O'Charley's

O'Charley's

Type	Public (NASDAQ: CHUX)
Industry	Restaurants
Founded	1969
Founder(s)	Charley Watkins
Headquarters	Nashville, Tennessee, United States
Number of locations	343
Area served	Southeast and Midwestern United States
Key people	David Head(CEO)
Revenue	US$830.1 million (2010)
Operating income	US$-17.3 million (2010)
Net income	US$-34.9 million (2010)
Total assets	US$422.7 million (2010)
Total equity	US$178.2 million (2010)
Website	http://www.ocharleys.com

O'Charley's is a casual dining restaurants chain in the United States, with more than 240 company-owned locations. O'Charley's is located in 17 Southern and Midwestern states, including four franchised O'Charley's restaurants in Michigan, one franchised O'Charley's in Ohio, three joint venture O'Charley's restaurants in Louisiana, and one joint venture O'Charley's restaurant in Wisconsin.

O'Charley's is part of the parent company O'Charley's, Inc. Enterprise, a multi-concept restaurant company that operates or franchises a total of 363 restaurants under three brands including O’Charley’s, Ninety Nine Restaurant, and Stoney River Legendary Steaks.

History

Charley Watkins founded O'Charley's restaurant in 1969 with a single restaurant on 21st Avenue South in Nashville, across the street from Vanderbilt University. Watkins ran O'Charley's from 1969 to 1984 when he sold the restaurant to David K. Wachtel. David K. Wachtel spent 23 years working for Shoney's where he eventually became president and chief executive officer of the restaurant company. Wachtel resigned from Shoney's in 1982. Wachtel intended to develop the O'Charley's restaurant into a restaurant chain. In mid-1987, the 12th O'Charley's opened in Lexington, Kentucky, occupying a site formerly used by the Bennigan's chain of restaurants. While the Lexington grand opening was under way, Wachtel was working on plans to convert two more Bennigan's units in Huntsville, Alabama and Nashville, Tennessee into O'Charley's.

In the three years following Wacthel's purchase, O'Charley's had developed into a small regional casual dining chain of restaurants. In July 1990 O'Charley's had an initial public offering (IPO) of shares. The conversion to public ownership represented the second tool used by Wachtel to speed expansion. O'Charley's made its debut in the public spotlight just before tensions in the Persian Gulf flared and the United States implemented Operation Desert Storm. Further, a national economic recession was under way, exacerbating the effects of O'Charley's ill-timed IPO.

Following the initial public offering, O'Charley's per restaurant sales and profits plunged, falling to among the lowest in the restaurant industry nationwide precipitating a two-thirds fall in the stock price of O'Charley's compared to its initial value.

Five new restaurants were opened in 1990 and another five debuted in 1991 providing a presence in several small market Southern cities. By mid-1992, O'Charley's expanded to a 37-unit chain with restaurants clustered in eight Southeastern states. Three additional restaurants were slated for openings by the end of 1992 and another five units were scheduled to be developed in 1993. A renewed optimism regarding the company's expansion plans was attributable to the first financial results recorded after the menu and pricing changes were made in 1991. For the first fiscal quarter of 1992, O'Charley's reported a 30 percent jump in sales and a more encouraging 37 percent gain in profits, convincing management that the switch to a smaller menu had been the right move.

In June 1992, O'Charley's signed a letter of intent to form a partnership to purchase Logan's Roadhouse restaurant, a casual steakhouse restaurant with a grill in public view, concrete floors, muraled walls, and buckets of peanuts in a "honky-tonk" atmosphere. Under the terms of the deal, the partnership called for the establishment of a minimum of five additional Logan's Roadhouse restaurants during the ensuing five years, with the second unit targeted for its grand opening in Nashville in August 1992. O'Charley's became a 20 percent owner in the partnership with the remaining 80 percent belonging to a small group of investors that included Wachtel and senior vice-president and chief operating officer, Charles F. McWhorter, Jr..

Slightly less than a year after Wachtel signed the Logan's Roadhouse agreement, he began to fade from the foreground at O'Charley's. In May 1993, Wachtel relinquished day-to-day control as president and chief executive officer to devote more time to other business projects, but continued to serve as chairman of O'Charley's. In his place, Gregory L. Burns was named president and selected to the additional post of chief financial officer, while McWhorter climbed the corporate rungs to the chief executive position. Although the orchestrator of O'Charley's resolute expansion for the previous nine years had stepped aside, the pace of expansion did not slacken in his absence.

