SOURCE: Meritage Hospitality Group Inc.

August 01, 2007 08:59 ET

Meritage to Explore Strategic Options Including Recapitalization of Company and Expansion of Wendy's Business

GRAND RAPIDS, MI--(Marketwire - August 1, 2007) - Meritage Hospitality Group Inc. (PINKSHEETS: MHGU), one of the nation's premier hospitality companies and only publicly traded Wendy's and O'Charley's restaurant franchisee, has announced that following the completion of the deregistration transaction earlier this year, the Company's Board of Directors plans to engage a strategic advisor to assist the Company in considering options including a recapitalization and the acquisition of additional Wendy's units in markets outside of Michigan.

"Consistent with our previously stated goals, we intend to investigate value-creating alternatives for our shareholders who are interested in a liquidity event," said Robert E. Schermer Jr., Meritage's Chief Executive Officer and President. "A recapitalization could produce several benefits such as a better legal and tax structure, shareholder liquidity and new capital for business growth. We intend to move forward by retaining a strategic advisor to assist us in this review," Mr. Schermer stated.

Mr. Schermer added, "A private equity scenario appears preferable as it would provide the Company with more flexibility to pursue a wide array of growth options in the Wendy's system." Wendy's took the top spot for customer satisfaction in the "limited service restaurants" category in this year's American Customer Satisfaction Index survey, which is produced by the University of Michigan's Stephen M. Ross Business School, and measures customer attitudes about the quality of products and services available across the country. In addition, the Zagat Survey, which is considered the world's leading provider of consumer survey-based leisure content, recently named Wendy's as having the "Best Burger" in the quick-service restaurant industry. "We continue to believe that the Wendy's franchise system will be a strong brand and provide opportunities in the long term, which is why we are looking to expand our platform in the Wendy's system at this time," Mr. Schermer added.

There is no assurance that the Company will retain a strategic advisor on satisfactory terms or that retaining a strategic advisor to assist us in our review will result in any changes to the Company's current structure, or that any transaction will be consummated. In addition, the steps announced today do not preclude the possibility of the Company pursuing other strategic alternatives in the future.

Meritage is one of the nation's premier franchise operators, currently operating 53 restaurants in two brands; Wendy's in the QSR Segment and O'Charley's in the Casual Dining Segment. In addition, the Company is exploring other franchise opportunities including oceanfront hospitality developments on the Island of Eleuthera, Bahamas. The Bahamas developments are subject to permits, economic feasibility of the projects, acquisition and development financing and other conditions.


Certain statements contained in this news release that are not historical facts constitute forward-looking statements which may be identified by words such as "estimates," "anticipates," "projects," "plans," "expects," "believes," "should," and similar expressions, and by the context in which they are used. Such statements are based only upon current expectations of the Company. Any forward-looking statement speaks only as of the date made. Reliance should not be placed on forward-looking statements because they involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements to differ materially from those expressed or implied. Meritage undertakes no obligation to update any forward-looking statements to reflect events or circumstances after the date on which they are made.

Statements concerning expected financial performance, business strategies and action which Meritage intends to pursue to achieve its strategic objectives, constitute forward-looking information. Implementation of these strategies and achievement of such financial performance are subject to numerous conditions, uncertainties and risk factors, which could cause actual performance to differ materially from the forward-looking statements. These include, without limitation: competition; changes in the national or local economy; changes in consumer tastes and eating habits; concerns about the nutritional quality of our restaurant menu items; concerns about consumption of beef or other menu items due to diseases including E. coli, hepatitis, and mad cow; promotions and price discounting by competitors; severe weather; changes in travel patterns; road construction; demographic trends; the cost of food, labor and energy; the availability and cost of suitable restaurant sites; the ability to finance expansion; interest rates; insurance costs; the availability of adequate managers and hourly-paid employees; directives issued by the franchisor regarding operations and menu pricing; the general reputation of Meritage's and its franchisors' restaurants; the relationship between Meritage and its franchisors; legal claims; and the recurring need for renovation and capital improvements. In addition, Meritage's expansion into the casual dining restaurant segment as a franchisee of O'Charley's will subject Meritage to additional risks including, without limitation, unanticipated expenses or difficulties in securing market acceptance of the O'Charley's restaurant brand, the ability of our management and infrastructure to successfully implement the O'Charley's development plan in Michigan, and our limited experience in the casual dining segment. Also, Meritage is subject to extensive government regulations relating to, among other things, zoning, public health, sanitation, alcoholic beverage control, environment, food preparation, minimum and overtime wages and tips, employment of minors, citizenship requirements, working conditions, and the operation of its restaurants. Because Meritage's operations are concentrated in certain areas of Michigan, a marked decline in Michigan's economy, or in the local economies where our restaurants are located, could adversely affect our operations.

Contact Information

    Robert E. Schermer, Jr.
    Chief Executive Officer
    Meritage Hospitality Group Inc.
    616/776-2600 x 1012