Hudson's Grill Rebounds

The chain, now Dallas-based, has spent 10 years overcoming lease workouts in California to get the operation back on a growth track, Robert Fischer, general counsel and director of Hudson's Grill International, tells GSR. Part of the rebuilding plan was to take the company public in 2001 and rework the business model for franchise-only expansion, he explains. Since that decision, operators have been picked up in Michigan and Iowa and the newest one signed just a few weeks ago in De Pere, WI.

Fischer says Hudson's Grill will be debt free from its California troubles by mid-2005. The problem, he says, arose over "seven or eight" shuttered Pelican restaurant locations, including some Wendy's franchised sites, that were part of a predecessor company. "There was almost $2 million paid out in dead leases that we fell heir to...all for dead assets," he says.

Rather than find another way out, Hudson's Grill's new owner, David Osborn, charted a rebuilding course to repay the debt and keep the concept on track. "They wanted to do it the honest way," Fischer says. "The guys who are involved are straight forward. We felt the concept was fine. It had value." What happened in California is that landlords aren't obligated to mitigate leases for darkened locations, says Fischer, adding "it was just the fate of bad luck."

The current 12-store chain uses Hudson Motorcar original grills, picked up at automobile graveyards, a Wurlitzer jukebox with late 1950s and early 1960s Rock 'n' Roll music and a soda fountain counter for a step back in time when white T-shirts and pink poodle skirts were popular attire and Elvis was America's heartthrob. Restaurants include televisions...big screen models along with video monitors to marry the "Good Old Days" with a bit of technology from the New Age.

According to Fischer, the plan is to add "one or two" franchisees per year. "We want to grow naturally," he says.

Fischer says he was surprised by the new-found interest in the Hudson's Grill concept since it came practically out of the blue and right at the time that there was light at the end of the tunnel. Even more surprising, he adds, is the interest came from the Midwest. "We thought it would be California and Texas," he says.

In late October, Creekside Trail Inc., led by Peter Palm, inked a franchise pact to open two restaurants in three years in De Pere, WI. Earlier in the year, Hudson's Grill signed a deal with an Iowa-based limited liability company, led by Susan Heim and family, to open a restaurant by early 2005 in a new shopping center in Dubuque. And Hudson's Grill franchisee, James Stabile, in Marquette, MI, is planning two more stores within three years, according to Fischer.

According to Bond's Franchise Guide, there are 163 franchises in the family-style restaurant industry, of which there are 16,571 franchised units versus 11,154 corporate-owned units. The average franchise fee for a family-style restaurant in the US is $35,500 and the total investment $888,800. The average ongoing royalty fee is 4.4%.

Hudson's Grill, a full-service restaurant, is following true to the industry standards, setting $35,000 as the franchise fee and 4% for the royalty rate in 20-year agreements. Another 1% is levied for ongoing advertising royalty. According to the company Website, it costs $115 per sf to $155 per sf to build the typical 4,500-sf Hudson's Grill from the ground up. The equipment package, priced at $175,000 to $300,000, includes fixtures, signs, decor, uniforms, jukebox and back-office system. Franchises are being offered in Canada, Mexico, the Caribbean, Latin and South America, Western and Eastern Europe, Asia and the Pacific Rim, the Middle East, Africa, Indonesia and Australia as well as all 50 US states.