Recent CEO departures highlight severance package agreements

Recent CEO departures highlight severance package agreements

Add this to the ever-growing list of current pressures on restaurant executives: job security. As if the economy, consumer skittishness, slowing sales, increasing costs and looming legislation weren’t enough to keep the restaurant chief executive up at night, the possibility of losing the corner office may indeed cause insomnia.

This month, high-profile chief executive departures took place at such well-known industry brands as Buca Inc., Krispy Kreme Doughnuts Inc. and Starbucks Corp. In each case, the leaders, Wally Doolin, Daryl Brewster and Jim Donald, respectively, were charged with directing brands that had struggled to varying degrees.

Keith Kefgen, president of HVS Executive Search, said the tenure of chief executives,especially “headline CEOs,” or big names hired to effect corporate change, is dwindling rapidly. HVS, based in Mineola, N.Y., focuses on the hotel, restaurant, retail and gaming industries.

“Headline CEOs are saying, ‘Hey, my life span isn’t 10 years anymore, my tenure is about three years, so I need some protection,’” Kefgen said. “The severance package is supposed to be there to protect both [the CEO and the company] in the event a marriage doesn’t work.”

The former chief executive at Winston-Salem, N.C.-based Krispy Kreme will receive a severance package worth more than $2 million, according to documents filed with the Securities and Exchange Commission. In his less-than-two-year tenure, Krispy Kreme’s stock price lost nearly 57 percent of its value, reaching a low of $2.50 per share in December and a 52-week high of $13.91 per share in January 2006. In its latest regulatory filings, Krispy Kreme has reported reduced sales and warned that franchisees would close “a significant number” of locations this year.

Brewster, who resigned Jan. 7, will receive one year’s salary of $700,000 during the next 12 months, as well as restricted Krispy Kreme stock valued at about $1.2 million. He also will receive $319,552 in pension benefits and is eligible on Aug. 1 for a lump sum of $628,000 in deferred compensation, for a total of $2.8 million. Brewster still is eligible for a bonus for the January-ending fiscal 2008 if certain corporate goals are met.

At Minneapolis-based Buca, as outlined in the separation agreement between Doolin and the company, Doolin will receive $583,000 for the 12 months ending in March 2009. Because Buca is currently seeking a sale of the company, Doolin’s separation agreement included a clause that protected his severance pay should the company change hands.

It is a tactic many chief executives are adopting in an environment rife with mergers and acquisitions, Kefgen said. In Doolin’s case, any severance amount greater than $450,000 will be paid out by August in a lump sum regardless of a change in control at Buca, the agreement said.

Meanwhile, Starbucks did not disclose whether just-resigned chief executive Donald, who made $1 million a year in salary, would receive a severance package. A 2007 securities filing said he was an “at-will employee without any guaranteed term or severance protection.” In 2005, Seattle-based Starbucks and its senior executives signed employee pacts that removed any severance protection.

