Round Table Pizza Files Chapter 11

<p>
Round Table Pizza, the 500 unit, privately held pizza coop, filed&nbsp; for Chapter 11 reorganization Wednesday. The company could not pay down a&nbsp;$30M balance on a initial $65M line of credit negotiated with GE Capital and Prudential&nbsp;in 2006 as required.<!--break--> It also owes $1.3 to its food distributor.</p>
<p>
Round Table has 150 company units and 355 franchisee units (a total of 148 individual franchisees).</p>
<p>
The company noted it would close unprofitable company stores, renegotiate leases and&nbsp;attemp to restructure its line of credit.&nbsp;&nbsp;Franchisee units remain open.</p>
<p>
Round Table struggled with intense competition, its general California unit overweighting and associated sales weakness, closed stores, employee stock ownership plan expense and wage and hour lawsuit expense.&nbsp;Its systemwide revenue in 2006 was $120M and fell to $112M in 2010, only 53% of the proforma that accompanied the $65M loan.</p>
<p>
We think it&#39;s position was just overwhelmed over time..</p>
<p>
We spoke with Round Table in 2006 and remember that then 75% of its sales mix was deal, coupon related.&nbsp;</p>
<p>
Its bigger chain competitors, Dominos and Pizza Hut regained&nbsp;US same store sales momentum in 2010 with their new pizza formulation (DPZ), and $10 any/any (PH)&nbsp;pitches after sales declines in 2007-2009. Papa John&#39;s sales levels were generally steady through that period and did not have the large 2007-2009 decline..</p>
<p>
As always we wonder and concerned what will be the impact on the franchisees. The franchisees own on average 2.4 units each, about half that of other QSR mega giants..&nbsp;&nbsp;</p>
<p>
_______</p>
<p>
<em><span style="font-size:11px;">About the author: Chain Restaurant Financial analyst John A. Gordon of <a href="http://www.pacificmanagementconsultinggroup.com&quot; target="_blank">Pacific Management Consulting Group </a><br />
</span></em></p>