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Bennigan’s hitting the bottle after bankruptcy

Bennigan's diners can expect a bigger emphasis on booze, burgers and other bar and grill fare in the days and months to come, the new owner of the chain said Thursday.
/ Source: The Associated Press

Bennigan's diners can expect a bigger emphasis on booze, burgers and other bar and grill fare in the days and months to come, the new owner of the chain said Thursday.

Joel Holsinger, managing director of private equity firm Atalaya Capital Management, said he plans to reposition the brand by re-establishing its place in the high-margin bar segment and by focusing on sandwiches, onion rings and appetizers.

Holsinger said Bennigan's was one of the most dominant casual dining brands in the early 1990s with 30 to 40 percent of its business coming from beer, wine and liquor sales. Those products typically sell for significantly more than they cost, helping a company boost its margins. Bennigan's was also well known for its appetizers and sandwiches.

But as the decade came to a close, that dominance eroded. The chain, he said, racked up large amounts of debt by expanding too quickly and tarnished its bar and grill image by adding pricier, lower-quality entrees to its menu to compete with other sit-down chains.

"They stopped being defined as a brand and they started chasing Applebee's and Chili's," Holsinger said.

Atalaya is taking over at a challenging time for the restaurant industry. Casual dining chains are struggling to keep sales growing as more consumers bypass eating out for either fast food or meals at home, which are considered cheaper.

But by bringing the focus back to the bar business, Holsinger said, the chain can find its niche again.

In addition, he said he plans to open a new "fast-pub" concept that will marry alcoholic beverages with pub fare in smaller locations. The new concept would likely be found in malls, shopping centers and airports.

Holsinger also said the company plans to reopen 50 or 60 formerly company-owned Bennigan's locations by finding new or existing franchisees to operate the restaurants. Atalaya will also reopen a few of the Steak & Ale locations that closed due to the bankruptcy, he said.

Atalaya said Wednesday that it will buy the assets of both the Bennigan's and Steak and Ale brands. The assets include the Bennigan's Franchising Co., which owns the rights to franchise the Bennigan's brand and has helped keep franchise-owned restaurants up and running during the bankruptcy period.

The deal is expected to close Oct. 31.

The parent company of both the Bennigan's and Steak & Ale brands, S&A Restaurant Corp., filed for Chapter 7 bankruptcy at the end of July under pressure to repay its debts. S&A was owned by Metromedia Restaurant Group, a part of billionaire John Kluge's empire. In a Chapter 7 filing, a company seeks to liquidate its assets and close its doors.

The filing did not include 138 domestic and international franchisee-owned restaurants.

Holsinger said although it's a "very tough" environment for restaurants now, the chance to breathe life into the Bennigan's brand was too good to pass up.

"It's going to take a lot of work and a lot of rolling up the sleeves," he said. But, he added, "Bennigan's created a unique opportunity and these types of opportunities aren't available in bull markets," he said.