Everything Yogurt refinances debts, averts stock auction; chain ready to move ahead with $4 million high-tech headquarters, office complex

Nation's Restaurant News,  Sept 27, 1993  by Milford Prewitt

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STATEN ISLAND, N.Y. -- Everything Yogurt has defused a potential financial calamity by restructuring its long-term debts -- an action that staved off a government auction on its stock -- and paved the way for the opening of a new $4 million head-quarters and office complex.

The company said the manner in which it restructured its debts -- by using outside equity to acquire collateralized company stock from the Federal Deposit Insurance Corp. -- ends a bitter lawsuit between the company and former president Stephen Beninati.

Last month it was disclosed that the FDIC was preparing to auction off the stock as a means of recovering the unpaid balance of a $1.1 million loan Everything Yogurt secured from a commercial Bank. But the bank collapsed, sending the stock and the loan -- considered by the government to be in default -- under the control of the FDIC.

Richard Nicotra, chairman of the privately held, 300-unit company, said Everything Yogurt bought the collateralized shares with the help of an outside investor, who paid in excess of $725,000 for the stock. He declined to give more details about the FDIC closing, nor would he identify the investor.

Nicotra said that with the conclusion of the refinancing, the company would soon file an income statement to update its Uniform Franchise Offering Circular, as required by the New York Attorney General. The Attorney General had ordered Everything Yogurt to stop soliciting franchises until it amends its UFOC, which was 18 months in arrears. Nicotra said the company deliberately delayed filing until it weeded out bad operators and secured the refinancing.

With the recovery of the stock, Nicotra said, a long-running legal battle he had with his ex-partner, Beninati, has effectively ended because it was the ex-president's holdings -- about 47.5 percent of the company -- that the FDIC held as leverage on the loan.

"As far as this company is concerned, the war is over," Nicotra said. "We now own 100 percent of the stock. It's a bitter-sweet victory, but the point of the matter is that he [Beninati] is no longer a director, a shareholder or an employee.

"And because he has no more stock, his suit has essentially no grounds."

But a defiant Beninati said just the opposite.

"He [Nicotra] couldn't be more inaccurate," Beninati contended. "If anything, the battle has just begun to escalate."

Beninati alleges that he was dismissed through an elaborate scheme to rewrite the company's shareholders' agreement, or by-laws, that held that he would have a job as long as he owned stock in the company.

The pact also had a "buy-sell agreement" that Beninati said prevented him or Nicotra from unilaterally making any corporate decisions or selling off assets or stock without the consent of the other partner.

"So what they've done with the FDIC flagrantly violates the buy-sell agreement," Beninati said. He stressed that he had a third-party investor willing to outbid Nicotra on the stock, but that the FDIC "suspiciously" chose not to inform him of the date it would accept closing bids.

"We're going to file a complaint against them [Everything Yogurt] as well as the FDIC," Beninati said.

Richard Wilkenson, assistant managing liquidator for credit at the FDIC, said that as far as he knew, both Nicotra and Beninati were dealt with fairly and on a "level playing field."

Nicotra insisted that the company's dealings with the FDIC were completely above board, and he argued that in some respects, Beninati had ample opportunities to buy back the stock before Everything Yogurt had.

"There is no more shareholders' agreement because he owns no more shares," Nicotra said. "If he wants to sue us, let him. Anybody can be sued for anything these days. But it can't be over the shareholders' agreement.

"We're just happy we can put all this behind us now and move this company forward," he added.

One of the ways Nicotra intends to move Everything Yogurt forward is through its new high-tech headquarters and office complex in a growing industrial park in Staten Island. The three-story, 40,000-square-foot building is personally owned by Nicotra and will not be on the company's balance sheet. The ground floor is the yogurt chain's corporate offices while the rest of the building has been totally leased out to law firms and other businesses.

But what the company is watching closely is the strong consumer reaction to its most recent venture, the Gourmet Pretzel, a kiosk snacks concept that serves chewy, soft pretzels with a variety of toppings.

Everything Yogurt generates about $45 to $50 million in annual systemwide volume. For the past year and a half, it has been urging its franchisees to convert their old restaurants into the new Everything Yogurt & Cafe concept, an attempt to wean itself away from yogurt by emphasizing salads, sandwiches and soups. About 65 units have been converted, and most are reporting sales gains in excess of 30 percent, the company reported.

COPYRIGHT 1993 Reproduced with permission of the copyright holder. Further reproduction or distribution is prohibited without permission.
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