Outback Steakhouse to acquire Chi-Chi's

LOUISVILLE, Ky. -- Chi-Chi's, the Mexican restaurant chain, may have served its last chimichanga.\nOutback Steakhouse Inc. this week closed on its $42.5 million deal for the rights to 76 restaurants in the Chi-Chi's chain, which was beleaguered by bankruptcy and a hepatitis outbreak.\nOutback plans to convert many of the restaurants into its own brands -- which include its signature Outback Steakhouse, Carrabba's Italian Grills, Bonefish Grills, Fleming's Prime Steakhouse and Wine Bars, Roy's and Cheeseburger in Paradise restaurants.\n"We felt it was a good opportunity to acquire a large number of good locations that we can use for our brands," said Joseph Kadow, senior vice president for Outback Steakhouse Inc., based in Tampa, Fla.\nThe deal did not include Chi-Chi's brand, its restaurant operations or any recipes, Kadow said.\nA statement posted on Louisville-based Chi-Chi's Web site said, "We would like to thank all of our loyal customers of the past 27 years and with a tear in our eye, say ¡Adios!"\nA recorded message on Chi-Chi's toll-free guest relations hot line said the chain was no longer in business and apologized for any inconvenience caused by the closure of its restaurants.\nThe chain's parent, California-based Prandium Inc., declined to comment Wednesday about the fate of Chi-Chi's.\nChi-Chi's was left reeling by a hepatitis A outbreak last fall that sickened 660 people who ate at a Pennsylvania restaurant. The outbreak, traced to green onions, killed four. More than 300 victims filed claims seeking damages from the company.\nChi-Chi's filed for Chapter 11 bankruptcy protection a few weeks before the outbreak, due to unrelated cash-flow problems.\nA call to a Chi-Chi's bankruptcy attorney in Delaware was not immediately returned.\nThe chain had about 100 restaurants at the time of the hepatitis outbreak, but the company said earlier this year that it would close more than two dozen.\nWilliam Marler, a lawyer for plaintiffs suing Chi-Chi's over the outbreak, said Outback's successful bid for the rights to the Chi-Chi's restaurants would not affect pending cases.\nMarler, of Seattle, said about 150 of approximately 325 claims have been settled, with $7 million paid out so far. He said plenty remains in an existing insurance pool to pay off future claims.\n"It would be very unlikely that this insurance money is not enough," said Marler, who represents about a third of claimants.\nBy acquiring the rights to the Chi-Chi's restaurants, Outback can convert them into its own brands or sell the properties. The restaurants are in several states, including New Jersey, Pennsylvania, Ohio, Michigan and Wisconsin, Kadow said.\nThe company hopes to move quickly to put its own name on some stores.\n"We're going to move with all deliberate speed, but there may be permitting issues, there's obviously some renovations to be done," Kadow said in a phone interview this week.\nOutback's stock fell 63 cents to close at $40.91 in trading Wednesday on the New York Stock Exchange.