By Eve Samples

Palm Beach Post Staff Writer

Tuesday, April 10, 2007

PALM BEACH GARDENS — Duffy's Sports Grill spent the past two decades building a presence in Palm Beach County and the Treasure Coast by taking over restaurant sites, one by one, from down-and-out eateries.

On Monday, the Palm Beach Gardens-based chain announced it would snag 57 struggling restaurants in one fell swoop with the purchase of Pompano Beach-based Roadhouse Grill Inc.

In a deal valued at $29 million, Duffy's Holdings Inc. plans to buy outstanding shares of the ailing Roadhouse chain to take the company private. The agreement calls for Duffy's to buy 85.5 percent of Roadhouse's common stock from its top three shareholders for $7.99 million, then buy the remaining stock for about $2 million, or 46 cents a share.

Shares of Roadhouse (OTC: GRLL) closed Monday at 8 cents.

Duffys also will invest $9 million cash in Roadhouse and assume about $10.1 million in debt.

"I always had my eye on Roadhouse Grill," said Duffy's chief executive and largest shareholder, Paul Emmett. "I knew they were having financial problems."

But the chain has great real estate, Emmett said. It owns and operates 57 restaurants in 10 states from Florida to New York, and its 11 franchises include overseas locations as far away as Malaysia.

Emmett, 55, pointed to the Roadhouse at Linton Boulevard and U.S. 1 in Delray Beach as a likely target for conversion to Duffy's.

"We're dying for something in Delray," he said.

Most of the acquired restaurants will remain Roadhouses, at least in the near term, and Emmett said he plans to beef up sales with higher-profile marketing and customer loyalty programs. Roadhouse's sales were about $125 million last year, while Duffy's recorded sales of about $40 million with one-fourth as many restaurants.

"We can walk into a Roadhouse Grill and instantly increase sales by 50 percent," Emmett said.

Duffy's formula is part sports bar, part family-dining destination. The restaurants are littered with televisions, and about 27 percent of sales come from alcohol — far more than the 9 percent at Roadhouse — yet they are well-lighted and offer kids' menus.

The Roadhouse sale is expected to close by the end of May, and Duffy's intends to keep all 3,000 Roadhouse employees. Duffy's now has about 1,200 workers.

Roadhouse, which is known for its peanut shell-littered floors and country-style atmosphere, debuted in 1993 in Pembroke Pines. It had about 85 sites at its peak, but the moderately priced steakhouse struggled with rapid growth and the post-Sept. 11 slowdown in casual dining, Roadhouse Chief Executive Officer Ayman Sabi said.

The chain filed for Chapter 11 bankruptcy in 2002 and emerged the same year with about $50 million in debt. It has reduced its debt to $10 million, Sabi said.

One of Roadhouse's problems was that it didn't stay on top of trends, said Richard Lackey, a Palm Beach Gardens-based restaurant consultant who was not involved in the deal. But that's one of Duffy's strengths, he said.

"They're continually changing the menu, bringing in new items and taking out old things that don't sell," Lackey said.

Roadhouse had been looking for a buyer for about a year, since San Diego-based Steakhouse Partners Inc.'s plans to buy the company for $25.3 million fell apart.

Sabi owns about 10 percent of Roadhouse's shares, the Malaysian conglomerate Berjaya owns about 70 percent and Lakeland-based investor Steve Satterbo owns about 5 percent.

Sabi, one of the original investors in Roadhouse, plans to leave the company.

"I was wanting to kind of quasi-retire and possibly, down the road, look at different opportunities," the 42-year-old said.

Roadhouse has 29 restaurants in Florida, including many with leases that pre-date the real estate boom sent prices soaring in 2001, said Alan Koch of Palm Beach Gardens-based Score Realty Inc.

"And the locations are prime, so it became very attractive for them, instead of fighting the market, to be able to merge," said Koch, who brokered the deal.

Palm Beach investor Carlos Morrison, part-owner of Duffy's, joined forces with Emmett last year to finance a growth spurt for the chain.

Emmett declined to reveal how much Morrison invested in Duffy's, but said: "His backing is allowing this transaction to happen."

Emmett and Morrison will be 50-50 partners after the deal closes.

The Roadhouse agreement is Duffy's biggest expansion and its first move outside of Florida.

"We're not afraid of the size," Emmett said.