U.S. Foodservice is signed to supply Chili's restaurants

`This is a feather in their cap,' says Baltimore analyst

3 years, $600 million


January 13, 2000|By Mara H. Gottfried | Mara H. Gottfried,CONTRIBUTING WRITER

U.S. Foodservice announced a three-year, $600 million contract yesterday with Chili's that will make the Columbia-based company the restaurant chain's provider of food and related products.

Chili's had a contract with AmeriServe Food Distribution Inc. and its predecessors for more than 10 years, said Chili's spokesman Louis Adams.

"Our contract was up and we decided to look around at other companies that might be a better fit," Adams said.

The contract turnover to U.S. Foodservice will take place over the next few months in Chili's restaurants other than those in Florida and some parts of Alabama. Chili's restaurants in those areas have contracts with other food distributors.

Chili's is a unit of Dallas- based Brinker International, which owns, operates or franchises more than 650 Chili's in the United States and 20 abroad.

Kurt Funderburg, an analyst at the Baltimore-based investment banking firm Ferris Baker Watts, said: "AmeriServe is having some apparent operating difficulties and may be struggling with debt load. As a result, they may be walking away or resigning from some of their contracts. Some of their customers may be vulnerable to bids from U.S. Foodservice or Sysco."

Funderburg, who follows U.S. Foodservice, called the contract with Chili's a significant move for the company, the second-largest national food-service distributor.

"This is a feather in their cap to win the distribution," he said. "Chili's is a high-profile and successful restaurant operator. This is an indication of how well U.S. Foodservice is thought of."

Bonna Walker, U.S. Foodservice vice president of marketing and public relations, said the company had been involved in discussions with Chili's for several years.

"Anytime you work with a large company like this, you might talk to them for a while, but it doesn't necessarily lead to anything," Walker said. "But it was important to keep our name in front of them."

Walker said U.S. Foodservice and Chili's had worked on the contract for two to three months. The deal will be finalized within 60 days, she said.

U.S. Foodservice will not hire any employees because of the contract, Walker said.

Adams said his company was agreeable to a contract with U.S. Foodservice because of its good reputation in the food-service industry. "They have a lot of strength in the markets we serve," he said. "We feel like they'll be able to service our restaurant in an exceptional fashion."

Walker said some of U.S. Foodservice's clients include Ruby Tuesday, Perkins and Old Country Buffet.

U.S. Foodservice earned $83 million on $6.2 billion in sales during its most recent fiscal year, which ended Aug. 24. Funderburg said he expects that the company will exceed $7 billion in revenue this fiscal year.

"I think you'll continue to see other contract announcements by U.S. Foodservice as the year continues," Funderburg said.

Late last month, U.S. Foodservice acquired Parkway Food Service Co. in Greensburg, Pa. In November, the company announced a Web site to handle orders from hotels and restaurants in need of kitchenware and gourmet food items.

Shares in U.S. Foodservice rose 31.25 cents to $19 yesterday.

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