Ramada Agrees to Sell Its Marie Callender Pie Chain
The owners of the Ramada hotel and casino concern have agreed to sell Marie Callender Pie Shops--the coffee shop chain that began as a single bakery in Long Beach--to a private investment group, the company said Friday.
Ramada has entered into a definitive agreement to sell the Orange-based restaurant chain for an undisclosed price to Wilshire Restaurant Group of New York. The sale is expected to close within the next 30 days.
With the pie and sandwich chain’s purchase under its belt, Wilshire Restaurant expects “to make Marie Callender a national chain,” ideally within five years, said Michael Hayes, a director of the acquiring company.
The sale is part of a restructuring announced last October by Ramada, which has experienced weak earnings in its hotel and restaurant divisions. Ramada wants to sell those businesses and concentrate on its lucrative casino operations.
Marie Callender has 152 restaurants in 17 states. Of those, 105 are in California. Since Ramada acquired the chain in 1986 and named its own management team, Marie Callender’s operating income has fallen by more than 50%.
Wilshire Restaurant Group has no other restaurant interests. The venture was formed recently by two private investor groups, Hayes Financial Corp. and Hampton Ventures Inc., to buy Marie Callender Pie Shops. It plans to relocate its headquarters from New York to Orange County, Hayes said.
“We like the California economy. . . . Its growth pattern will continue to be strong,” Hayes said. “And we feel very comfortable that Marie Callender is the Cadillac of family-style restaurants.”
According to Don Callender, the chain’s former owner and Ramada’s second-largest shareholder, Wilshire Restaurant Group beat out several big names in the restaurant industry in the acquisition. Callender said other suitors included American Restaurant Group in Irvine, Hamburger Hamlet, Paragon Restaurant Group in San Diego and Shoney’s South in Nashville.
Hayes said 17 companies expressed interest in Marie Callender, but he would not identify them.
But people haven’t always beat a path to Marie Callender’s door.
The chain got its start in 1948 as a Long Beach bakery that made pies for a few restaurants. The pies for which it later became famous were based on the recipes of Marie Callender, now a retired widow who lives in Leisure World in Laguna Hills.
Her son, Don, built the pie specialty restaurant chain out of mom’s wholesale baking business. Eventually, he became president and chief executive of the family business.
Plans Were Changed
In 1986, Callender sold the chain to Ramada for nearly $57 million in cash and 2.5 million shares of Ramada stock. At the time, Ramada said it planned to place Marie Callender’s restaurants in or near its new hotels. Don Callender was to remain as president.
But things didn’t work out according to plans.
Ramada ended up appointing one of its executives to operate the chain, and Callender wound up on the sidelines.
Callender has since filed four lawsuits against Ramada. One suit charges the company’s officers and directors with breach of fiduciary duty in rejecting a buyout offer made last year by the Pritzker family of Chicago. The other suits accuse Ramada of fraud, conspiracy and alleged violations of the 1986 sale agreement. Ramada has cross-sued Callender and has denied any wrongdoing.
Meanwhile, the chain’s earnings were sliding.
For the first nine months of 1988, the Callender chain reported operating income of $7 million on revenue of $84.5 million. For the comparable period in 1987, operating income was $8.8 million on revenue of $113 million.
The downturn contributed to mounting problems at Ramada, which was experiencing declining profits within its lodging division, as well. The company’s only real winner was its gaming division, which has grown and prospered since Ramada acquired the Tropicana casino in Las Vegas in 1979. It later added casinos in Atlantic City, N.J., and Reno and Laughlin, Nev.
Called a ‘Smart Move’
Dudley Heer, an analyst with Duff & Phelps in Chicago, predicted that the sale of Marie Callender’s will prove to be “a very smart move” for Ramada. “I think they should concentrate on the gaming business,” he said. “That has the greatest potential for them.”
Don Callender said he does not oppose the sale to Wilshire Restaurant Group, but he regrets that the investors are not in the restaurant business. “Too bad they didn’t sell to a restaurant group,” he said.
But Ramada Chairman Richard Snell predicted that the new owners “will build the Marie Callender’s chain into an even stronger entity in today’s restaurant industry arena.”
