X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.

AUSTIN, TX-New ownership for locally based sandwich purveyor Schlotzsky’s is on the horizon after a bankruptcy judge in Texas approved a plan to sell the assets of the company by auction early in December. The sale would the latest event in a stormy period for the company, which uses the slogan “Funny Name. Serious Sandwich,” precipitated by large losses in 2003 and earlier this year.

The sale of Schlotzsky’s assets, approved the day before Thanksgiving by Judge Leif M. Clark with the United States Bankruptcy Court for the Western District of Texas, San Antonio Division, will be held on Dec. 7 at the Dallas offices of the company’s law firm, Haynes and Boone, with bids accepted the day before. “There are a number of leading contenders to buy the company, both strategic and financial,” Sam Coats, interim president and CEO of the sandwich maker, tells GSR. “People with financial wherewithal have partnered with restaurant operating backgrounds. This is very encouraging.

“At one time, this company had a market cap of more than $170 million, but when I started on June 17, market cap had dwindled to less than $11 million,” he continues. “We had too many stores that were negative cash-flowing, typically stores that corporate had taken back, which were then closed. Technically, the company was insolvent when I walked in the door,” says Coats, a former airline executive who was involved in the restructuring of Continental.

At its peak about five years ago, there were about 750 Schlotzsky’s. Now there are 511 restaurants in 36 states, the District of Columbia and six foreign countries. “It has the ability to grow again, and most of the suitors we’ve done due diligence with agree that the company needs to simplify things,” says Coats. “For example, I think you’re see more kiosk and in-line operations going forward.”

When the sale is completed, Schlotzsky’s will have new ownership, and will be able to operate the Schlotzsky’s brand, company restaurants, and franchise system without millions in debts that company is currently saddled with. The company sought Chapter 11 bankruptcy protection in August, after its board of directors fired then-CEO John Wooley in the wake of $11.7 million in losses in 2003, followed by $671,000 in losses in the first fiscal quarter of 2004. Wooley had been running the chain for 23 years, taking it public in 1995, and lost his job along with brother Jeff Wooley, an SVP with the company.

Though Wooley could not be reached for comment, he has publicly denounced his firing and the bankruptcy proceedings, asserting that bankruptcy was too extreme a measure for the problems that the company faced. Wooley owns about 12% of the Schlotzsky’s stock, and is also a subordinated creditor to the company.

Want to continue reading?
Become a Free ALM Digital Reader.

Once you are an ALM digital member, you’ll receive:

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 1 free article* every 30 days across the ALM subscription network
  • Exclusive discounts on ALM events and publications

*May exclude premium content
Already have an account?

Dig Deeper

 

GlobeSt

Join GlobeSt

Don't miss crucial news and insights you need to make informed commercial real estate decisions. Join GlobeSt.com now!

  • Free unlimited access to GlobeSt.com's trusted and independent team of experts who provide commercial real estate owners, investors, developers, brokers and finance professionals with comprehensive coverage, analysis and best practices necessary to innovate and build business.
  • Exclusive discounts on ALM and GlobeSt events.
  • Access to other award-winning ALM websites including ThinkAdvisor.com and Law.com.

Already have an account? Sign In Now
Join GlobeSt

Copyright © 2022 ALM Global, LLC. All Rights Reserved.