Suffering through bankruptcy in the worst recession in decades is never promising for future growth, but with a new buyer, one West Coast fast-casual chain has found that it is poised to grow again post-Chapter 11.
Purchased by Wreath Equity LLC, which is comprised of New York–based Garrison Investment Group and Scottsdale, Arizona–based Trefethen Advisors LLC, on August 6, Daphne’s Greek Café is setting its sights on becoming a prominent purveyor of quick-service ethnic cuisine.
William Trefethen, cofounder of investment management firm Trefethen Advisors LLC and newly appointed CEO of Daphne’s, says the fall of the Daphne’s brand into bankruptcy was a matter of the brand being in the wrong place at the wrong time.
“If you look at the reasons why the bankruptcy came about, it was really just overexpansion at the top of the market, coinciding with the crash of the economy in late 2008,” Trefethen says.
“In late 2008, the company was on a very ambitious expansion campaign in Arizona, Colorado, Oregon, and Washington. That’s when the air came out of the economy.”
With the old owners, including founder George Katakalidis, fighting to keep the company afloat, Trefethen says the operations of the brand suffered in the last two years. The ownership team, he says, intends to turn it around quickly.
“When you buy a company that’s in bankruptcy, getting it out of that process as quick as possible is key because it eats up all of your cash flow,” he says. “When it eats up the cash flow, you’re not spending the money on advertising or product development and all the stuff that you need to do to survive long term. Our strategy was to buy the debt and to get this brand out of bankruptcy.”
Trefethen says the new team behind Daphne’s wants to make the brand “more current,” which he says means boosting the food, service, and ambiance of the stores. He says a “more current” Daphne’s might be something akin to a Chipotle.
Many changes are already in store for Daphne’s. The company rolled out three new Pita Melts this month, and Trefethen says more menu innovations are in store to boost the brand’s dinner business, including the addition of beer and wine at several stores.
Trefethen says about 75 percent of the changes that will be made to Daphne’s will happen in the next six months. Expanding the chain outside of its West Coast comfort zone, however, will take some time.
“Certain markets we really like, but I wouldn’t say we’re going to have any real expansion in the next year,” Trefethen says. “We’re looking on shoring up our core markets, and getting some momentum behind the brand. Then we’ll go out.”
By Sam Oches