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O'Charley's shutters 16 restaurants

Closures included 11 O'Charley's units, 5 Ninety Nine restaurants

O'Charley's Inc. has closed 16 underperforming restaurants across the country, including 11 locations of its flagship casual-dining brand, the company said Monday.

Five locations of the Ninety Nine Restaurants brand also were shuttered, said O'Charley's, which also owns the Stoney River Legendary Steaks concept.

“These closings permit us to focus our energy and efforts on improving the performance of our remaining 339 company-operated restaurants in 25 states," David Head, the company's president and chief executive, said in a statement. "We continue to strongly believe in the potential of our three concepts which enjoy high brand loyalty and guest appeal.”

MORE: O'Charley's CFO leaves for Cracker Barrel

Four of the 11 closed O’Charley’s restaurants are in North Carolina, while the restaurant chain is moving out of the Kansas City area by closing its two restaurants in that market, said Larry Hyatt, O’Charley’s chief financial officer.

Two other O’Charley’s restaurants are being closed in Alabama, while single units are closing in Arkansas, Florida and South Carolina, Hyatt said.

O’Charley’s is closing all four of its remaining Ninety Nine restaurants in the Philadelphia area, including one in south New Jersey, he said. The fifth Ninety Nine closing is in Connecticut, Hyatt said.

Chief executive Head visited each of the restaurants and determined their underperforming financial results could not be remedied, Hyatt said.

“The conclusion was that it was better to close the restaurants and to fully focus on management of the other restaurants,” he said.

The closing affects 750 to 800 employees. Some are being transferred to other units in the chain, Hyatt said, adding that the company is also reaching out to restaurant competitors in hopes of landing jobs for the displaced workers. Some managers will be transferred from the closed restaurants to others in the chain, while others will lose their jobs, he said.

Hyatt said the decision to close the 16 restaurants was unrelated to the company's recent earnings, which included a wider net loss.

Last month, Nashville, Tenn.-based O'Charley's Inc. reported a third-quarter loss of $7.4 million, compared with a loss of $2.1 million in the year-ago period. Revenue slipped 1.2 percent to $191.7 million for the latest quarter. Same-store sales declined 2.2 percent at corporate O'Charley's restaurants, but rose 1.2 percent at Ninety Nine and increased 1.7 percent at Stoney River.

The O'Charley's concept includes 230 restaurants in 19 states in the Southeast and Midwest. The company operates 107 Ninety Nine restaurants in New England and upstate New York and 11 Stoney River restaurants in six states in the southeast and Midwest. Nine O’Charley’s restaurants are also operated by franchisees, Hyatt said.

He said there are no current plans for more closings.

“While I will never say never, our expectation is that we have now closed the underperforming restaurants in the restaurant portfolio. We do not currently, and I emphasize currently, anticipate additional closings,” Hyatt said.

Eight of the 16 closed restaurants will be treated as discontinued operations in the company¹s financial statements, O’Charley’s announcement said. Not including the discontinued operations, the company anticipates recording $5 million in total pretax charges in the current fourth quarter related to the closings for asset impairment, future lease obligations and severance. O’Charley’s said it estimates the restaurant closings will increase annual income from operations by about $1.5 million.

Alan Snel is a contributor to Nation's Restaurant News. Contact editor Molly Gise at [email protected].

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