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June 25, 2004

CEO says low-carb craze spelled end for Tippin's

Mark Kind

Staff Writer

A weak economy, a glut of pie and a growing consumer boycott of carbohydrates finished off Tippin's Restaurant Inc., the company's CEO testified Friday, the morning after the restaurants closed their doors for good.

"I think, finally, the final straw was low-carb craze that didn't seem to abate; it seemed to strengthen," CEO James Kerwin testified in an emergency hearing in U.S. Bankruptcy Court for in Kansas City.

Chief Judge Jerry Venters on Friday approved the sale of the chain's pie factory in Kansas City, Kan., to Four B Corp. Kerwin said Four B, owner of the Hen House grocery store chain, had promised the factory's 100 employees they'd remain employed there as the plant changed hands.

Employees of the company's restaurants were less fortunate, however, as their jobs vanished.

"We closed our stores in about two minutes yesterday," Kerwin said in response to questioning from Thomas Franklin, a lawyer with the Franklin Law Firm representing creditor Sysco Food Services of Kansas City Inc.

Franklin questioned whether Kerwin had properly appraised the value of the pie factory and its equipment in the nearly $1.48 million sales agreement with Four B. Kerwin said negotiations started at $1.95 million.

Once covering several states, the Tippin's chain had four restaurants in Lenexa, Overland Park, Prairie Village and Independence and operated a fifth in Tulsa, Okla., Kerwin said. The chain also operated Gambucci's Inc., an Italian restaurant in Olathe.

The Overland Park-based chain filed for bankruptcy Jan. 10, 2003, but as recently as March presented a plan it said would keep the company afloat until fall, when demand for pies traditionally begins to increase until the end of the holiday season.

But Kerwin said the economic rebound wasn't particularly evident in his business, and the company's cash shortage allowed little advertising to boost demand. Carbohyrate-rich pies and Gambucci's pastas remained unpopular with dieters.

Among the major creditors is Valley View Bank, which is owed $4.3 million by Tippin's, including $2 million on a line of credit that Tippin's had sought to increase by $400,000 earlier this month.

"They said they just really couldn't do that," Kerwin said.

Kerwin said the deal with Four B made sense because it preserves the value of the factory by allowing it to continue operating with an experienced staff.

"If you don't have the people with the knowledge and the skill, the value goes to practically nothing," Kerwin said.

The former Pillsbury executive had started other successful restaurant chains and knew the business well, he said. Aside from Four B, buyers for the pie factory would be tough to locate, he said, because too many companies have excess bakery capacity.

REACH MARK KIND at 816-421-5900 or mkind@bizjournals.com.



© 2004 American City Business Journals Inc.