Krystal Announces New Ownership, Leadership
Krystal announced May 22 that it was under new ownership and new management, a week after a bankruptcy court approved a deal with senior lender Fortress Investment Group.
Atlanta-based Fortress, which served as the 88-year-old company’s senior lender prior to bankruptcy, took control of the company with a $27 million credit deal and assumed liabilities of $21.5 million from its own affiliate, DB KRST Investors. The company, which was acquired by SoftBank in 2017, is joined by Golden Child Holdings, another Atlanta-based restaurant investment firm that focuses on recapitalizations, “special situations,” mature companies, distressed loans and underperforming assets—all of which apply to Krystal.
Krystal filed for bankruptcy protection in January 2020. In the filing, the company cited many reasons for the protection, including new competitors, third-party delivery sapping sales and lagging traffic. There had been a bit of positive momentum from a new prototype and a new development deal, but given the economics of the new build (early prototypes were $950,000) and the operational challenges, franchise growth was hard to come by and the cost of renovating many restaurants that “hadn’t been touched in 30 years,” as former president and COO Tim Ward put it, was immense.
The company undertook several measures, from refranchising some of the 200 corporate locations to an expansion to 24-hour operations, a headquarters move to Atlanta and several management changes, before the bankruptcy filing.
As part of the recent annoucment, Krystal named 30-year industry veteran Thomas Stager as president, replacing Ward. Stager serves as CEO at GC Pizza Hut, another Golden Child investment, and as a partner at the investment firm. He has success in turnaround situations on both the franchisee and franchisor side of the restaurant industry, according to a company statement. Prior to his turnaround work, through 2013 Stager was a regional vice president in the Arby’s system, overseeing all 320 company restaurants and sales of $350 million.
Stager said six guiding principles in use at Golden Child also worked for the Pizza Hut franchise operation and other company investments. Stager oversaw the process as GC Pizza Hut closed underperforming, “neglected” locations and pivoted into more disciplined operations and back to growing sales in 2018. He said while he will still have some involvement on the Pizza Hut business, his focus is now on Krystal.
Stager told Franchise Times those principles helped chart the path back to profitability and growth.
“Grow and evolve, make informed decisions, value the truth, enjoy your work, be accountable to our guests and find a way,” said Stager, listing the key guidelines. “We’re going to focus on those guiding principles and grow the brand. I’m working with the senior leadership team here at Krystal so we can do that while providing our guests with the best possible experience.”
He said high on his to-do list is hiring a franchise development expert to focus on franchise sales and finalize a growth plan in the near future. But given the COVID-19 effects on the restaurant industry, some of that development work will take time to ramp up.
“We do have a pretty good plan for the upcoming year, but with everything going on with COVID-19, we just have to get through this year,” said Stager.
After that, he said the real push will begin. He said the key differentiator for the company is, of course, its history and hallowed place in many consumer’s memories.
“Krystal is steeped in history, it’s a nostalgic place for so many of our guests and our guests have so many fond memories of Krystal, and our menu is extremely craveable,” said Stager. “Everyone has fond memories and I’m very excited to be part of the Krystal family right now.”
According to the Franchise Times Top 200+, Krystal had 2019 sales of $377 million and 356 locations. As of the bankruptcy filing, it had about 320 locations, 200 of which were company owned.