Lorne Goldberg made his name through his accomplishments in L.A. investment banking among them was saving YouBet.com Inc. by raising $6 million for its launch. Now, he is set to add to his fortune by, among other initiatives, spicing up the menu at two Chinese fast-food chains he acquired.
It's been an odd evolution, since Goldberg had once considered the dining sector too risky.
"The restaurant business is the last business that I would have wished to end up participating in," he said in a recent interview at his offices overlooking Ventura Boulevard in Sherman Oaks.
Nonetheless, he now owns one of the largest Chinese fast-food chains in the United States with 70 stores and 1,000 employees.
His success with the Mandarin Express chain can be seen as a validation of the model developed by Panda Express, the 1,000-store Rosemead-based chain owned by the Cherng family. Goldberg has followed the local company's footsteps in that he profited early from captive audiences at mall food courts.
Now, also like Panda Express, he's expanding into free-standing restaurants. Last year he purchased another Chinese food chain, Minneapolis-based LeeAnn Chin, which has 40 stores not in food courts across the Midwest.
"Panda is in malls and on the street, and right now they are really focused on the street," Goldberg said. "Well, I now have diversification. LeeAnn Chin is a very important acquisition for that reason. You want to have both."
For almost 10 years, Goldberg did investment banking deals through West Coast Capital, which he founded in 1995 when he was 26. During that time he completed more than 40 transactions with a total value of about $500 million. He found investment money for companies such as Jakks Pacific Inc., the Malibu toy company that later went public. He also played a key role in raising money for the launch of Woodland Hills-based horse-wagering tech startup YouBet.com when other funding had fallen through.
Mandarin Express, which had 25 locations in the Southeast, was brought to him in 2004 as a client for investment banking services. But after taking a look into the company's financials, Goldberg decided a better move would be to buy Mandarin, because he could operate it with little risk.
"Mandarin Express is somewhat different from a sit-down restaurant where you hope people will come each day," he said. "When you are in a food court, you have a captive audience on a daily basis and your goal is to beat your neighbor."
Goldberg spent a year negotiating with the Atlanta, Ga.-area family that had owned the restaurant for 25 years. He eventually completed a more than $10 million leveraged buyout with money borrowed from G.E. Capital.
In the past three years, he has added five stores to the chain and modernized the d & #233;cor. He added two important menu items that have become the top sellers: spicy Mongolian chicken and grilled bourbon chicken.
The changes have paid off. Same store sales have increased by 23 percent cumulatively since Goldberg has been the owner.
"There was a lot of low-hanging fruit and a lot of opportunity," he said. "That is what caused me to purchase the company."
After buying LeeAnn Chin, he added the same two dishes, which alone account for 20 percent of sales. In nine months, same-store sales have increased 4 percent.
Goldberg plans to acquire other Asian restaurant chains and expand the ones he owns. Leases already have been signed for new stores in both chains for the first quarter of 2008. He merged the operations for both LeeAnn Chin and Mandarin Express to the same location in Minneapolis where they have their food distribution facilities. Goldberg will remain in L.A.
The quick-serve chain model is relatively rare in the U.S. Chinese restaurant sector, said Randall Hiatt, the president of Costa Mesa-based hospitality consultancy Fessel International. Most of the operators are independent.
"There is a perception and some reality to the fact that it is tougher to wok entrees than to flip burgers," Hiatt said.
Though chains such as Panda Express, Pick Up Stix and Pei Wei have proved to be successful business models, others have fallen by the wayside.
Sit-down restaurants don't necessarily translate successfully to quick-serve. In 2006, P.F. Chang's shut its lower-priced Paul Lee's Chinese Kitchen, a joint venture with Outback Steakhouse, after opening just four locations.
"I bought two of the most established chain food stores in the country," Goldberg said. "You are going to have a difficult time in this industry unless they are buying a company that is seasoned and professionalized. That is why the opportunity for us is enormous."
Goldberg is originally from Canada and came to Los Angeles in 1982 after graduating from Temple University in Philadelphia. He first worked for Heitman Financial, a real estate investment group. After three years, he started his own investment banking business.
A year and a half after starting West Coast Capital, Goldberg had raised $18.5 million for local companies needing rapid growth capital. For most of his career as an investment banker, he worked with mid-sized companies that needed $5 million to $30 million.
Some of his first jobs were raising money for companies such as Pink Dot Enterprises Inc., a delivery service; Color Me Mine Enterprises Inc.; and Jakks Pacific.
In 1998, he met David Marshall, one of the founders of Youbet.com. At the time, the company was struggling to stay alive, losing several hundred thousand dollars a month and unable to cover payroll.
The company had gone public in a reverse merger in 1995 and faltered after funds from an investment banking firm in London fell through.
Goldberg raised $6 million for YouBet. The money was put toward launching the site.
"We were an Internet startup in the development stage when Lorne stepped in," Marshall said. "We were a company in a difficult position and that didn't scare him away."
But Goldberg said the Mandarin Express and LeeAnn Chin deals were the most significant of his career.
"I enjoyed deal making for many years and continue to enjoy the deal business," Goldberg said. "But my real passion is to own and operate and to build. Now I don't have much inclination to be out doing deals."
Currently, he is focusing on innovation.
Goldberg recently introduced a Pinkberry-like product in 10 LeeAnn Chin locations after seeing the popularity of Pinkberry yogurt here in Los Angeles. He plans to do a complete rollout this year.
"I know how to be a trend-setter and innovator," he said.
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