O'Charley's commissary sale furthers outsourcing

Nation's Restaurant News,  July 23, 2007  

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NASHVILLE, TENN. -- O'Charley's Inc., operator or franchisor of 363 casual-dining restaurants under the O'Charley's, Ninety Nine Restaurant and Stoney River Legendary Steaks brands, has completed the sale of its 185,000-square-foot commissary facility and 12 acres of land here to the real estate investment firm W.R Carey & Co. for $9 million. The property is next to O'Charley's 4-acre corporate headquarters and training site.

The Carey company has leased the commissary building to Mountain City Meat Co., which will be the chains' meat processor, O'Charley's indicated. In addition, it has formed an exclusive distributor alliance for the O'Charley's and Stoney River chains with Performance Food Group, which will buy O'Charley's distribution inventories at cost and assume its truck leases. O'Charley's also has outsourced the manufacturing of frozen dough for its namesake chain's yeast rolls to Cornerstone Baking, following a previously announced outsourcing of its salad dressing manufacturing and poultry processing, with plans to close its facility in Woburn, Mass.

O'Charley's expects eventually to save up to $3 million a year from the changes and receive up to $18 million in cash for the sale of inventory and processing equipment, but related noncash charges would reduce second-quarter income from operations by $6 million to $7 million.

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