As filed with the Securities and Exchange Commission on June 4, 2010

No. 333-      

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

 

Form S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

 

 

LRI HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

 

 

3011 Armory Drive, Suite 300

Nashville, Tennessee 37204

(615) 885-9056

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

 

 

 

G. Thomas Vogel

President and Chief Executive Officer

LRI Holdings, Inc.

3011 Armory Drive, Suite 300

Nashville, Tennessee 37204

(615) 885-9056

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

 

 

With copies to:

 

 

Approximate date of commencement of proposed sale to the public:  As soon as practicable after this Registration Statement becomes effective.

 

 

 

 

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box:  o

 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o

 

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities act registration statement number of the earlier effective registration statement for the same offering.  o

 

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

(Do not check if a smaller reporting company)

 

CALCULATION OF REGISTRATION FEE

 

 

 

The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

 

 

SUBJECT TO COMPLETION, DATED JUNE 4, 2010

PROSPECTUS

 

Shares

 

 

LRI Holdings, Inc.

 

Class A Common Stock

 

 

This is an initial public offering of shares of Class A common stock of LRI Holdings, Inc. We are offering          shares of our Class A common stock, and the selling stockholders identified in this prospectus are offering an additional           shares of Class A common stock. We will not receive any of the proceeds from the sale of the shares being sold by the selling stockholders in this offering.

 

Prior to this offering, there has been no public market for our Class A common stock. The initial public offering price per share of the Class A common stock is expected to be between $      and $     . We intend to apply to list our Class A common stock on The NASDAQ Global Select Market under the symbol “LGNS”.

 

The underwriters have an option to purchase a maximum of           additional shares from us and the selling stockholders to cover over-allotment of shares. The underwriters can exercise this option at any time within 30 days from the date of this prospectus.

 

Investing in our Class A common stock involves risks. See “Risk Factors” beginning on page 12.

 

 

Delivery of the shares of Class A common stock will be made on or about          , 2010.

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

Credit Suisse

 

The date of this prospectus is          , 2010

 

[ARTWORK]

 

 

TABLE OF CONTENTS

 

 

 

You should rely only on the information contained in this prospectus or in any free-writing prospectus we may specifically authorize to be delivered or made available to you. We have not, the selling stockholders have not and the underwriters have not authorized anyone to provide you with additional or different information. We and the selling stockholders are offering to sell, and seeking offers to buy, shares of our Class A common stock only in jurisdictions where such offers and sales are permitted. The information in this prospectus or any free-writing prospectus is accurate only as of its date, regardless of its time of delivery or the time of any sale of shares of our Class A common stock. Our business, financial condition, results of operations and prospects may have changed since that date.

 

Until          , 2010 (25 days after the date of this prospectus), all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This delivery requirement is in addition to the dealers’ obligation to deliver a prospectus when acting as an underwriter and with respect to their unsold allotments or subscriptions.

 

Unless otherwise indicated, information in this prospectus concerning economic conditions, our industry, our markets and our competitive position is based on information from independent industry analysts and publications, including KNAPP-TRACK^tm, as well as our own estimates and research. Our estimates are derived from publicly available information released by third-party sources, as well as data from our internal research, and are based on such data and our knowledge of our industry, which we believe to be reasonable. However, neither we, the selling stockholders nor the underwriters have independently verified any third-party data or guaranteed the accuracy and completeness of such information. None of the independent industry publications used in this prospectus were prepared on our behalf, and none of the sources cited in this prospectus have consented to the inclusion of any data from their reports, nor have we sought consent from any of them.

 

This prospectus includes our trademarks, such as Logan’s Roadhouse^® and the design, our stylized logos set forth on the cover and back pages of this prospectus, Logan’s^® and the design, The Logan^®, Onion Brewski^®, Brewski Onions^®, Peanut Shooter^®, Roadies^® and The Real American Roadhouse^®, as well as the peanut man logo and the trade dress element consisting of the “bucket” used in connection with our restaurant services, which are protected under applicable intellectual property laws and are the property of LRI Holdings, Inc. or its subsidiaries. This prospectus may also contain trademarks, service marks, tradenames and copyrights of other companies, which are the property of their respective owners. Solely for convenience, trademarks, service marks and tradenames referred to in this prospectus may appear without the ^®,^tm or ^sm symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the right of the applicable licensor to these trademarks, service marks and tradenames.

