EatZi's Shuts Stores, Puts Focus on Dallas Area

DALLAS EatZi's, a hybrid grocery-restaurant concept that made its debut amid much industry attention in the mid-1990s, has shuttered all its company-owned stores with the exception of its original store here, and one held by a licensee in Chicago. Saddled with debt that couldn't be satisfied with current earnings, the company closed its units in Houston; Rockville, Md.; and both its locations in Atlanta

DALLAS — EatZi's, a hybrid grocery-restaurant concept that made its debut amid much industry attention in the mid-1990s, has shuttered all its company-owned stores with the exception of its original store here, and one held by a licensee in Chicago.

Saddled with debt that couldn't be satisfied with current earnings, the company closed its units in Houston; Rockville, Md.; and both its locations in Atlanta this month.

The Chicago unit will remain open for the time being, Cliff Smith, EatZi's chief executive officer, told SN. The company has sold its assets, which consist of equipment and furniture, and has been freed from leases to take care of debt incurred over the last four years. The company plans to focus all its attention on the Dallas store.

“This is a creative way to save the brand, and we'll build out locally from this core unit,” Smith said. “We have already signed a letter of intent for another location in Plano, and we're looking at another spot in the Dallas-Fort Worth area. In fact, I have several such appointments. So we do expect to have five or six stores in the Dallas-Fort Worth area three years from now. From that base, then we'll see.”

The company chose to go into an assignment process instead of going through bankruptcy.

“In this procedure, we bring in a third party, assets are sold, and through that process we satisfy the debts. The Dallas store will still exist, owned by a different company, and we'll grow it from there. That store is extremely profitable, and this new group [of new owners] is extremely well capitalized,” Smith said.

“In this case, all we want is the Dallas store and trademarks and namesakes. We want to save the brand which is well recognized in the Dallas-Fort Worth area, and we know this market very well,” Smith explained.

The company has been bought by a small group of Dallas investors led by Phil Romano, the creator of the EatZi's concept, and one of the original investors, who, with Brinker International, Dallas, launched EatZi's in 1996. The original owners sold the concept four years ago to a venture capital firm.

A new company, formed this month in a collaborative effort by Smith, Romano and local, private investors, is called EBG. It has no other holdings besides the EatZi's brand and the Dallas unit of EatZi's.

Smith emphasized that all EatZi's units had been well managed and had been making money, just not enough money to keep ahead of debt that was incurred by the previous owners.

“One of the big problems was we had no regional synergies since the stores were so spread out,” he said. “All the equipment and furniture had been leased. In addition, the stores were getting old. They needed to be remodeled. There was no way we could handle the debt and be able to grow.”

Just a year ago, Smith was brought in as chief executive officer, to correct problems so the EatZi's brand could be saved and the groundwork laid for future growth. Earlier this year, Smith — a veteran of the retail industry — began putting more emphasis on the retail role of EatZi's, changing some operating procedures, and merchandising and marketing strategies.

He has agreed to stay in his post as CEO through the transition, and he said he feels positive about what is taking place.

“Nobody likes to see stores close. That's a negative, but for the long-term this is a very positive move. In the next 90 days, we'll get the Dallas store painted up and get some new equipment. We fully intend to expand the concept,” Smith said.