Sizzler Orders Big Stake in Oscar’s Restaurant Chain

Sizzler International Inc., the Culver City-based operator of Sizzler restaurants, said Wednesday that it agreed to buy a majority stake in Oscar’s Restaurants, a small chain of casual restaurants that also specialize in takeout and delivery--dining concepts that have cut into Sizzler’s market.

Sizzler International will pay $21 million in cash and stock for an 82% interest in San Diego-based Oscar’s and provide as much as $9.5 million in financing to help the chain expand. Oscar’s, whose menu includes gourmet pizza, baby-back ribs and barbecued chicken, has eight restaurants, including two in Orange County.

Analysts said the move offers another growth vehicle for Sizzler, the once-highflying chain of casual-dining restaurants that emerged from Chapter 11 bankruptcy protection in 1997 and has struggled to retain its former standing in an increasingly crowded restaurant sector. In 1999, Sizzler posted $226.3 million in revenue, down 6.6% from 1998.

Half of Oscar’s business--it reported $22 million in revenue in 1999, up 37% from 1998--comes from takeout and catering. These are options known in the industry as “home-meal replacement”--a niche that looks to provide quality meals at fast-food turnaround times, which consumers are demanding more and more.

“Oscar’s offers Sizzler a kind of bullet in the gun to help accomplish growth,” Irvine-based restaurant consultant Randall Hiatt said. “They aren’t growing at the rate they were” in the late 1980s.

Same-store sales at privately held Oscar’s grew 15% in the quarter ended March 31. In contrast, Sizzler’s same-store sales--the industry’s best measure of performance--grew 4.7% in its fiscal third quarter ended Feb. 6.

Sizzler Chief Executive Charles Boppell said he expects the Oscar’s restaurants to increase sales by a minimum of 30% a year.

“Adding this brand is allowing us to continue to grow the Sizzler’s brand but also giving us something more mainstream,” Boppell said.

He said Sizzler has been seeking to acquire another chain for the last year. Oscar’s, which is primed to benefit from the marketing strength of its larger partner, was the only company that met all its goals of profitability and growth.

Analysts speculated that Sizzler might try to convert some of its poor-performing units into Oscar’s restaurants. But Boppell said the company wasn’t considering that strategy, but it does plan to open two more Oscar’s locations this year and four or five in the next several years.

Oscar’s restaurants will keep their name, and Boppell said he expects the chain’s headquarters to remain in San Diego, where it was founded in 1991 by Oscar and Pat Sarkisian. Their son, John Sarkisian, is chief executive and is expected to stay on board.

Sizzler International operates or licenses 348 Sizzler restaurants worldwide and 101 KFC restaurants in Australia.

The acquisition is expected to close by September. Sizzler shares rose 31 cents to close at $2.88 on the New York Stock Exchange.