Its Mexican food foray was never a fiesta for Wendy's International Inc., and last week the burger chain cut its losses. Wendy's said on Thursday it would sell the fast-casual Baja Fresh chain to a consortium of investment groups for about $31 million.
That's well below the $275 million that Wendy's paid for the then-173 unit Baja Fresh chain in 2002, but Wendy's was forced to take a $122 million second quarter charge for Baja Fresh, which along with the 19-unit Cafe Express chain posted a combined $51.6 million operating loss. The move comes shortly after the restaurant group sold off its Tim Hortons coffee chain.
David Kim, an Anaheim restaurant and retail operator, leads the investment groups. He owns the Sweet Factory candy store chain and is a franchisee of Cinnabon and Denny's outlets.
Of the 298 Baja Fresh outlets, 143 are company-owned and 155 are franchised restaurants. Nearly half of the units are in California, where the first restaurant opened in Newbury Park 15 years ago.
Kim was traveling Thursday and unavailable for comment by press time.
Wendy's interim chief executive, Kerrii Anderson, said in a statement the move "will allow us to sharpen our focus on the Wendy's brand."
The deal is expected to close in the fourth quarter. Like many of its rivals, the nation's third-largest restaurant chain was looking to drop some extra weight in the form of its non-burger assets. Once the sale is completed, the Dublin, Ohio-based fast-food company will be left with its namesake hamburger chain as its primary business.
A franchisee, who owns several Baja Fresh stores locally, speaking on condition of anonymity, said that getting out from under the Wendy's umbrella was a positive step.
"We need someone to get back to running the company-owned restaurants," he said. "Wendy's dumbed them all down and hurt the brand. Fast food and fast casual are both fast, but otherwise completely dissimilar. Wendy's couldn't distinguish between them and had a basic inability to manage the brand."
Wendy's share closed at $35.11 Thursday, up more than 4 percent from the previous day.
Wendy's tinkered with the Baja Fresh brand for four years before jettisoning the struggling Thousand Oaks-based Mexican food chain. During that time multiple Mexican-themed competitors popped up on the fast casual landscape notably McDonald's Corp.-owned Chipotle making it harder for Baja Fresh to set itself apart.
The company needed a little prodding to put Baja on the block. Nelson Peltz, the billionaire investor who sold Snapple for $1.2 billion more than he spent to buy it, pushed the deal along earlier this year, when his Trian Group bought a 5.5 percent stake in Wendy's and clamored for the sell-off of subsidiaries.
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