State Bank has committed $7.7 million and Regions Bank $2.3 million to Austin-based Schlotzsky's. The company will retire the last $7.3 million of a $40-million credit facility obtained in December 1999.
Schlotzsky's, which operates and franchises sandwich shops, used the $40-million facility, which came from Wells Fargo, Frost Bank and Texas Capital Bank, to buy development rights in Austin and parts of 18 states. Under direct corporate control, sales in the Austin area increased from $13.4 million in 1998 to $24.8 million in 2001.
The company hopes to show similar results after taking over the Houston, Dallas and San Antonio markets and parts of Colorado, Missouri, Mississippi, Arkansas, Louisiana, Tennessee, Utah, Wyoming and Utah. The transaction is to close Aug. 30. "This will be an important transaction because we will gain control over most of our home market in Texas, and other key markets and further reduce out area developer service costs," John Wooley, Schlotzsky's CEO and president, said in a statement.
The company says it reduced developer service cost as a percentage of royalty revenue from 38.3% in 1998 to 21.8% in 2001 by reacquiring development rights. Schlotzsky's has 672 restaurants in 38 states.
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