Chains eye savings as they relocate headquarters

AFC, Bob Evans among chains with plans to move corporate offices

Driven by more favorable tax rates and lease terms or other incentives, several restaurant companies are relocating their corporate headquarters or contemplating a move to more business-friendly locales.

ACF Enterprises Inc., the parent of the 1,977-unit Popeyes Louisiana Kitchen brand, is moving into a new corporate office in its home base of Atlanta later this year, and Bob Evans Farms Inc. said it would leave Columbus, Ohio, for a new headquarters complex 23 miles away in the village of New Albany.

Meanwhile, sandwich chain Jimmy John’s is reportedly considering a move from Champaign, Ill., to Florida after Illinois raised income tax rates.

AFC chief financial officer Mel Hope III recently offered details about the company’s upcoming move to a new corporate office and research and development center in Atlanta, which he said would provide it with more space at a smaller rent.

“Our new lease will provide us with 40 percent more office capacity to accommodate our growth, and it does so at 20 percent less rent per square foot,” he said during AFC’s latest earnings conference call in March. “We expect to incur G&A expense of approximately $1 million for the move, plus we’ll recognize write-offs and accelerated depreciation of another $0.5 million, and we will invest about $3 million net of landlord allowances into capital expenditures for the new office.”

Jimmy John’s founder Jimmy John Liautaud told the Champaign News-Gazette in January that a new law passed in Illinois that raises the state’s individual income tax from 3 percent to 5 percent and its corporate income tax from 7.3 percent to 9.5 percent may push the company to relocate to Florida. He said he has already has applied for Florida residency.

“All they do is stick it to us,” Liautaud told the paper at the time. “I could absorb this and adapt, but it doesn’t feel good in my soul to make it happen.”

Officials from the Jimmy’s John’s chain, which includes more than 1,000 units, would not comment on the proposed move.

Raymond Keating, chief economist with the Small Business and Entrepreneurship Council, said if companies isolate only the tax and regulatory burdens of a new home, a relocation could pay off quickly depending on where the company moves.

“If you move from a place that ranks poorly like New Jersey to a place that ranks well like Nevada, those savings can be tremendous just from a tax standpoint,” he said. “If you’re going from states with the highest income taxes like New York, New Jersey or California to a state with no income tax, it doesn’t get more clear-cut.”

Some brands need not cross state lines to find greener pastures, as is the case with Bob Evans Farms, which got an $11.8 million package of research and development grants and job creation tax credits from the state of Ohio to keep its offices in the Buckeye State and not move them to land it owns in Texas.

Bob Evans said March 10 it would move its corporate headquarters 23 miles from its current Columbus, Ohio, campus to the village of New Albany. The new headquarters complex is expected to complete construction in 2013.

“Bob Evans Farms is a part of the fabric of Ohio,” Mark Kvamme, director of the Ohio Department of Development, said in a statement. “We worked hard to keep the company’s headquarters in the state, and we fully expect Bob Evans Farms will continue to grow and thrive here.”

Scott McAfee, public information officer for the village of New Albany, said the village’s incentive package of $9.8 million included about $8.3 million in real estate tax abatements. Though New Albany’s offer was less than a $14 million package from the city of Columbus to move to another site within city limits, McAfee said, “when businesses are looking to relocate, so many more things than just cost go into the decision.”

“They’re coming to a rural-looking business park, even down to the white picket fences Bob Evans’ logo is known for,” McAfee said. “There’s room for expansion, and the location is a business park with sophisticated business infrastructure, including its own fiber-optic network.”

Keating of the Small Business & Entrepreneurship Council warned that states and municipalities should work to reform business conditions in their areas, rather than just “trying to pick winners” by offering attractive packages to specific companies. There’s nothing to stop businesses from moving again when their incentives expire, he noted.

“Rather than getting into that game of, ‘Come here and you get a property tax break for X number of years,’ the best path is to have the broad-based incentives, like keeping property taxes low in general,” Keating said. “States should work toward being known as a good place for everyone to do business. You don’t want to be known as a difficult place to be in business unless you’ve got a deal.”

Bob Evans said its presence in Ohio generates $36 million per year in tax revenue for the state. In addition to its headquarters in Columbus and 194 namesake family-dining restaurants and three Mimi’s Café locations throughout Ohio, Bob Evans operates two production facilities for its packaged goods, a distribution fleet and maintenance centers in the state.

The company recently said it would spend $3 million to renovate its original farm and restaurant in Rio Grande, Ohio. Its 30 restaurants in the Dayton, Ohio, area also are among the first units to be addressed in a remodeling initiative.

Ohio Gov. John Kasich stood with Kvamme and Bob Evans chief executive Steve Davis at last week’s press conference to announce the move to New Albany and praised the restaurant company’s willingness to upgrade its facilities in the state.

“They’re making huge investments in the state of Ohio,” Kasich said, according to Columbus Business First. “The last thing we wanted was for the headquarters to move to a faraway place that’s not Ohio.”

Contact Mark Brandau at [email protected]