Investor group acquires Johnny Rockets.

New owners plan aggressive expansion of chain

A group of investors with aggressive expansion plans has acquired the 1950s-style Johnny Rockets burger chain for $25.6 million from a group of small investors.

The new owners actually invested a total of $44 million. The $25.6 million went to the group of small investors, but another $12 million was set aside for expanding the chain, and another $4.4 million was spent to buy back some of the privately held chain's franchised outlets, said Bill Bottoms, the new chairman of what is now called Johnny Rockets Group Inc.

The remaining $2 million was used for expenses related to the acquisition, such as fees for attorneys and financial advisors.

The new investors are hearted by New York-based Patricof & Co., a venture capital firm. Patricof invested $12.5 million, New York-based investment firm Centre Partners invested $6 million and the General Motors Corp. pension fund, a limited partner in both Patricof and Centre, invested $10 million, said Steve McCall, an analyst at Patricof. In addition to chairman of Johnny Rockets, Bottoms is also a partner in Patricof.

The remainder is made up of investments from smaller investors, including some of the previous Johnny Rockets shareholders.

Johnny Rockets is a chain of 78 casual restaurants that primarily serve hamburgers and malts. Of these, 61 are franchised and 17 are company owned.

The outlets are scattered nationwide, but 19 are outside the U.S. There are 13 in Australia, three in Mexico, and one each in Canada, United Kingdom and Japan, McCall said.

The new owners plan to open at least 500 more Johnny Rockets outlets across the country, Bottoms said. However, he declined to cite a time frame for the expansion. Most of the new stores would be company owned, McCall said.

The company will be searching for three types of sites for restaurants, Bottoms said.

For one, it will seek high-traffic locations, such as shopping malls with lots of foot traffic, he said.

It will also look for "trophy" locations that are unique, he said. For example, there is a Johnny Rockets outlet on the main floor of the Reno Hilton hotel, which gamblers often patronize, he noted.

The third type of locations are neighborhood outlets, where most of a restaurant's business is generated by people who live in the surrounding neighborhood, Bottoms said.

Under the new ownership, most of Johnny Rockets' prior management remains. However, the new owners brought in a new CEO, Jeff Campbell, and chief financial officer, Steve Fenstermacher.

Campbell was CEO of the Burger King fast-food chain during the 1980s, and was most recently senior vice president of brand development at PepsiCo Inc.

Campbell "has a lot of operational experience with chain restaurants," said Janet Lowder, president of Rancho Palos Verdes-based consulting firm Restaurant Management Services. "He was definitely a leader in the 80s in the restaurant industry."

Johnny Rockets' former CEO, Ray Cabana, now works under Jeff Campbell and is currently overseeing the chain's international franchised restaurants, McCall said.