Dive Brief:
- Luby's, Inc. has entered into an agreement to sell its Fuddruckers franchise business operations to Black Titan Franchise Systems, a newly formed affiliate of Nicholas Perkins, according to a press release. Fuddruckers currently has 92 locations operating in the U.S.
- The deal has an expected value of $18.5 million, most of which will be driven by the purchaser's issuance of a note to Luby's and the assumption of certain liabilities. The transaction is expected to close within the next 90 days.
- This transaction is the latest step in Luby's plans to liquidate and sell its assets, which the company previously said would generate $92 million to $123 million.
Dive Insight:
Following shareholder approval of Luby's liquidation plan, the company and its financial advisor contacted 150 entities during the sales process before accepting the best offer, which came from the Perkins Group. Luby's previously worked with Perkins' affiliate Black Titan Holdings in December when it agreed to franchise 13 of its 24 corporate stores.
"As a Fuddruckers franchisee, I have a vested interest in ensuring that all Fuddruckers franchisees have the resources, infrastructure, and operational and marketing support they need to maximize their return on investment," Nicholas Perkins, CEO of Black Titan Franchise Systems, said in the press release.
Luby's is also in advanced discussions to franchise an additional 14th corporate store to Black Titan Holdings. After these transactions, Luby's will own only five standalone Fuddruckers locations.
Black Titan Franchise Systems will be inheriting a business that was in decline last year during the pandemic. Franchise revenue was down 45.7% to $3.6 million during fiscal year 2020, ending Aug. 26, 2020 compared to $6.7 million in revenue during fiscal year 2019 ending Aug. 28, 2019, according to the company's 2020 annual report.
Despite this loss, however, the fast casual segment's rapid recovery bodes well for Fuddruckers' ability to recoup lost revenue. Total fast casual customer transactions increased 2% in May 2021 compared to May 2019, according to data from The NPD Group.
Luby's is still looking for a buyer of its cafeterias and its contract management company, Luby's Culinary Contract Services, Restaurant Business reports.