TARGET:Taneko Japanese Tavern (1 unit)
ACQUIRER:Food, Friends & Co., the restaurant management company of industry veteran Jack Baum
SELLER:P.F Chang’s China Bistro Inc.
ACTION:Agreement to sell majority stake, terms undisclosed
STATUS:Pending
COMMENTS:Analyst Matthew DiFrisco, Thomas Weisel Partners: The eventual sale will improve P.F. Chang’s per-share earnings, as Taneko negatively impacted results by 6 cents in 2006, 8 cents in 2007 and an estimated 5 cents in 2008.
TARGET:Wendy’s International Inc.
ACQUIRER:Triarc Cos. Inc.
ACTION:Unspecified buyout offer, known to be less than $3.2 billion
STATUS:Pending
COMMENTS:Wendy’s has said there is no specific time frame and that the company will comment when appropriate.
TARGET:Mitchell’s Fish Market (19 units) Cameron’s Steakhouse (3 units)
ACQUIRER:Ruth’s Chris steak House Inc.
SELLER:Cameron Mitchell Restaurants LLC
ACTION:$94 million acquisition agreement
STATUS:Expected to close in the current 1st Q
COMMENTS:Ruth’s Chris to incur in 4th Q about 2 cents per share in acquisition-related costs.
TARGET: Buca Inc. (91 Buca di Beppo units)
ACQUIRER:To be determined
ACTION:Company announced last month a strategic review and the hiring of Piper Jaffray Cos.
STATUS:No time frame given
COMMENTS:Analyst Paul Westra, Cowen & Co.: “The most likely result of the process will be a going-private transaction.”
NRN STOCK INDEX AND OTHER SELECTED INDICESVariability for the 52 weeks ended Jan. 11, 2008
 CLOSE 1/11/08WEEKLY % CHG.
NRN STOCK INDEX1,203.17-0.55
NYSE COMPOSITE9,347.47-0.90
DOW JONES INDEX12,606.30-1.51
S&P 5001,401.02-0.75
WEEK’S TOP GAINERS
MEXICAN RESTAURANTS INC.20.6%
P.F. CHANG’S CHINA BISTRO INC.13.9
GOOD TIMES REST. INC.12.7
IHOP CORP.11.8
GRANITE CITY FOOD AND BREWERY11.2
MAX & ERMA’S REST. INC.10.8
STARBUCKS CORP.9.3
CKE RESTAURANTS INC.7.2
LUBY’S INC.6.1
PAPA JOHN’S INT’L. INC.5.9
WEEK’S TOP LOSERSPercentage changes in stock prices, week ended 1/11/08
RUBY TUESDAY INC.-29.2%
COSI INC-21.7
MORTON’S RESTAURANT GROUP-15.8
RUTH’S CHRIS STEAK HOUSE INC.-15.8
DARDEN RESTAURANTS INC.-13.3
KONA GRILL INC.-12.5
CARIBOU COFFEE CO.-11.6
BRINKER INTERNATIONAL INC.-11.4
FAMOUS DAVE’S OF AMERICA INC.-10.7
BENIHANA INC.-9.9
NRN’S FINANCIAL SCORECARD(PUBLICLY TRADED COMPANIES*; $ IN MILLIONS) *EXCLUDES OTC STOCKSNEW RESULTS IN BOLDFACESOURCE: MERGENT INC. AND FINANCIAL CONTENT INC.
COMPANYTICKER SYMBOLQTR. END DATEREVS.%CHG.NET%CHG.TRAILING FOUR QTRS.WEEK ENDED 1/11/08
       REVS.%CHG.NET%CHG.MKT. CAPP/E RATIO
AFC Enterprises Inc. AFCE10/7$38.98.1%$6.510.2%$168.217.2%$25.164.1%267.111
Ark Restaurants Corp.ARKR9/29124.27.113.0149.3124.27.113.0149.3119.99
Benihana Inc. BNHN10/1467.013.62.5-4.3290.713.714.1-2.162.812
BJ’s Restaurants Inc.BJRI10/280.430.13.131.2296.833.610.816.0362.334
Bob Evans Farms Inc.BOBE10/26426.33.315.514.71,689.24.762.82.8836.414
Brinker International Inc. EAT9/26895.1-13.937.6-21.14,232.10.4220.0-3.61,710.69
Buca Inc.BUCA9/3056.50.2(4.8)-5.3253.016.1(9.9)12.617.9-
Buffalo Wild Wings Inc. BWLD9/3082.420.54.321.0321.626.720.469.1388.019
Burger King Holdings Inc. BKC9/30602.010.349.022.52,290.09.8157.0248.93,125.420
California Pizza Kitchen Inc. CPKI9/30162.013.51.4-78.9615.915.315.1-27.4368.125
Caribou Coffee Inc. CBOU9/3062.08.8(8.5)172.8253.412.4(17.6)-129.860.8-
Carrols Restaurant Group Inc. TAST9/30203.57.34.9-5.2780.9-0.915.243.3174.111
CBRL Group Inc.CBRL11/2581.24.113.9-28.52,374.5-7.5156.542.3641.410
CEC Entertainment Inc.CEC9/30197.51.415.9-7.4786.53.268.53.7622.210
