FROM A 10Q filed 8/31/98
BUSINESS RISKS
The Company's business is subject to a number of risks. A comprehensive summary of such risks can be found in the Company's Form 10K.
CERTAIN OPERATING RESULTS AND CONSIDERATIONS
In fiscal 1996 and 1997, respectively, the Company experienced an increase of 2.5% and an increase of 4.7% in comparable restaurant sales. In the first nine months of fiscal 1997 and 1998, respectively, the Company's comparable restaurant sales increased by 3.0% and 7.4%, respectively. The Company's newer restaurants have not historically experienced significant increases in guest volume following their initial opening period. In addition, the Company does not believe it has significant latitude to achieve
comparable restaurant sales growth through price increases. As a result, the Company does not believe that recent comparable restaurant sales is indicative of future trends in comparable restaurant sales. The Company believes that it may from time to time in the future experience declines in comparable restaurant sales, and that any future increases in comparable restaurant sales
would be modest.
EXPANSION RISKS
The Company opened seven salad buffet restaurants in fiscal 1997 and has opened six restaurants to date in fiscal 1998, all of which are in new regions (Oregon, Houston, Atlanta, Utah and Las Vegas). The Company currently intends to open two additional restaurants in fiscal 1998. The Company's ability to achieve its expansion plans will depend on a variety of factors, many of which may be beyond the Company's control, including the Company's ability to locate suitable restaurant sites, negotiate acceptable lease or purchase terms, obtain required governmental approvals, construct new restaurants in a timely manner, attract, train and retain qualified and experienced personnel and management, operate its restaurants profitably and obtain additional capital, as well as general economic conditions and the degree of competition in the particular region of expansion. The Company has experienced, and expects to continue to experience, delays in restaurant openings from time to time. The Company incurs substantial costs in opening a new restaurant and, in the Company's experience, new restaurants experience fluctuating operational levels for some time after opening. Owned restaurants generally require significantly more upfront capital than leased restaurants, as a result of which an increase in the percentage of owned restaurant openings as compared to historical practice would increase the overall capital requirements, required to meet the Company's growth plans. There can be no assurance that the Company will successfully expand or that the Company's existing or new restaurants will be profitable. The Company has encountered intense competition for restaurant sites, and in many cases has had difficulty buying or leasing desirable sites on terms that are acceptable to the Company. In many cases, the Company's competitors are willing and able to pay more than
the Company for sites. The Company expects these difficulties in obtaining desirable sites to continue for the foreseeable future.
IMO, it's a buy and should be sold at resistance of 16 3/4.
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