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Packo's buyer sees tasty opportunity Bob Bennett made a $5.5M bid this month in the court-ordered sale of Tony Packo's Inc. Bennett Management Corp, a Maumee firm, owns 26 Burger Kings in three states.
Bob Bennett made a $5.5M bid this month in the court-ordered sale of Tony Packo's Inc. Bennett Management Corp, a Maumee firm, owns 26 Burger Kings in three states.
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Published: Sunday, 10/23/2011 - Updated: 2 years ago

Packo's buyer Bob Bennett sees tasty opportunity

Owner of area Burger Kings wants to be 'white knight'

BY JON CHAVEZ
BLADE BUSINESS WRITER

Four decades ago, Bob Bennett shelved a thriving law career in Coral Gables, Fla., hopped a flight, and came to Toledo to salvage his budding Burger King franchise opportunity, which was in jeopardy of being shut down.

He and three partners had to find someone to run the stores or the Miami-based burger chain wouldn't allow them to open three stores it had under construction. They picked Mr. Bennett, who took a two-year leave from his law firm and moved to Toledo.

"I came up here, liked the city, everything was going well, and I got excited about it. And pretty soon three years became 11," he said with a smile.

Now he is about to rescue another restaurant chain -- Tony Packo's Inc., Toledo's iconic eatery begun in 1932 by Hungarian hot-dog creator Tony Packo.

"It's a once in a lifetime opportunity, and I think I mesh into what the icon needs just perfectly," Mr. Bennett, 74, told The Blade last week in an interview about his plans for his new purchase.

His Bennett Management Corp., a Maumee firm that owns 26 Burger Kings in three states, made a $5.5 million winning bid this month in a court-ordered sale of Packo's. A judge gave him the right to buy the company and restore it to fiscal health after a 15-month legal battle between Packo family members trying to wrest control of the chain from each other. Completion of the financial transaction will be at least a few weeks off.

"It's exciting. It's a good company and it's a natural fit," said Mr. Bennett about his decision to unretire in order to run the local company that gained national fame by being mentioned on five episodes of M*A*S*H*, a hit 1970s television show about an Army mobile medical unit during the Korean War.

Packo's, based in East Toledo, has 200 employees and annual sales of about $10 million. It has three Toledo-area full-sized restaurants and two Packo's Express eateries in The Andersons general stores in Toledo and Maumee. It also has a wholesale business, selling some of its products in stores and restaurants in other states.

Mr. Bennett, a Sylvania resident who had retired in 1995, said he is buying Packo's for two reasons.

First, he wanted to be a "white knight" who'll preserve what Lucas County Common Pleas Judge Gene Zmuda called a community asset and part of Toledo's legacy. "I don't think a lot of people would invest this kind of money in Toledo in this environment," Mr. Bennett said.

But, he said, Packo's is a tasty business venture that could pay off nicely.

"I thought I could protect the brand and maybe grow the brand in the future," he said.

His cash offer filed under the name TP Foods LLC outbid four others, but Mr. Bennett said he doesn't think he overpaid for the chain. He said he had his analysts calculate what Packo's would be worth if it were a national chain, and his bid was at the top end of what he was willing to offer.

Not a done deal

The purchase is contingent on the Packo's name and its recipes being named corporate assets. Judge Zmuda is expected to determine next month if they are owned by the company, a ruling Mr. Bennett thinks will go his way. However, one of the company's current owners, Robin Horvath, has indicated he may contest whether the recipes were part of the sale.

However, if Mr. Bennett does get Packo's, he said customers should not expect any changes in its name, menus, or atmosphere. "That would be foolish," he said.

And there won't be any Burger King connections at Packo's.

"Burger King is very jealous of their brand. They want a wall built between any other brands that a franchisee may operate," he said.

Steve Skutch, a court-appointed receiver, has been running Packo's since August, 2010. He is now preparing the company for the sale transaction. The preparation includes hiring an executive chef and food analysis team this month to document Packo's secret ingredients and mixing procedures. Once written down, the recipes "will be locked away in a safe," Mr. Bennett said.

As Mr. Skutch readies the company, Bennett Management has its team examining all aspects of the 79-year-old chain -- known for its Hungarian hot dogs, chili sauce, spicy pickles and peppers, and celebrity-autographed hot dog buns that line the walls of its restaurants.

Family ties

Once the sale occurs, Packo's would be a division of Bennett Management, which has 600 employees and headquarters in a former Burger King restaurant in Maumee's Arrowhead Park. But it will be run by Tony Packo, Jr., and his son, Tony Packo III, each of whom could end up with some ownership stake, if they perform well enough, Mr. Bennett said.

Of the company today, Mr. Packo, Jr., is president and Mr. Packo III is an executive. The company was ordered sold on Oct. 6 to Mr. Bennett by Judge Zmuda.

Mr. Packo, Jr., and his son were defendants in a lawsuit and court action pursued by a third Packo family member, Robin Horvath, who is the chain's chief operating officer and the son of Mr. Packo, Jr.'s sister, the late Nancy Packo Horvath.

Mr. Packo, Jr., and Mr. Packo III own half of the company; Mr. Horvath owns the other half. Collectively, they could receive $200,000 to $300,000 from the sale, the receiver's attorney has said.

Mr. Bennett said he suspects the court fight may have split the work force, with some loyal to the Packos and others loyal to Mr. Horvath.

So he'll offer "complete amnesty" to all in order to heal any schisms. "I don't want any holdover animosity or grievances. I want to try to work as a family again," he said.

Mr. Bennett said all Packo's employees must reapply for their jobs. He was unsure whether the chain will need the same number of workers. He added he is anxious to meet with workers as soon as possible.

