Houlihans

Engagement Summary – Houlihan’s Restaurant Group (HRG)

Hudson Consulting Group (HCG) was retained by Dan Scoggin (the founding and former
CEO of T.G.I. Fridays) to find the capital to purchase Houlihan’s Restaurant Group.
Scoggin previously worked with Hudson Consulting on the restructuring of a similar
restaurant chain named Ground Round and its sale to Boston Ventures. HRG was being
sold by the Malcolm Glazier family, sophisticated sellers who had retained Montgomery
Securities as their Investment Banker (financial advisor). The Glazers have several
disparate holdings including First Allied (6.7 million sq. ft. real estate), Zapata Oil
(purchased from George Bush), the Tampa Bay Buccaneers and stadium, and Manchester
United soccer.

HCG was successful to persuading the Hampstead Group (Dallas, TX) to review the
business plan it developed with Mr. Scoggin’s management team. The plan called for the
growth of EBITDA over a three year period from $22 million to $42 million. This
growth was to be accomplished by three primary means:
1. Reduction in G&A – tangible expenses to be eliminated worth $10 MM/year
2. Reduction in store labor – implementation of staffing model worth $5 MM/yr.
3. Increase in sales – new menu and a doubling of franchised stores for $10 MM/yr.

The Houlihan’s Restaurant Group was headquartered in Kansas City, MO with 102
company owned restaurants in 26 states. The highest bid price was $125 million through
an auction process conducted by Montgomery. After 3 intense months of due diligence,
the capital structure was funded consisting of $65 million in new bank debt, $64 in
private equity from Hampstead, and $1 million from the management team. Also during
this period of time, the liquor license of 26 states was transferred to Stephen J. Kiel, one
of the HCG principals, who agreed to stay on for 3 years as the CFO.

Due to the sophisticated abilities of the seller, there was very little negotiation and much
more rapid and intense due diligence, business planning, operational preparation and staff
evaluation. There was a limited time for the EBITDA achievements to be accomplished.
Prior to transaction, an industry expert and a valuation firm were each brought in to
gauge the feasibility of meeting the business plan goals and projections. This illustrates
another characteristic of Hudson Consulting Group. We are not viewed as independent
valuation or industry experts. We do advocate for the transaction and for the buying
team’s business plan. Even though we are not industry specialists, we are thorough
enough generalists for our plans to pass muster.

The lender group was led by Bank Boston, N.A.  HCG had developed considerable
credibility with the restaurant lending community as a result of its work at Ground Round.
We develop credibility as a result of getting to results; where other brokers utilize their
name, size or industry reputation. HCG also develops business plans with realistic goals
and assumptions. The ability to anticipate what information banks want and the
questions/concerns they typically have, makes Hudson Consulting Group very effective
and efficient in dealing with lenders. This transaction also illustrates the importance of
having the right incoming CEO in the eyes of the investor.                                                                                                                                     That chemistry is one that HCG cannot forge; it  is either there, or it is not.