Roy's stores get new owner McDonald's acquiring 180 area restaurants in growth plan

April 09, 1997|By Liz Bowie | Liz Bowie,SUN STAFF

McDonald's Corp. will complete the purchase of 180 company-owned Roy Rogers restaurants in the Baltimore-Washington area by the end of May as part of its growth strategy.

The real estate deal, worth at least $66 million, will allow the company to increase the number of stores in the Baltimore metropolitan area from 117 to 177.

"We are working with McDonald's to make the transfer of the remaining restaurants," said Sharon Hamilton, director of public affairs for Hardee's.

This doesn't mean that Roy Rogers fans will have to trade roast beef sandwiches for Big Macs, but they may have to go farther to get them. Some 34 Roy Rogers will remain in Maryland, most ringing Baltimore, in Belair, Glen Burnie, Churchville, Westminster, Catonsville, Eldersburg and Finksburg as well as at Baltimore-Washington International Airport.

Those will remain franchisees of Hardee's Food Systems Inc., the fast-food operator that purchased the Roy Rogers chain from Marriott Corp. in 1990 for $365 million. Hardee's put the Linthicum-based Roy Rogers up for sale in late 1995 to focus on its core Hardee's business, which was faltering under intense competition. It sold its New York-area Roy Rogers to Wendy's for $26 million and last August struck the deal with McDonald's for the Baltimore-Washington units.

Of the 160 Roy Rogers stores it has already acquired, McDonald's plans to sell some 45 to 50. The remainder will be converted into McDonald's over the next three years. Until then, McDonald's will own the stores and operate them as a franchisee of Hardee's.

In the Baltimore area, McDonald's has bought 60 stores and plans to sell 30 to 35 of them, said Joseph Carvajal, marketing manager on McDonald's conversion team.

The purchase of the Roy's chain is the first time McDonald's has bought another chain and converted stores in this country, Carvajal said.

Damon Brundage, an analyst with NatWest Securities Ltd., said McDonald's is a savvy buyer that saw the opportunity to get some good sites that might not have been available to it otherwise in Baltimore and Washington.

"Typically, the reason they do a deal like this is for the real estate," he said. "I think they feel they could do sales volumes significantly above what the Roys were doing," he said.

The question is whether the company will be able to boost its profits with the tactic, said Brundage, who noted that McDonald's sales and profits have been under pressure.

For the past two years, McDonald's sales increases have primarily been due to expansion, with sales at U.S. stores open at least 13 months down 6.4 percent last year, as intense competition continued for the fast-food dollar.

Consequently, McDonald's is emphasizing expansion abroad. While it accelerated expansion last year, opening 2,642 new stores last year, just 726 -- or 27 percent -- of those were in the the United States. That compared with 1,130, or 47 percent, in 1995.

Pub Date: 4/09/97

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