in Montgomery County.

"It was seven in the evening and we were passing a Silver Diner lit up like High Mass, and I saw this line of people of people up front, and my comment was, 'Is this a grand opening?' " he recalled. His friend said no, the line was there every night.

"I said to him, 'Pull over,' " Mr. Naddaff said.

He said he went into the diner and saw executives, families and elderly people all coming together in a "happy atmosphere." He saw a high-tech kitchen about one-third the size of those in most diners. He stole a menu.

"The rest, as we say, is history," said Mr. Naddaff, adding that he was the one that approached Mr. Giaimo.

"He had something that was eternal. Diners have been around for 100 years, but what Bob did in my opinion is bring it to the year 2000," Mr. Naddaff said.

Mixed initial reactions

Mr. Giaimo, sitting beside Mr. Naddaff and eating a coconut cream pie, said his first reaction after hearing from Mr. Naddaff was to feel "incredibly complimented" that the man who built Boston Chicken would be interested in the Silver Diner.

The regional chain had sales of $13.3 million last year.

"My second reaction -- as any entrepreneur -- was fear," Mr. Giaimo said. "This was my baby, my team, and we wanted to achieve our destiny."

But as it turned out, control wasn't an issue, Mr. Giaimo said. Mr. Naddaff wanted the existing management team to stay in place.

In June 1995, a letter of intent was signed, putting 58 percent of the stock in the hands of Silver Diner's managers and giving 42 percent to Food Trend's investors. Mr. Naddaff and one associate joined an expanded Silver Diner board.

Yesterday, Food Trends shareholders gave their almost unanimous approval to the deal, clearing the way for the restaurant chain to merge into Food Trends, which immediately changed its name to Silver Diner Development Inc. and began trading on the Nasdaq stock market under the symbol SLVR.

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