Burger giant sells Donatos

The world's largest restaurant company said it will sell its 182 U.S. Donatos restaurants back to original owner Jim Grote for an undisclosed amount. Mr. Grote, who founded the Columbus, Ohio-based chain some 40 years ago, sold it to McDonald's in 1999.

The Globe and Mail
December 16, 2003

Burger giant sells Donatos
McDonald’s signals a return to basics
Deborah Cohen

CHICAGO — McDonald's Corp. yesterday gave Wall Street its latest signal that it is sticking to the basics of selling hamburgers and fries, announcing that it will sell its Donatos pizza business and curb growth of its other non-hamburger brands.

The world's largest restaurant company said it will sell its 182 U.S. Donatos restaurants back to original owner Jim Grote for an undisclosed amount. Mr. Grote, who founded the Columbus, Ohio-based chain some 40 years ago, sold it to McDonald's in 1999.

Wall Street had been expecting McDonald's to disclose sell-off plans for some or all of the so-called "partner brands," which also include fresh Mexican Chipotle chain and homestyle meal chain Boston Market. Combined, all three lost $66.8-million (U.S.) in 2002. Their $1.1-billion in sales are just a fraction of McDonald's $41.5-billion total. The company had promised news by year-end.

McDonald's shares closed down 36 cents at $25.42 on the New York Stock Exchange yesterday. Analysts said there was some disappointment that the company did not lock in a deal to also divest the Boston Market chain.

"Keeping Boston Market surprised us," said CIBC World Markets analyst John Glass in a note yesterday. "While Chipotle is a proven winner … Boston Market is break-even and [average store unit volumes] a lacklustre $1-million," he said.

McDonald's had also considered selling the Boston Market chain but was unwilling to part with it too cheaply amid a lack of interested buyers, according to sources familiar with the matter. Big private equity firms such as Texas Pacific Group and Thomas H. Lee Partners were said to be unwilling to bid.

The company plans to limit development of Chipotle and Boston Market to its primary U.S. market.

Currently it operates 285 Chipotles and 652 Boston Markets in the United States. Oak Brook, Ill.-based McDonald's has closed or will be closing all of its non-U.S. Boston Market and Donatos restaurants. The company was running two Canadian Boston Market units.

McDonald's said it expects to post charges of 23 to 28 cents a share in the fourth quarter, largely owing to actions it is taking with its non-hamburger restaurants, annual asset impairment and other issues.


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