GREENWOOD VILLAGE, CO-The Red Robin restaurant chain has signed a letter of intent to acquire 17 franchised locations in California for $47.5 million. The non-binding letter of intent applies to Red Robins that are owned by Top Robin Ventures and Morite of California, and the deal is contingent upon purchase price adjustments, minus any assumed debt.

The letter of intent also provides for up to an additional $3 million purchase price earn-out to be paid in 2008 upon the acquired restaurants achieving certain 2007 sales targets.The 17 restaurants generated $56.3 million in revenue in 2006.

The territory covered by the exclusive franchise rights of the sellers includes the area of Los Angeles County north of Interstate 10, the California counties of San Luis Obispo, Santa Barbara, Ventura, Fresno, Kings, Tulare and Kern, as well as a portion of Riverside County. Red Robin, which expects the acquisition to close in the second quarter of 2007, subject to customary closing conditions, anticipates funding the purchase through borrowings under its line of credit.

The Red Robin franchisees who are selling the restaurants have operated them for about 20 years and have expanded steadily during that time, according to comments in a conference call this morning in which Red Robin officials discussed the acquisition.Dennis Mullen, chairman and chief executive officer of Red Robin, said that the two were among the first franchisees in California and that while he could not be sure of their reasons for selling, the franchisee founders were advancing in age and that was likely a factor in their decision to sell.

The most recent stores to open in the franchisee area debuted about a year ago, Mullen said, and Red Robin will evaluate whether to expand further in the territory. “Obviously, we think there is potential” for expansion, he said.

Top Robin Ventures and Morite rank among the largest franchisees of Red Robin restaurants. The chain operates 349 restaurants across the US and Canada.

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