In December 1993, Burns and McWhorter announced the formulation of a growth strategy designed to carry the 45-unit chain into the ranks of the country's largest regional dinner-house chains. In 1994, the company planned to open at least eight new O'Charley's restaurants, situating the new units primarily in southeastern markets such as Cookeville, Tennessee; Louisville and Paducah, Kentucky; and Palm Harbor, Florida. It was a year expected to be filled with news of new restaurant openings, but as the calendar flipped to 1994 other headlines grabbed the attention of both those inside and outside the company. In February 1994, Wachtel resigned as chairman of O'Charley's, citing his "pressing commitments" with other business interests, the most notable of which was the 300-unit Western Sizzlin' budget steakhouse chain he had acquired in 1993. Wachtel's full departure from O'Charley's made room for advancement for Burns and McWhorter. Burns was named chief executive and co-chairman and McWhorter was tapped as president and co-chairman. One month after Wachtel's resignation, the company received devastating news when it was announced that four former O'Charley's employees had filed a federal lawsuit charging the restaurant chain with racial discrimination practices against African Americans in the company's hiring, assignment, and promotion procedures. Burns flatly denied the charges, saying the lawsuit was "without merit and the company intends to defend it vigorously."

Brighter news for O'Charley's management arrived in 1995 when the company's involvement in the Logan's Roadhouse partnership turned into a source of cash to fund expansion during the year. The partnership completed an IPO in July 1995, netting O'Charley's $11 million, or more than half of the money needed to open the 11 new restaurants scheduled for grand openings in 1995. Meanwhile, to Burns's and McWhorter's consternation, the attorneys for the plaintiffs in the racial discrimination lawsuit were seeking to win class-action status, which threatened to broaden the scope and deepen the damage of the lawsuit. The attorneys were successful in winning class-action status.

O'Charley's agreed to settle the racial discrimination lawsuit it had been facing since 1994. In agreeing to settle the suit, and pay what eventually would amount to $6.2 million, Burns was adamant in his denial that there was any truth supporting the charges, declaring, "We agreed to this settlement because of the significant distraction the lawsuit has had on management and the uncertainty it has caused in the marketplace." One month after the settlement was announced, another management shakeup occurred when McWhorter resigned as president after his six-year tenure at the company. His departure left Burns in full power, occupying the posts of chief executive officer, president, and chairman of the board. The settlement of the lawsuit struck a decisive blow to O'Charley's profit total for 1996. After recording $10.6 million in profits for 1995, which had been inflated by the money gained through the sale of its stake in Logan's Roadhouse, O'Charley's registered a $1.15 million loss for 1996 on an 11 percent gain in sales to $164.5 million.

With its problems in the past, O'Charley's looked to significantly expand in the following years. By 1999 store count had surpassed 106 units. Led by Burns, the company began to entertain the idea of a growth-through-acquisition strategy. The firm made a play for the J. Alexander's chain in 1999 but its attempts were rebuffed by the J. Alexander's board of directors. At the same time, O'Charley's itself opted to turn down a buyout offer made by Wachtel, who believed the chain's shareholders would best be served by taking the chain private through a management-led leveraged buyout.

O'Charley's purchased an upscale Georgia-based Stoney River Legendary Steaks chain in 2000, from Pierre Panos and David Rowe, planning to open three new locations each year through 2004. O'Charley's then took its strategy one step further with the purchase of the casual-dining Ninety Nine Restaurant & Pub, an 80-unit chain with locations in Massachusetts, New Hampshire, Rhode Island, Maine, Vermont, and Connecticut. Announced in late 2002 and completed in early 2003, the deal bolstered the company's holdings by nearly 40 percent and gave it a solid foothold in the northeastern U.S. market.

New O'Charley's constructed in 2008 in Hendersonville, Tennessee.

During 2002, O'Charley's opened 24 new restaurants, bringing its total store count to more than 180 locations. The company was named to Forbes's "200 Best Small Companies in America" list for the third consecutive year in 2002, a testament to its successful expansion efforts during a considerable downturn in the U.S. economy. With sales and profits climbing steadily, management remained focused on strengthening its position as a multi-concept operator. The company also was looking into franchise options as a vehicle for future growth.

In 2004, Meritage Hospitality Group, Inc. opened an O'Charley's in Grand Rapids, Michigan as the nation’s first "O’Charley’s" restaurant franchisee.

In 2007, O'Charley's closed its Nashville commissary and distribution center, and began using Performance Food Group to distribute product to all of its locations.

Awards

Named to Forbes "200 Best Small Companies in America" list for the third consecutive year in 2002.

Menu

The menu features a wide selection of appetizers, salads, steaks, sandwiches, burgers, entrees and desserts. Often individual restaurants will personalize dishes, making them variants of the listed menu items, and adding their own flair and style to the entree.

There are moderately priced menu items such as steak, chicken, pasta, and seafood.

References

• Official website

External links

• O'Charley's.com