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Private equity firm should answer for steakhouse shutdowns

By
Dan Primack
Dan Primack
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By
Dan Primack
Dan Primack
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November 30, 2010, 3:24 PM ET
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Several years ago, my wife and I began something called BBQ chicken nacho night. Not a regular happening, but an occasional treat to celebrate special stay-at-home occasions (like the Lost finale). The star was cooked up at our local Bugaboo Creek steakhouse.

I know what you’re probably thinking: “How unsophisticated.” I don’t care. It was the epitome of yumminess.

So imagine my surprise the other night, when I called in an order (first night home alone with baby Emma, sans mother-in-law) and was told that the location was closed. A bit more Google searching uncovered that the parent company had filed for Chapter 11 bankruptcy, closed over half of its 86 locations — which include Bugaboo, Charlie Brown’s and Office-branded restaurants – and laid off over 2,000 employees without warning. Moreover, it seems that the company is owned by “walking dead” private equity firm Trimaran Capital Partners.

Trimaran bought Charlie Brown’s in 2005 from Castle Harlan for around $150 million (50/50 debt/equity split). The company later acquired Bugaboo for around $28 million, which may partially have been financed via an $11.5 million equity injection from Trimaran.

I say “may” have been partially financed, because Trimaran so far is declining to comment on the situation. A Trimaran managing director yesterday cited firm policy, and said that someone else might choose to discuss the matter at a later date.

Sorry Trimaran, but that isn’t good enough. When you fire 2,000 workers without warning – in a lousy labor market, to boot – then you should at least explain why it happened. How did you manage to oversee the partial collapse of two restaurant franchises that you once thought were worth nearly $200 million? Was it simply macro trends, or did you not do enough to make the brands more relevant. And what role, if any, was played by a pending class action lawsuit brought by employees who claim that they were denied earned tips and overtime?

I spoke this morning with a private equity investor who had looked a few times at Charlie Brown’s/Bugaboo, who passed because he said the topline trends were in the wrong direction – a statement at odds with Charlie Brown’s CEO, who told Fox Biz News this past spring that sales had improved.

[Update: A reader sent over marketing materials for Bugaboo Creek, which the parent company began trying to sell off this past summer. It shows declining year-over-year revenue between 2008-2010, but rising gross profit margins. You can view the doc below)

Private equity firms serve their limited partners, but they also have a responsibility to company employees. It’s a trust of sorts. Not necessarily to maintain employment, but to give some reason for handing out pink slips. So far, Trimaran is violating that trust.

Here is that marketing doc, which was circulated by investment bank Raymond James:

[scribd id=44402142 key=key-2laaclaw4mxewlqt59sg mode=list]

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By Dan Primack
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