Golden Corral Parent Buys Stake in Port City Java
WILMINGTON, N.C.-- (NATION'S RESTAURANT NEWS) -- January 23, 2006 -- Investors Management Corp., whose Golden Corral brand of 470 restaurants dominates the family segment's grill-buffet niche, is putting its muscle behind the national brand vision of 45-unit Port City Java, based here.
Port City this month disclosed that Raleigh, N.C.-based Investors Management had bought a 16-percent stake in the 10-year-old upscale coffeehouse chain, which is operator or franchisor of 45 outlets in 10 states. The investment by IMC hints strongly that it - and, potentially, its Golden Corral franchisees - want an entry point to the profitable and still-expanding coffeehouse segment.
That seems particularly apparent in the decision by IMC chairman James Maynard's to sit on the Port City Java board. Furthermore, according to Port City Java founder and chief operating officer Don Reynolds, IMC partner Charles Maready has been named senior vice president and treasurer of Port City, a new post.
" This is the largest opportunity Port City Java has ever had, " Reynolds said, indicating that terms of the new deal allow for IMC to buy an increasing share of Port City. " You don't see James Maynard jumping on every board of directors. That he likes a company well enough to associate his name with it says a lot. "
Another sign of IMC's apparent readiness to partner with a coffeehouse brand that has national growth potential is Reynolds' comment that IMC would head the search for Port City's new chief executive. " IMC doesn't just figure out how to compete, " Reynolds said. " When you analyze what they did with Golden Corral, it was about differentiating themselves enough to make the competition obsolete. That's what we're doing with our Fairganic™ program, our house-baked desserts and sandwiches, our culture and store appearance, and our advertising. "
Despite Reynolds' enthusiasm, IMC is viewing the partnership with more due diligence. Reynolds said IMC's investment money would be spent on infrastructure and opening new company units at $250,000 to $350,000 each. Stores were grossing an average $450,000 when Port City began franchising in 2003, but Reynolds did not disclose current unit sales.
" We're going to be in an advisory role at best, " said IMC finance vice president Richard Urquhart, who declined to reveal the dollar amount of his group's investment. " We're just a 16-percent stockholder at this point, and we don't think Don Reynolds and his partners [real estate veterans David Swain and Alex Thorpe] have much interest in being diluted. "
Reynolds still owns 50 percent of Port City Java, and his partners each own about 17 percent, Urquhart said.
According to Reynolds, IMC's Maready, a onetime chief financial officer and chief operating officer of Charlotte, N.C.-based Kerr Drug, is aligning Port City's financial reporting with IMC's systems on a weekly format.
" They didn't get in this looking for a regional coffee operation - they want a national brand, " Reynolds said. " They've brought in rating systems that will enable us to get our hands around franchisee performance. They've got the multiunit and marketing smarts to really move us forward. "
Reiterating IMC's minority position, Urquhart agreed that his group liked Port City Java's profile. He said IMC's only investment qualifier was not to align with companies that are potential Golden Corral competitors, which is why IMC divested its casual-dining chain vehicles Oh Brian's and Ragazzi's in the late 1990s.
" James Maynard loves entrepreneurs, and Don Reynolds is one, " Urquhart said. " If the company is performing well and needs more money, then we want to be the ones putting those dollars in. "
At least one Golden Corral franchisee, Maitland, Fla.-based Eric Holm, who operates more than 20 of the highest-volume grill buffets in the nation, said he wouldn't hesitate to look at Port City Java as a potential brand addition to his franchise portfolio and as a serious rival to segment leaders Starbucks Coffee and Caribou Coffee.
" I go to Starbucks every day, and I know how busy they are, " said Holm, whose Metro Corral Partners also owns 15 Sonny's Real Pit Bar-B-Q units in Florida and Georgia. " If Port City has that kind of appeal, I'd say it's a brand worth looking at. I think somebody needs to compete with Starbucks and Caribou. "
About the Port City Java® Brand
Port City Java® is located in Wilmington, NC. The Company opened its first café in March 1995, in Wilmington, NC. The Company began Roasting in October 1995 and Franchising in September 2003. Port City Java® has created a specific identity by creating an " all day approach " to sales, through its café environment. For additional information regarding Port City Java®, please email us.