An eye on growth

After a year of stability, Mr. Bennett said he'll want to build company-owned stores outside the Toledo area, but there will be no franchising.

"I think you have to pick your market very carefully … but just in the Midwest there's a lot of markets that would be good for expansion, with an eastern European heritage. Hungarians, you could say," Mr. Bennett said, citing Minnesota and Cleveland as two likely candidates.

He said he might expand Packo's wholesale operations, which are 10 percent of the chain's revenues. Wholesale operations could help develop new markets by placing products in supermarkets before opening new restaurants, Mr. Bennett said.

Packo's also might do more marketing through community involvement, Mr. Bennett said. "Community support is something Bennett [Management] does a lot," he said.

Mr. Packo III, teaming with other investors, had submitted a bid to buy the firm, but the group withdrew at the last minute to support TP Foods, the buying group that represents Mr. Bennett.

Mr. Bennett said Mr. Packo, Jr., and Mr. Packo III "came to me and … decided they wanted to work with me." Mr. Bennett said he had talks with Mr. Horvath, who also had bid to buy the company, but the talks did not work out because Mr. Horvath wasn't interested if he had to give up control of the company.

While Mr. Horvath could start a new business, Mr. Bennett said he doesn't expect it to be a restaurant that competes with Packo's.

"I think Robin will be fair … If he's going to open another restaurant in Toledo, he'll do one that won't hurt us," Mr. Bennett predicted.

Asked how he can be certain, Mr. Bennett said, "I've turned over a lot of employees and had a lot of experience in this world … I measure [Mr. Horvath] to be an honest man, a good man."

Mr. Horvath, through his attorney, declined to comment. But he did file a notice to appeal Judge Zmuda's sale decision. His complaint outlining the appeal grounds, however, wasn't filed by Friday.

Back to work

When he retired 16 years ago, Mr. Bennett was working nearly 100 hours a week to run his Burger King empire, which then had 31 stores. If the Packo's sale occurs, Mr. Bennett said he knows he'll likely go back to working more than 40 hours a week.

"I was kind of bored, actually," he said when asked why he'd want to run Packo's as a septuagenarian.

That rings true to Rob Armstrong, the man responsible for running operations at Bennett Enterprises, which is unrelated to Bennett Management and owns the area's Big Boy and Ralphie's Sports Eatery stores.

"I can guarantee that he never really retired. He's always had a lot of energy," said Mr. Armstrong, who has known Bob Bennett for three decades and worked for him five years in the 1980s.

"He was a great operator and Toledo's fortunate to have him take over Packo's," he said.

Mr. Bennett's firm developed organizational systems, controls, and management benchmarks to keep his Burger King empire running efficiently, Mr. Armstrong said. "He has systems in place that would greatly benefit a company like Packo's," he added.

In his lawsuit filing in July, 2010, Mr. Horvath stated that he had discovered more than $100,000 in questionable transactions paid to the company's controller or Mr. Packo III with no supporting documentation. Mr. Horvath, who also is the firm's treasurer, said he had tried to investigate up to $300,000 in what he termed questionable transactions but the records were kept from him.

Mr. Bennett said Mr. Skutch checked into the transactions "and no one ever felt that it should be pursued." Going forward, Mr. Bennett said he won't reopen the issue.

A good fit

Mr. Bennett, the largest Toledo-based food franchise operator with 26 stores, said he first thought of buying Packo's in late 2010 at a friend's suggestion. In March, 2011, Fifth Third Bank, which held a $2.7 million loan owed by Packo's, asked Mr. Bennett if he wanted to make a bid.

"It seemed like something that would fit into my organization well. It's Toledo-based. It affords me a chance to invest in the Toledo market and put money back into where I earned all my money from," Mr. Bennett said.

The Burger King franchisee said that Packo's offers something else -- a chance to run restaurants independent of franchise restrictions.

In the early 1980s, having built up his Burger King empire and bought out his three Florida partners, Mr. Bennett invested in 18 Long John Silver's franchises in northern Ohio and southern Michigan. They were successful and lucrative, but then the chain decided it wanted to compete with McDonald's, Wendy's, and Burger King and it changed its menu.

Customers rebelled and the move wiped out nearly half the chain. Mr. Bennett sold his stores back to the company around 1990.

The lesson taught Mr. Bennett, who has accounting and law degrees from the University of Miami, the value of having sole control over a restaurant operation.

"The pitfalls and mistakes [the Packos] would make on their own I can prevent because I have already made those mistakes and learned from them," he said of his Long John Silver's experience and a later failure at developing a Mexican-style chicken chain in Arizona.

Tanya Pipatjarasgit, a commercial real estate broker and retail property expert at the Toledo office of Signature Associates, helped Mr. Bennett sell some of his property two years ago. She grew up around restaurants -- her family owns Magic Wok Inc. -- and said Mr. Bennett is friendly and unassuming, but "he's a shrewd businessman."

Mr. Bennett frequently knows more than he lets on, she said.

"He knows what he is doing and he's definitely the captain of the ship," she said. "He asked the right questions, so he does his homework. But he's also very personal and very welcoming."

Mr. Bennett also is very philanthropic in the Toledo community. Through the years he's been heavily involved in fund-raising for Central Catholic High School, the Cherry Street Mission, Toledo Public Schools' athletic programs, and other organizations.

"He's been a very generous benefactor of the Boy Scouts for years," said Dan Anderson, president of the Retail group for The Andersons, Inc. "He sure believes in that organization."

As for the soon-to-be his Packo's, Mr. Bennett said, he hopes employees and company management soon will ask him to sign a hotdog bun to be mounted on the restaurant wall.

"I'll have to talk to them about that. I understand you get a free hotdog, too," Mr. Bennett said.

Contact Jon Chavez at: jchavez@theblade.com or 419-724-6128.



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