Roy Rogers restaurants reach end of the trail Hardee's selling 184 area outlets to McDonald's

August 03, 1996|By Abbe Gluck | Abbe Gluck,SUN STAFF

Hardee's Food Systems Inc. said yesterday that it is selling all 184 Roy Rogers restaurants it owns in the Baltimore-Washington area to McDonald's Corp. for $74 million.

The 184 restaurants are the last remaining in Hardee's Roy Rogers chain, although 49 area Roy Rogers outlets are owned by independent operators.

"That's it for Roy's," said Jack Russo, an analyst at A. G. Edwards.

Russo and other analysts said that without the support of a chain, most of the independents will be forced to close or affiliate with a different restaurant.

McDonald's plans to convert "a substantial number" of the Roy Rogers into McDonald's and put the others up for sale, said spokesman Chuck Ebeling.

Hardee's, a subsidiary of Montreal-based Imasco Ltd., bought Roy Rogers from Marriott Corp. in 1990 for $365 million. It sold the Linthicum-based chain for less to "focus our resources on our core Hardee's markets," said Hardee's spokesman Coleman Sullivan.

To account for the loss, Imasco took a $239 million charge in December, said Imasco spokesman Peter McBride.

"Value pricing came into the marketplace right after the

Roy's acquisition," he said. Chains such as Taco Bell, "with their 'value menus,' changed the industry."

That kind of competition made things rough for Hardee's and Roy Rogers, which led management last fall to announce its intention to sell Roy Rogers, McBride said.

This year, Hardee's sold its New York-area Roy Rogers restaurants to Wendy's International Inc. for $26 million.

For McDonald's, the deal fulfills an element of the Oak Brook, Ill.-based company's expansion strategy.

Although there are more than 19,200 McDonald's worldwide, on any given day they serve fewer than than 1 percent of the world's people -- and McDonald's says that's not enough.

Given McDonald's size, said David J. Adelman, an analyst at Dean Witter Reynolds, the deal "isn't going to fundamentally change its growth prospects."

But he called it a "good strategic move because it's easier to convert existing restaurants than to build from scratch."

Such easy expansion should benefit McDonald's franchisees, who run 85 percent of all McDonald's restaurants, Ebeling said.

"We have a number of areas in Washington and Baltimore that are not well serviced by McDonald's," he said.

"Franchisees can look at this as an opportunity to grow sooner than they would have with conventional development."

There are 115 McDonald's restaurants in Baltimore and the surrounding five counties.

Pub Date: 8/03/96

Baltimore Sun Articles
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.