Expansion Of Cinnabon Chain On The Menu For Restaurant Firm

Freed from the financial troubles of its former majority owner, Restaurants Unlimited Inc. says it soon will start a long-delayed national expansion of its Cinnabon bakery chain.

RUI's approximately 255 company-owned and franchised Cinnabon outlets, which feature cinnamon rolls, are primarily in major shopping malls.

"Five years from now, we'd like that number to look something like 1,500," said Jim Welch, executive vice president.

RUI, which operates 24 restaurants in six states, also hopes to resume the national expansion of Palomino restaurants similar to the one it opened in downtown Seattle in 1989. The company has built Palominos in Minneapolis, San Francisco and Palm Desert, Calif., and is negotiating to build another in Honolulu.

The company also hopes to create an interstate chain based on the Zoopa concept restaurant it built a few years ago near Southcenter - and to offer RUI stock to the public "hopefully in two to three years," Welch said. RUI also operates the Cutter's, Kayak and Palisade restaurants in Seattle.

Since 1990, 80 percent of the company was owned by Eli Jacobs, a New York investor who also owned the Baltimore Orioles.

Jacobs, accused in lawsuits of defaulting on $44 million in loans and personal guarantees to investors, banks and other companies, filed for Chapter 11 bankruptcy protection early last year. Last fall, he sold the Orioles to a local investor group for $173 million.

The week after Jacobs filed for bankruptcy, RUI was contacted by UBS Capital Corp. in New York, which is affiliated with Union Bank of Switzerland and which had been RUI's senior lender for years, Welch said.

After more than a year of negotiations, Jacobs' stake was bought last week by some RUI executives, UBS and Thomas H. Lee Co. in Boston, for an undisclosed price.

Welch said RUI management now owns 25 percent of the company, and the largest shareholder is Lee, a private investment firm that manages $1.7 billion in equity and capital.

Last year, RUI had sales of $110 million, excluding its franchised Cinnabon units. The company expects sales of $130 million this year.

Welch said RUI plans to nearly quadruple its capital spending over the next few years, primarily to add Cinnabons in supermarkets, airports and in stores like Wal-Mart and Fred Meyer.

RUI also plans to open a Zoopa restaurant this fall in Bellevue Square and is hoping to create a national chain of similar self-service restaurants.

"We have more work to do (on Zoopa) and more questions to answer, but we expect this to be a national brand," Welch said.

The company hopes to open one to two more Palomino restaurants a year for four or five years.

But it has no plans to duplicate its 2-year-old Seattle waterfront Palisade restaurant.