 

PROSPECTUS SUMMARY

	•	Menu Innovation.  The Real American Roadhouse concept provides a broad platform from which to expand our menu. We have successfully introduced new menu items such as our Roadies, our Health Nuts! menu (offering 12 items with under 550 calories), our Bleu Cheese Sirloin, our Cinnamon Roll Sundae and our Loaded Sweet Potato. We believe our customers appreciate the introduction of new items on an ongoing basis. Our goal is to add four to eight new menu items each year.
	•	Increasing Our Average Check.  Our relatively low average check versus our primary competitors in the bar & grill and steakhouse segments gives us the ability to selectively implement moderate pricing increases without impacting our value proposition. Additionally, we expect to grow sales by responsibly increasing alcoholic beverage sales. Our alcoholic beverage sales were 7.4% of total sales for the 39 weeks ended May 2, 2010, compared to approximately 9% before fiscal year 2008, which we believe corresponded to the onset of the economic downturn.
	•	Promoting Our Brand.  We intend to focus our marketing efforts on driving repeat visits from frequent customers and attracting new customers. We use various marketing programs, including television, radio and print advertising as well as various local marketing efforts. We also promote our brand using a combination of in-restaurant sales initiatives, including specials and happy hours, table-top merchandising, outdoor banners, gift cards and our on-line loyalty club. We believe that our brand awareness will continue to increase as we backfill units in existing states and expand into adjacent states.
	•	Emphasizing Excellent Operations and Customer Satisfaction.  We intend to improve upon our strong customer satisfaction by continuing to focus on delivering a superior customer experience. Our servers are generally limited to serving no more than four tables at a time, allowing them to provide attentive service to our customers. We receive approximately 120,000 phone survey results from customers each year and these surveys have shown an 800 basis point improvement in the top rating of overall customer satisfaction scores since 2006. We will continue to invest in our in-restaurant execution through annual operational programs to improve our customer experience.

	•	our ability to successfully execute our growth strategy and other initiatives intended to enhance long-term stockholder value;
	•	the adverse effect of macroeconomic conditions on sales and profits of existing restaurants or on our ability to open new restaurants;
	•	intense competition in the restaurant industry;
	•	changes in consumer preferences related to potential negative publicity regarding food safety and health concerns, including E. coli bacteria, hepatitis A, “mad cow” disease, “foot-and-mouth” disease, avian influenza, peanut and other food allergens, and other public health concerns;
	•	changes in our costs, including food (especially beef), labor, utilities, insurance and taxes;
	•	supply and delivery shortages or disruptions; and
	•	our concentration of restaurants in the Southeast and Southwest United States.

Class A common stock offered by us		shares
Class A common stock offered by the selling stockholders		shares
Class A common stock outstanding immediately after this offering		shares or          shares, if the over-allotment option is exercised in full
Use of proceeds		We estimate that the proceeds to us from this offering, after deducting estimated underwriting discounts and commissions and offering expenses payable by us, will be approximately $      million, assuming the shares offered by us are sold for $      per share, the midpoint of the price range set forth on the cover of this prospectus.
		We intend to use the proceeds from the sale of Class A common stock by us in this offering, together with cash on hand, to prepay our outstanding senior subordinated unsecured mezzanine term notes, including a prepayment premium and accrued and unpaid interest on such notes, to redeem all of our outstanding Series A preferred stock, including accumulated dividends, to pay BRS and Black Canyon a termination and transaction fee in connection with the termination of the management and consulting services agreement and to pay other fees and expenses incurred in connection with this offering. See “Use of Proceeds” and “Description of Certain Indebtedness”.
		We will not receive any of the proceeds from the sale of shares of Class A common stock by the selling stockholders.
Principal stockholders		Upon completion of this offering, BRS, Black Canyon and Canyon Capital will, acting together, own a controlling interest in us. We currently intend to avail ourselves of the “controlled company” exemption under the corporate governance rules of The NASDAQ Stock Market.
Dividend policy		We currently expect to retain all available funds and any future earnings to fund the development and growth of our business and to repay indebtedness; therefore, we do not anticipate paying any cash dividends in the foreseeable future. Our ability to pay dividends on our Class A common stock is limited by our existing credit agreements and may be further restricted by the terms of any of our future debt or preferred securities. See “Dividend Policy”.
Proposed symbol for trading on The NASDAQ Global Select Market		“LGNS”

	•	gives effect to (i) a          -for-1 Class A common stock split that will occur prior to the completion of this offering and (ii) the redemption of all of our outstanding Series A preferred stock;
	•	assumes the effectiveness of our amended and restated certificate of incorporation and amended and restated by-laws, which we will adopt prior to the completion of this offering;
	•	excludes (i)           shares of Class A common stock issuable upon the exercise of outstanding stock options at an exercise price of $      per share and (ii)           shares of our Class A common stock reserved for future grants under our new equity compensation plan we plan to adopt in connection with this offering; and
	•	assumes (i) no exercise by the underwriters of their option to purchase up to          additional shares from us and (ii) an initial public offering price of $      per share, the midpoint of the price range set forth on the cover of this prospectus.

