Turnaround Management Case Study
Quick Service Restaurant Chain
Financial Advisor / Interim CEO
| Industry | Food & Beverage / Quick Service Restaurant |
| Revenue | Approximately $16 million |
| Locations | Nine stores across two states |
| Employees | Approximately 250 |
| Ownership | Third-generation, family-owned |
| Engagement | Rapid Business Assessment; Financial Advisory; Interim CEO; Refinancing; Growth Strategy |
Overview
Cedar Croft Consulting, in its capacity as Financial Advisor and subsequently Interim CEO, guided a nearly century-old, family-owned quick service restaurant chain through a comprehensive turnaround—from lender default and organizational dysfunction to financial stability, operational modernization, and a return to growth. The engagement spanned financial restructuring, management overhaul, family succession resolution, and strategic planning, ultimately preserving approximately 250 jobs and positioning the Company for multi-state expansion under fourth-generation leadership.
The Company
Founded in the late 1920s, the Company is a beloved quick-service restaurant chain with deep roots in its home market in the northeastern United States. Known for its signature menu and loyal customer base cultivated over generations, the Company operated nine locations across two states at the time of Cedar Croft’s engagement. The business is wholly owned by a third-generation family member and has long been considered a cultural institution in the communities it serves. Annual revenues were approximately $16 million.
Despite its powerful brand equity and devoted following, the Company’s operational and financial management had not kept pace with its reputation. It was operating with outdated financial systems, limited management oversight, and no formal strategic plan.
Situation
The Company was in acute financial and operational distress when Cedar Croft was initially engaged at the direction of the senior lender:
- Lender Default. The Company had defaulted on its credit arrangements with its senior lender after failing to meet required debt service coverage ratios. The lender indicated it would not extend financing and demanded full repayment of its approximately $4.0 million note.
- Overstated Financial Performance. Cedar Croft’s initial assessment revealed that the Company’s annual budget had overstated revenues by $1 million and EBITDA by $706,000. Actual results fell further below the revised expectations.
- Management Dysfunction. The CEO, hired roughly eighteen months earlier, was frequently absent, did not meet regularly with store managers, and provided limited operational direction. The controller missed reporting deadlines regularly. Communication between the CEO and the finance function had broken down to the point that they communicated only through a family member.
- Family Succession Crisis. The owner faced the difficult decision of choosing which of her two children would lead the next generation of the business. The resulting dispute permeated the entire organization, creating friction and distracting leadership from operational priorities.
- Delinquent Tax Filings. Tax returns for multiple years had not been filed, creating regulatory risk and a significant impediment to any refinancing.
- Stalled Refinancing. Although Cedar Croft had identified a new lender and secured a term sheet, the refinancing stalled for months because the Company could not deliver basic financial information—a direct symptom of the organizational dysfunction.
The Company’s survival as a going concern was genuinely in question.
Cedar Croft’s Approach as Interim CEO
Cedar Croft’s involvement evolved through three distinct phases as the depth of the Company’s challenges became apparent:
Phase 1 – Assessment and Financial Advisory. Cedar Croft was initially engaged to conduct a Rapid Business Assessment. The assessment revealed the extent of the financial overstatement and operational deficiencies. Cedar Croft recommended closing an underperforming location, improving the budgeting process, and securing new credit facilities. Cedar Croft was then re-engaged to lead the refinancing effort, preparing a comprehensive Confidential Information Memorandum and canvassing over 70 potential financing sources. A new lender was identified and a term sheet secured.
Phase 2 – Interim CEO and Organizational Restructuring. When the refinancing stalled due to organizational dysfunction, Cedar Croft recommended a decisive leadership change. The existing CEO’s resignation was accepted, and Cedar Croft’s engagement principal was appointed Interim CEO. This embedded approach—leading the turnaround from inside the business rather than advising from the outside—proved critical for a small, family-owned company that lacked the internal resources to implement advisory recommendations on its own.
As Interim CEO, Cedar Croft took the following actions:
- Replaced the entire operations management team from the store manager level upward, installing competent, accountable leadership throughout the organization.
- Resolved the family succession dispute: the owner’s son was formally installed as President, the owner transitioned to a Chairperson role, and organizational clarity was restored.
- Replaced the controller with a qualified finance professional, subsequently promoted to VP of Finance and Administration, rebuilding the finance function from the ground up.
- Resolved all delinquent tax filings to clear the path for the refinancing.
- Proactively communicated each leadership change to the prospective lender, framing them as positive developments that demonstrated the Company’s commitment to transparency and sound governance.
Phase 3 – Refinancing, Operational Transformation, and Growth. With the organizational foundations rebuilt, Cedar Croft closed the refinancing. The new credit facility retired the prior lender’s debt in full and, critically, provided capital for expansion—something the prior facility had not permitted. Cedar Croft then drove a series of operational and strategic initiatives to transform the business into a growth platform.
Engagement Key Steps
- Conducted a Rapid Business Assessment that identified $1 million in overstated revenues and $706,000 in overstated EBITDA, providing stakeholders with an accurate baseline.
- Implemented a weekly communication protocol providing continuous, transparent updates to ownership and the senior lender throughout the engagement.
- Prepared a Confidential Information Memorandum and canvassed over 70 potential financing sources, evaluating competing proposals to identify the optimal lender.
- Recommended and executed a leadership change, with Cedar Croft’s engagement principal stepping into the Interim CEO role to accelerate execution.
- Replaced the entire operations management team from the store manager level upward.
- Resolved the family succession dispute, formally installing the next-generation leader as President and restoring organizational clarity.
- Rebuilt the finance function by replacing the controller with a qualified professional and resolving all delinquent tax filings.
- Closed the senior debt refinancing, retiring the prior lender’s debt in full and securing a new credit facility with expansion capital.
- Implemented a modern, industry-specific ERP system providing real-time financial visibility across all locations for the first time.
- Launched delivery service across all stores, opening a new revenue channel.
- Closed an underperforming location upon lease expiration, as recommended in the initial assessment.
- Developed a comprehensive five-year strategic plan articulating the next-generation leader’s vision for growth.
- Designed and initiated a legal entity restructuring to support multi-state expansion, provide liability protection, and create a tax-efficient structure.
- Secured financing for and commenced construction of a new ground-up location in a growth market, with an opening planned for mid-2026.
- Facilitated the acquisition of a property where the Company had been a tenant for over 40 years, securing long-term presence and potential capital appreciation.
Results
- The senior lender was paid in full—100% recovery of outstanding principal and accrued interest—without any bankruptcy filing or formal insolvency proceeding.
- Same-store sales increased 3.3% during Cedar Croft’s tenure, while the industry average was flat or declining.
- Prime costs were reduced by 5.5 percentage points through disciplined food cost management, renegotiated vendor agreements, and improved labor efficiency.
- Adjusted EBITDA as a percentage of sales improved by 5 percentage points.
- The Company went from generating negative cash flow and defaulting on loan covenants to producing positive, growing cash flow and meeting all lender obligations.
- Approximately 250 jobs were preserved across nine locations in two states.
- All trade creditors were paid in the ordinary course throughout the turnaround. No creditor was required to accept a haircut or any concession.
- A new ground-up store is under construction in a growth market, expected to create approximately 25–30 new positions.
- The family succession was resolved, with a fourth-generation leader now in place, supported by modern systems, a clear strategic plan, and a professional management team.
- The Company was transformed from a distressed, shrinking business into a growth platform positioned for multi-state expansion—approaching its centennial milestone with renewed momentum.
