Koo Koo Roo yanks its share price out of the fire; new products, cutbacks form firm's recipe for success.

Stock prices of Los Angeles-based Koo Koo Roo Inc., a fast-food chain specializing in skinless chicken, made a slight recovery in early May after nose-diving to 25 cents per share last year.

Rapid expansion, California's recession and store revamps hammered company profits and stock prices. Koo Koo Roo's stock dropped to its 52-week low of 25 cents per share on Oct. 20, just a year after the company went public in October 1991 at $5 per share.

However, overhead cutbacks, new products and the closure of less profitable stores have slightly boosted investor confidence and Koo Koo Roo stock prices. The company's stock closed at $1.25 per share on May 17.

Koo Koo Roo Inc.
Stock Prices for past 12 months
                  PRICE PER
DATE                SHARE
5/3/93              $1.37
4/1/93              $0.37
3/1/93              $0.37
2/1/93              $0.50
1/4/93              $0.62
12/1/92             $0.82
11/2/92             $0.76
10/1/92             $0.37
9/1/92              $1.12
8/3/92              $2.00
7/1/92              $2.00
6/1/92              $1.25
Source: Wilshire Associates Inc.

Koo Koo Roo, known for its take-out business of skinless flame-broiled chicken, has upscaled somewhat, renaming several stores Koo Koo Roo California Chicken and adding new products including a deli counter and turkey bar.

"Perhaps the actual original concept wasn't as good as it could've been," said Morton Wall, chief financial officer with Koo Koo Roo. "We all feel we're going in the right direction now. We're doing dramatic cost reductions to try to turn the company around."

After rapidly expanding from one L.A. store in 1988 into a 15-store chain, Koo Koo Roo began consolidating last year, closing down California stores and one New York store. It currently has six stores, including four in L.A., a New York store, and one in Atlantic City, N.J., said Wall. He added that a Long Beach restaurant is under construction.

Wall said efforts to help the company include a turkey bar, which is being tested, with good results, in the company's Santa Monica store.

"The turkey bar seems to be a big winner," said Wall. "The company, I think, had to change its direction."

Michael D. Mooslin, president and chief operating officer of Koo Koo Roo since March 1992, refused to speak in detail about the company, saying this is "not a good time for us to have a lot of press." He added that the company's plans "aren't defined yet and we don't want to create false expectancy."

Mike Badalian, who in the mid-1980s co-owned Bistango, a fancy L.A. restaurant, founded Koo Koo Roo. He became a co-chairman last year with another co-chairman, Kenneth Berg, who provided at least $2 million of the company's original funding.

The company reported a loss for the 36 weeks ended March 9 of $1.3 million or 41 cents per share compared to a loss of $2.3 million or 91 cents per share a year earlier.

For its 12-week quarter ended March 9, Koo Koo Roo said sales from six company-owned restaurants were $2.732 million compared to a year earlier when sales were $2.715 million from 10 stores.

"If you look at the numbers, they look bad. It looks like sales are down, but same-store sales are up 11 percent," said Cynthia Buckwalter, director of corporate finance for New York-based Whale Securities, which took the company public and still makes a market in the stock.

Buckwalter said overall sales are down because of the stores which were shut down and the effect of March rains. However, she said, long-term the closures should enable the company to concentrate on the more profitable stores.

"We still believe in the company. I think people just expected the company to do better," she said, noting co-chairman Berg recently infused Koo Koo Roo with $500,000 to help turn the company around.