Conga Room Owner Sets Sights on Storied Hamburger Hamlet Chain

By DEBORAH BELGUM

Staff Reporter

The real estate investor and restaurateur behind the popular Conga Room nightclub plans to buy the storied Hamburger Hamlet chain for $15 million.

The deal with Orange County-based Prandium Inc. for the 14-unit eatery is part of a prepackaged bankruptcy reorganization plan filed May 6. It is set to close some time after July 24, pending approval by the U.S. Bankruptcy Trustee, according to Robert L. Carl, Prandium's vice president of investor relations.

"One of the terms of our (bankruptcy) agreement required us to sell Hamburger Hamlet," Carl said. "If not for that, we would continue to operate it because it is a great concept and a great chain."

Buyer Brad Gluckstein believes that the chain, with 10 locations in Southern California and four on the East Coast, is a good investment because of its name recognition and popular locations.

"I think the name has tremendous brand equity," said Gluckstein, principal of Latin Intellectual Properties Inc. and Apex Realty Inc. (neither of which is involved in the purchase). "That, coupled with some good old-fashion attention to service and hospitality, led to my interest."

The 14 restaurants had revenues of $32.4 million in 2001, down from $33 million a year earlier. The average restaurant check was $10.18.

The four East Coast restaurants are the strongest link in the chain, Gluckstein said. In Southern California, the Pasadena, Hollywood and Sherman Oaks restaurants are revenue leaders.

Fancier fare

When Hamburger Hamlet was started in 1950 by Marilyn Lewis and her actor husband Harry Lewis, burgers were a staple of the menu. The first restaurant opened on Sunset Boulevard in West Hollywood and soon became a popular spot among celebrities; Tony Curtis and Debbie Reynolds would hang out there for coffee klatches.

Restaurant analysts noted that one of the stronger selling points of the chain, once dubbed the "coffee shop to the stars," was leases in Brentwood and Hollywood.

"The one good lure of Hamburger Hamlet is they have some really pretty good locations. Their West Los Angeles real estate would be hard to duplicate," said Randall Hiatt, president of Fessel International, a consulting company in Orange County.

Janet Lowder, a restaurant consultant who did an evaluation of the restaurants five years ago, added that, "The dog locations are gone, and the remaining ones should be cash cows."

But Ron Paul, president of Technomic Inc., a restaurant consulting company in Chicago, said the menu needs to be retooled. "They've lost their focus. I'd make a bigger deal of hamburgers," he said.

Gluckstein said some changes would be made to the menu, which ranges from pot stickers to nachos to shepherds pie, although he wouldn't elaborate on specifics.

"Certain markets merit a more upscale approach, which could include significant design and cosmetic improvement work as well as wholesale menu changes," he said.

Bankruptcy history

The Lewises expanded the chain to 15 restaurants before selling in 1988 to a New York investment firm that took the company public in 1991. The chain added 11 locations nationwide.

A new management team arrived in 1994, making several changes to menu and d & #233;cor. A Chapter 11 bankruptcy filing followed a year later. The chain was purchased out of bankruptcy in 1997 by Koo Koo Roo, which in turn was purchased in 1998 by Prandium.

Prandium, which also operates Chi-Chi's Mexican Restaurants, has struggled for several years under a heavy debt load and slowly has been shedding divisions to pay off loans. In 2000, it sold its El Torito division for nearly $130 million to Acapulco Restaurants.

In its bankruptcy filing, Prandium listed debts of $336.5 million and assets of $173.9 million. A court hearing to evaluate Prandium's reorganization plan is set for June 14.

For reprint and licensing requests for this article, CLICK HERE.