Luby’s Inc., the Houston-based owner of Luby’s Cafeterias and Fuddruckers, has agreed to purchase the 23-unit Cheeseburger in Paradise brand for $11 million.
Luby’s disclosed in a statement that the acquisition of all Cheeseburger in Paradise restaurants in 14 states, as well as reimbursements for the brand’s cash on hand, inventory, and accounts receivable, would be funded through Luby’s retained cash and the company’s credit facility. The deal is expected to close on Dec. 5.
Year-earlier revenues for the restaurants to be acquired totaled more than $50 million, Luby’s said.
The island-theme, casual-dining restaurant was developed in partnership with musician Jimmy Buffett and OSI Restaurant Partners in 2002 and was named after one of Buffett’s most popular songs. In September 2009, OSI sold Cheeseburger in Paradise to an investor group led by chain president Steve Overholt.
OSI was a publicly traded company until it was taken private in a $3.2 billion buyout in 2007 by company founders and private-equity firms Bain Capital Partners LLC and Catterton Management Co. LLC.
Luby’s officials said the company hopes to expand Cheeseburger in Paradise, which at one point had as many as 38 restaurants in 17 states in 2006.
“Cheeseburger in Paradise will nicely complement our core family-friendly brands, Luby’s Cafeterias and Fuddruckers, with a casual-dining restaurant and bar offering,” Luby’s chief executive Chris Pappas said in a statement. “A number of their 23 locations are located in high-traffic areas, many near successful malls and tourist attractions. With the addition of Cheeseburger in Paradise, we will further enhance our competitiveness and increase the company’s opportunities for revenue growth in the future.”
Chief operating officer Peter Tropoli added that synergy with the other two brands in Luby’s portfolio would benefit Cheeseburger’s operations and unit-level economics. “From a guest and employee perspective, the transition should be seamless,” he said.
For its most recent third quarter, ended May 9, Luby’s profit rose 43 percent to $2.4 million, or 9 cents per share. Revenue rose slightly to $84.1 million. Same-store sales at the namesake cafeteria chain were essentially flat, while same-store sales at Fuddruckers rose 4.6 percent.
Luby’s Inc. owns and operates 92 namesake cafeterias and 58 Fuddruckers locations, and it franchises another 128 Fuddruckers units. The company also owns three Koo Koo Roo Chicken Bistros.