From Nation’s Restaurant News breaking news:
P.F. Chang’s to help develop True Food Kitchen
By Ron Ruggless
SCOTTSDALE , Ariz. (Aug. 12, 2009) P.F. Chang’s China Bistro Inc. said Wednesday it has agreed to lend $10 million to Fox Restaurant Concepts to develop more units of Fox’s True Food Kitchen, a health-oriented eatery that opened late last year in Phoenix.
Terms of the deal were not disclosed, but P.F. Chang’s said the debt capital could be converted into a future majority equity position. Fox Restaurant Concepts president and chief executive Sam Fox partnered with wellness author Dr. Andrew Weil to open the restaurant in the Biltmore Fashion Park as a regionally sourced “global” eatery.
“We have admired the work of Sam Fox and his team for quite some time,” Bert Vivian, co-chief executive of P.F. Chang’s, said in a statement. “We are pleased to be able to provide capital for the growth of their newest creation.”
P.F. Chang’s said the transaction would not have a material impact on its financial condition or prospects for the foreseeable future. In 2005, P.F. Chang’s first ventured outside its China Bistro and Pei Wei Asian Diner concepts to open Taneko Japanese Tavern in Scottsdale. The concept failed to gain a profitable following and was closed after sale attempts were made in 2008.
Read the rest of the article here:
I find this to be an interesting trend, especially in these days of rough economic waters. Restaurant chains becoming debt capitalists in order to diversify their holdings without actually creating new companies themselves? As the article indicates, it might not always be smooth sailing, but it it a creative use of capital. This sort of thing has gone on in other industries, and, for all I know, it might not be a new development in the restaurant world, but I’m more familiar with buyouts and mergers. Obviously, this could lead to ownership or a true merger down the road.
Whether or not this ends up offering a good return on investment, it’s just another way that P. F. Chang’s seems to be thinking outside the box. But I guess it’s just business as usual for the only company that has really been successful at growing a nationwide Chinese-themed restaurant chain – note I didn’t call it a Chinese restaurant chain. Other larger entities (Darden by way of General Mills) have tried it and failed.
I suspect that the companies that survive this economic downturn are the ones that aren’t scared to cautiously expand, either into their areas of strength or in creative ways such as this. Refusing to give into panic is key – finding ways to create what the military calls force multipliers will allow operations to aggressively combat weak economic times. This might include cost-cutting measures, but, as doctors found in the 18th century, bloodletting only gets you so far.