Irvine-based American Restaurant Holdings Inc. has bought three restaurant chains over the past 15 months with combined systemwide sales “approaching $40 million,” Chief Executive Tim Betts said.
Now it has to run them.
“Our plan in 2015 is to grow the brands,” he said.
The three chains—its first multiunit buys—are Fresca’s Mexican Grill in Costa Mesa; JoJo’s Pizza Kitchen in Chino Hills; and Muscle Maker Grill in Colonia, N.J.
The acquisitions fit the company’s plans to buy “stable, cash-flowing,” multiunit fast-casual chains, and it so far has focused on underperforming brands.
The $40 million in sales would put American Restaurant Holdings at about No. 29 on the Business Journal’s list of restaurant companies based in Orange County, just cracking the ranking.
OC locations planned or already open in the three chains total about 20.
Variety
The diversity of the acquisitions—Mexican, Italian, and American—is part of the plan.
“One of our goals is a strong presence in the food courts,” Betts said. “We want to provide multiple alternatives” to consumers, and to franchisees who might want to own more than one brand.
Betts said a unifying element is “the food you love with a healthy spin” and that he expects the three chains to find healthful alternatives in their own niches—gluten-free pizza dough or turkey meatballs instead of beef at JoJo’s, for instance—and to “cross-pollinate” in mix-and-match menu development: What can Fresca’s take away from a healthier nachos item at, say, Muscle Maker Grill?
The company also has two stand-alone restaurants: Canyon Fireside Grille in Rancho Santa Margarita, and Fronteras Mexican Grill and Cantina in Alhambra.
The former was recently remodeled and has a new menu.
The latter will become a Fresca’s, Betts said.
Franchise Plans
Betts said that this year he plans to open a couple of company-owned stores in each chain and lay the groundwork for further franchising.
The three chains total roughly 70 restaurants and 800 employees, including at franchised and licensed locations.
About 90% of the system is franchised.
American Restaurant directly employs about 200 of the 800 employees, Betts said.
Fresca’s has eight restaurants: five company-owned locations in Orange County, and three licensed at outlet malls managed by Newport Beach-based Craig Realty Group in Los Angeles, Phoenix, and Woodburn, Ore.
JoJo’s has one restaurant each in Brea, Mira Loma and Chino Hills.
Betts said JoJo’s would likely add sites in the Inland Empire, where two of its three locations are.
“It could be existing pizza locations that would switch over,” which would reduce startup costs, he said.
Fresca’s is planned for the internal switch in Alhambra, with future locations franchised, not licensed.
Muscle Maker has about 55 locations in 11 states, more than 80% of them in New Jersey and New York. It has two California locations in the San Francisco Bay area.
The chain had about 64 locations in 2013, according to a restaurant trade journal, and is nearing that level again.
Seven new franchised locations are scheduled to open in six states—including an entry in North Carolina—by midyear.
Betts said he plans to open two company-owned locations in Irvine this summer.
Orange-based Muscle Maker franchisee Veejay LLC has agreed to open seven to 10 locations in OC over the next five years.
Muscle Maker brings franchising experience that can help the parent company’s overall efforts, Betts said.
The founder and management team from that purchase includes former Pizza Hut President Bob Morgan, chief operating officer of Muscle Maker Grill, an executive Betts said would aid in developing the franchising program.
“We’re leveraging our own expertise … to do the franchising.”
Financial Future
Betts said he worked in venture capital in the 1990s.
“I come from the investment side,” representing companies that wanted to be acquired, he said.
He advised those companies and began to make minority investments under Irvine-based Nobis Capital Advisors Inc., then began to investigate industries where he could buy or control companies outright.
“We spent about a year looking … and ended up in fast-casual” in January 2013, he said.
Betts took over a nonoperating shell company in the middle of that year and formed ARHI.
American Restaurants LLC is its operating entity, which forms separate affiliates to run each acquisition, Betts said.
It’s publicly listed over-the-counter, but the stock almost never trades, according to Yahoo Finance: 1,200 shares total have traded on six days over the 15 months covering its recent acquisition activity.
Yahoo and Google list the company’s float at 98,000 shares, for a market cap of $220,000 at its steady price of $2.25 a share, but information Betts provided shows 254 shareholders and 39.4 million shares for a market cap of about $89 million.
He said the company is “working on our financials” to become a fully reporting company.