The Cheesecake Factory Inc. CAKE10/2375.515.418.52.21,466.014.381.1-3.81,421.818
Chipotle Mexican Grill Inc. CMG9/30286.435.620.674.61,016.630.963.983.31,690.060
CKE Restaurants Inc. CKR11/5351.6-3.66.2-34.41,555.5-1.441.3-78.7699.919
Così Inc. COSI10/135.37.0(3.0)5.1134.48.7(19.4)-43.074.2-
Darden Restaurants Inc. DRI11/251,522.09.943.5-29.55,715.4-1.9200.6-42.33,148.69
Denny’s Corp.DENN9/26241.4-6.55.3-79.1963.5-3.020.3-14.0283.715
Diedrich Coffee Inc.DDRX9/198.227.0(0.3)-83.638.3-28.6(0.4)95.118.2-
Dominos Pizza Inc.DPZ9/9337.33.311.0-55.21,452.2-0.552.8-53.8734.914
Einstein Noah Restaurant Group Inc.BAGL10/2100.44.84.9557.3396.90.611.8187.0271.027
Famous Dave’s of America Inc.DAVE9/3031.93.51.63.0122.48.26.133.1106.918
Flanigan’s Enterprises Inc.BDL9/2961.111.11.31.461.111.11.31.415.312
Frisch’s Restaurants Inc.FRS9/1889.51.42.57.8291.2-0.59.46.0116.313
Good Times Restaurants Inc.GTIM9/3025.019.20.070.625.019.20.070.623.9-
Granite City Food & Brewery Ltd.GCFB9/2519.630.3(2.3)41.973.242.3(6.9)-25.946.5-
Grill Concepts Inc.GRIL9/3021.311.0(0.6)32.489.316.81.0-44.236.6-
IHOP Corp.IHP9/3091.43.8(11.6)-202.6358.92.724.2-45.3764.134
J. Alexander’s Corp.JAX9/3033.41.40.4-10.6140.84.45.544.465.112
Jack in the Box Inc. JBX9/302,876.04.0126.316.92,876.04.0126.316.91,401.412
Jamba Inc.JMBA10/1683.6439.922.446.7324.1-932.416.6142.3162.039
Kona Grill Inc. KONA9/3019.239.10.4-194.969.049.0(0.9)45.871.1-
Krispy Kreme Doughnuts Inc.KKD10/28103.4-11.7(0.8)-88.9430.6-8.6(59.7)-7.4182.8-
Landry’s Restaurants Inc.LNY9/30301.94.0(4.3)-85.51,171.3-1.416.4272.4248.011
Luby’s Inc.LUB11/2173.4-0.44.8149.1320.1-1.513.7-28.7277.219
Max & Erma’s Restaurants Inc.MAXE8/539.2-3.6(1.0)485.9175.1-3.6(0.7)-199.96.2-
McCormick & Schmicks Seafood Rests Inc.MSSR9/2988.116.52.0-24.5343.512.214.612.2169.812
McDonald’s Corp.MCD9/305,900.90.31,071.227.022,063.71.32,363.4-18.864,247.541
Mexican Restaurants Inc.CASA9/3020.9-0.70.1-76.480.1-5.5(0.9)-126.421.1-
Morton’s Restaurant Group Inc.MRT9/3078.912.6(0.7)651.0344.29.412.2161.1115.89
Nathan’s Famous Inc.NATH9/2314.17.11.8-3.847.28.07.255.899.519
NexCen Brands Inc.NEXC9/3011.3526.30.1-114.222.6127.70.0100.5224.2-
O’Charley’s Inc.CHUX10/7220.90.9(0.4)-116.61,003.04.211.7-23.4266.426
P.F. Chang’s China Bistro Inc.PFCB9/30270.917.35.3-19.91,054.717.333.80.0633.419
Panera Bread Co. PNRA9/25273.233.311.99.8998.829.858.54.31,038.518
Papa John’s International Inc.PZZA9/30262.89.64.8-63.21,057.610.044.0-25.2636.116
Peet’s Coffee and Tea Inc.PEET9/3060.919.61.824.1238.718.87.2-20.4340.847
Pizza Inn Inc. PZZI9/2312.10.70.3-132.547.2-5.31.6124.630.419
Red Robin Gourmet Burgers Inc.RRGB10/7188.727.08.236.4743.430.129.412.7463.816
Rubio’s Restaurants Inc.RUBO9/3044.013.50.722.0169.316.4(3.3)-166.570.3-
Ruby Tuesday Inc. RT12/4320.9-4.7(10.4)-161.91,402.51.754.1-46.0310.74
Ruth’s Chris Steak House Inc.RUTH9/3070.220.51.8-23.6318.131.324.741.5159.97
Sonic Corp. SONC11/30190.28.813.6-11.1785.911.062.5-19.41,281.823
Star Buffet Inc.STRZ11/515.123.8(1.0)296.567.519.0(0.6)-153.217.0-
Starbucks Corp. SBUX9/309,411.520.9672.619.29,411.520.9672.619.214,454.623
The Steak n Shake Co. SNS9/26654.12.411.8-57.8654.12.411.8-57.8269.123
Texas Roadhouse Inc. TXRH9/25189.527.610.615.3701.324.740.023.0679.319
Tim Hortons Inc.THI9/30490.518.667.430.01,846.915.6261.725.76,622.328
Triarc Companies Inc.TRY9/30324.24.03.7580.81,274.54.7(19.3)24.4232.5-
Wendy’s International Inc.WEN9/30631.11.229.9-56.82,470.3-11.876.9-36.62,160.426
Yum! Brands Inc. YUM9/82,564.012.6270.017.410,170.07.7910.014.918,482.822