Kelly Capital urges Rubio's to consider franchising

By Lisa Kerner

Charlotte, N.C., July 10 - Shareholder Kelly Capital, LLC and certain affiliated entities suggested that Rubio's Restaurants, Inc. consider a franchising program "to unlock the latent value in its locations."

In a July 10 letter to Rubio's board of directors, Kelly Capital said it believes "there is at least $30 million in excess value that can be unearthed by closing select underperforming locations and franchising many of Rubio's existing units."

The letter was included in a schedule 13D filed with the Securities and Exchange Commission.

According to Kelly Capital, the strategy is similar to other leading restaurant companies including CKE Restaurants, Jack-in-the-Box, McDonald's, Wendy's and Applebee's.

Kelly Capital also suggested Rubio's do the following:

• Reduce its high general and administrative expenses;

• Reevaluate its capital allocation strategy; and

• Engage in a unit-by-unit analysis to maximize shareholder value.

The investors, with a 6% stake in the Carlsbad, Calif., fast-casual Mexican restaurant chain, intend to develop a more detailed strategy after further analysis and meetings with management and the board.

"We look forward to the company's upcoming annual meeting on July 24 and working together with the board of Rubio's to enhance shareholder value," the letter stated.

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