44.kookoo/greene/dt1st/mark2nd

No. 44

Family Restaurants Buys Koo Koo Roo

Even Lee Iacocca couldn’t turn Koo Koo Roo around.

The former Chrysler Chairman was named chairman of the Los Angeles-based restaurant chain earlier this year in the hopes of fixing a company that had been without a profitable quarter since it went public in 1991. But in June, Koo Koo Roo agreed to be acquired by Irvine-based Family Restaurants Inc. to form a new chain with an estimated $540 million in annual sales at 313 restaurants in the United States.

Iacocca stayed on as a board member of the new company, as did Koo Koo Roo CEO William Allen. Kevin Relyea, who headed privately held Family Restaurants since 1995, was named chairman, president and CEO of the new company, to be called Koo Koo Roo Enterprises.

Koo Koo Roo sells a variety of fast food and prepared foods, such as skinless chicken. Aggressive cost-cutting couldn’t stem the tide of red ink at the chain, which reported losses in 1997 of $29.4 million on sales of 68.3 million.

The much larger Family Restaurants, which operates 273 Chi-Chi’s, Casa Gallardo and El Torito Mexican-food restaurants in 30 states, also has had its problems, losing $31.5 million in 1997 on sales of $463.7 million (although much of that loss was attributed to interest payments on debt).

Analysts said the merger was a good move for Koo Koo Roo, which will benefit from the financial and management muscle of the larger company.

R.W. Greene