Thirty-four years after he opened the first Old Chicago restaurant, a downtown Boulder eatery that started a $382 million restaurant group, local businessman Frank Day knew it was time to loosen his grasp and relinquish the reins.
Louisville-based Rock Bottom Restaurants Inc. -- Day's 141-unit restaurant chain that included the brands of Old Chicago, ChopHouse and Rock Bottom -- had grown too capital-constrained during the past two years.
Rock Bottom Restaurants was in desperate need of some kind of infusion to keep his creation going.
"Our main loans were due this year, and it became apparent that in order for the company to move forward, we needed to improve our capital structure," he said.
That problem was solved on Monday when a New York private equity firm closed on the acquisitions of both Rock Bottom Restaurants and Chattanooga, Tenn.-based Gordon Biersch Brewery Restaurant Group. Centerbridge Capital Partners L.P., the equity firm boasting $12 billion under management, concurrently announced plans to combine the two operators of casual brewpub-focused restaurants to create CraftWorks Restaurants and Breweries Inc.
The full financial terms of the deal were not disclosed. Centerbridge entered into a $150 million credit facility to support the transaction, CraftWorks officials said in the announcement.
Industry reports from Technomic Inc. put Rock Bottom Restaurants and Gordon Biersch's 2009 sales at $381.7 million and $107.7 million, respectively.
Aside from the "substantial" purchase price, Day said he felt secure in relinquishing the ownership of Rock Bottom Restaurants because of the existence of some history between his firm and Gordon Biersch and also Centerbridge's track-record.
"(Centerbridge officials) have a good record with being partners with companies they get involved with," Day said. "... We didn't want to sell out. We wanted to continue."
As a result of the deal, Day transitioned from chief executive officer to chairman, a role in which he expects to be quite active. He'll work close to a familiar face in CraftWorks CEO Allen Corey, Gordon Biersch's CEO who previously headed Big River Breweries. In the '90s, Rock Bottom owned half of Big River Breweries.
After noting all of the above, Day expressed some certainty that the effects of the combination would not be negative. No restaurants are expected to close or be re-branded in the immediate time frame and CraftWorks plans to have headquarters operations in both Chattanooga and Louisville for at least the near-term, he said.
How everything will pan out in the long haul, Day said he doesn't know.
Most of the changes, he added, will be more operations-focused and mostly be behind the scenes.
Local and national industry experts say they don't expect an acquisition such as this to result in restaurant closures. Established brands such as Old Chicago, the analysts add, should remain.
"The most interesting thing I thought is (they're keeping) two separate headquarters and seemingly run these as two separate companies to some extent," said John Imbergamo, a Denver-based restaurant consultant. "That's not the typical way to merge two companies."
Putting Rock Bottom Restaurants and Gordon Biersch under the same umbrella could strengthen the restaurant group's competitive positioning among a casual dining sector well-worn by the economic downturn, said Ron Paul, president and founder of Technomic.
The combination also comes after two quarters that seem to show a bottoming-out and possible uptick in the casual dining sector, he said.
"The concepts are different, but they're still 'similar,'" he said. "I think it's an interesting combination because there should be some synergies."
For Day, the decision to sell wasn't an easy one.
"I think there's always some bittersweet to any decision, but I think the part I'm a little sad about is to see the Rock Bottom company, as a separate entity, come to an end," Day said.But the 78-year-old businessman -- who jokes that he's "not in a rocking chair anytime soon" and one who has his hands in area establishments such as the Hotel Boulderado, the Walrus, the Rialto Café and the Table Mountain Inn -- said he knows business is business sometimes.
"You know you never stay the same in any business," he said. "You have to keep moving."
Contact Camera Business Writer Alicia Wallace at 303-473-1332 or firstname.lastname@example.org.