Frisch's sold for $175M to private equity firm

Frisch's Restaurants Inc. is being sold to a private equity fund for $175 million, the company said Friday morning. The iconic local chain will continue to operate its Big Boys as full-service family dining restaurants.

The new owners pledged to stay true to the beloved company's roots, though some changes could be in store.

The transaction is expected to close before the end of September.

The $34 per share cash offer is a premium of about 21 percent over Thursday's closing price of $28.12 for Frisch's shares.

Craig F. Maier, the company's chief executive officer, and Karen F. Maier, the company's vice president of marketing, will retire but remain as franchisees of Frisch's. Each owns one location and will continue to do so.

Frisch's owns and operates 95 Big Boy restaurants in Ohio, Kentucky and Tennessee and licenses 26 others in Ohio, Kentucky and Indiana.

"We are pleased to have reached an agreement that maximizes value for our shareholders and ensures the iconic Frisch's restaurants can continue to provide a full-service family dining experience to our guests," said Craig Maier, in a statement.

"This is the culmination of over two years of strategic planning and this is the right transaction for the company," Maier said. "Frisch's has been a family operated business since my grandfather opened our first drive-in in 1939. On behalf of my entire family, I'd like to thank our loyal customers for allowing us to serve them ever since."

Maier owns 10 percent of Frisch's Restaurants, for which he'll be paid $17.5 million, while his sister owns 6 percent for which she'll receive $10.5 million.

Neither Maier nor the head of the Atlanta-based firm buying Frisch's were available for comment Friday.

"Frisch's restaurants are among the most classic and adored family restaurants in the country," said Aziz Hashim, NRD Partners I's chief executive officer. "We are excited to have an opportunity to acquire and implement our franchise growth strategy with this beloved brand."

NRD previously had specialized in owning restaurants. But now it's running what Hashim has called the first equity fund owned by franchise owners.

"We look at franchise companies not just as financial vehicles but as living entities... Our goal is to use our operational and financial expertise to position high quality brands for accelerated growth," the firm states on its website.

But in an August profile in Franchise Times magazine, Hashim is referred to as 'franchising's squeakiest wheel" and as planning to gain clout for "fellow operators, by buying brands and trying to fix them."

The article describes Hashim as planning to "buy brands and remake them the right way. But does he know the secret sauce that transforms a franchise? ... 'I'm going to give it a whirl,' " he told the magazine.

Walnut Hills-based Frisch's is a local icon. Most Cincinnatians remember growing up eating at their neighborhood Big Boy. Today, Frisch's is instantly recognized by its quirky ads asking: "What's your favorite thing?"

But the company's modest growth and thin profit margins have failed to make it a Wall Street darling – the stock trades at about half the valuation of other publicly-traded sit-down diner concepts.

Frisch's Restaurants tried numerous other ventures to augment its Big Boy eateries.

Through the past decades, the company has tried franchising restaurants as far away as Florida and Texas and four other restaurant concepts, two hotels, a horse farm and a 7.5 percent stake in the Cincinnati Reds.

Maier became CEO in 1989 and spent his first decade trying to grow the other businesses, before having to wind down those operations.

"All those businesses worked for a while ... but when they stopped making money, we went back to our base," Maier told The Enquirer last fall.

By the late 1990s, Frisch's sought rapid growth through the Golden Corral buffet eateries. From 1999 to 2007, Frisch's spent $106.9 million building 35 Golden Corrals.

But while Golden Corral sales became as much as a third of total revenues, they weren't profitable enough to keep.

Frisch's sold its struggling 29 remaining Golden Corral franchises for $49.8 million back to Golden Corral Franchising Systems of North Carolina in 2012 – exercising a right of first refusal that pushed aside an identical offer by NRD Holdings.

Frisch's shares have rebounded since it exited Golden Corral in 2012.

The company has been the subject of rampant takeover speculation for at least a year.

Last September, the company's stock shot to an all-time high of $30.90 on word that a Hollywood-based hedge fund had taken a 5.2 percent stake in the company and signed a nondisclosure statement.

Maier, the grandson of company founder David Frisch, at the time downplayed the investment by the firm, AOF Management. Shares settled down after a deal didn't materialize.

Family support for any transaction is critical: A 22 percent stake means a lot of "no" votes for unacceptable offers.

Still, Maier last fall admitted a fourth generation of Maiers would not take the helm. Other family members are not involved in the business and Maier's own children are too young and expressed no interest in it.

Then 64, Maier was about the age his father, Jack, was when he turned the reigns over to his son and became chairman of the board. The elder Maier remained chairman until his death at age 80 in 2005.