		Predecessor					Successor
		Period from					Period from
		July 29, 2006					December 6,
		through					2006 through				Fiscal Year Ended								39 Weeks Ended
		December 5,					July 29,				August 3,				August 2,				May 3,				May 2,
		2006					2007				2008				2009				2009				2010
		(In thousands, except share, per share and restaurant data)
Statement of Income (Loss) Data:
Revenues:
Net sales		$	153,663				$	321,421			$	529,424			$	533,248			$	402,047			$	414,483
Franchise fees and royalties			851					1,697				2,574				2,248				1,656				1,531
Total revenues			154,514					323,118				531,998				535,496				403,703				416,014
Costs and expenses:
Restaurant operating costs:
Cost of goods sold			49,527					104,881				176,010				172,836				131,383				130,220
Labor and other related expenses			48,580					97,641				164,074				161,173				121,049				123,945
Occupancy costs			5,768					22,365				37,952				39,923				29,701				31,677
Other restaurant operating expenses			26,116					47,335				80,255				79,263				59,919				60,472
Depreciation and amortization			5,631					9,351				16,146				17,206				12,906				12,761
Pre-opening expenses			699					3,008				3,170				2,137				1,797				1,791
General and administrative			11,996					19,209				26,538				25,126				18,534				17,219
Impairment and store closing charges			—					—				6,622				23,187				23,258				3
Total costs and expenses			148,317					303,790				510,767				520,851				398,547				378,088

		Predecessor					Successor
		Period from					Period from
		July 29, 2006					December 6,
		through					2006 through				Fiscal Year Ended								39 Weeks Ended
		December 5,					July 29,				August 3,				August 2,				May 3,				May 2,
		2006					2007				2008				2009				2009				2010
		(In thousands, except share, per share and restaurant data)
Income from operations			6,197					19,328				21,231				14,645				5,156				37,926
Other expense (income):
Interest expense, net			5,533					15,101				22,618				20,557				15,258				14,246
Other expense (income), net			—					313				2,631				1,543				2,335				(496	)
Income (loss) before income taxes			664					3,914				(4,018	)			(7,455	)			(12,437	)			24,176
Provision for (benefit from) income taxes			(422	)				566				(3,392	)			(5,484	)			(9,617	)			9,062
Net income (loss)			1,086					3,348				(626	)			(1,971	)			(2,820	)			15,114
Undeclared preferred dividend			—					(5,552	)			(9,605	)			(10,568	)			(7,887	)			(8,926	)
Net income (loss) attributable to common stockholders		$	1,086				$	(2,204	)		$	(10,231	)		$	(12,539	)		$	(10,707	)		$	6,188
Per Share Data:
Net income (loss) per share:
Basic and diluted		$	1,086				$	(2.28	)		$	(10.57	)		$	(12.95	)		$	(11.06	)		$	6.39
Weighted average shares outstanding:
Basic and diluted			1,000					968,000				968,000				968,000				968,000				968,000
Selected Other Data:
Restaurants open (end of period):
Company-owned			143					156				170				177				176				185
Total			169					182				196				203				202				211
Average unit volumes (in millions)		$	1.0				$	2.1			$	3.2			$	3.0			$	2.3			$	2.3
Restaurant operating margin(1)			15.4	%				15.3	%			13.4	%			15.0	%			14.9	%			16.4	%
Adjusted EBITDA(2)		$	12,391				$	39,694			$	54,987			$	65,117			$	49,457			$	56,495
Adjusted EBITDA margin(3)			8.0	%				12.3	%			10.3	%			12.2	%			12.3	%			13.6	%
Capital expenditures		$	15,637				$	31,864			$	37,372			$	27,039			$	17,965			$	16,221
Comparable Restaurant Data(4):
Change in comparable restaurant sales			0.6	%				1.8	%			0.8	%			(2.8	)%			(1.7	)%			(1.3	)%
Average check		$	12.76				$	12.95			$	13.01			$	12.79			$	12.85			$	12.69

						May 2, 2010
		August 2, 2009				Actual				As Adjusted(5)
		(In thousands)
Selected Balance Sheet Data:
Cash and cash equivalents		$	13,069			$	45,111			$
Total assets			408,256				425,705
Total long-term debt, including current portion			220,063				219,028

(1)		Restaurant operating margin represents net sales less (i) cost of goods sold, (ii) labor and other related expenses, (iii) occupancy costs and (iv) other restaurant operating expenses, divided by net sales. Restaurant operating margin is a supplemental measure of operating performance of our company-owned restaurants that does not represent and should not be considered as an alternative to net income or net sales as determined by U.S. generally accepted accounting principles, or U.S. GAAP, and our calculation thereof may not be comparable to that reported by other companies. Restaurant operating margin has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under U.S. GAAP. Management believes restaurant operating margin is an important component of financial results because it is a widely used metric within the restaurant industry to evaluate restaurant-level productivity, efficiency and performance. Management uses restaurant operating margin as a key metric to evaluate our financial performance compared with our competitors, to evaluate the profitability of incremental sales and to evaluate our performance across periods.

		Predecessor					Successor
							Period from
		Period from					December 6,
		July 29, 2006					2006
		through					through				Fiscal Year Ended								39 Weeks Ended
		December 5,					July 29,				August 3,				August 2,				May 3,				May 2,
		2006					2007				2008				2009				2009				2010
		(Dollars in thousands)
Net sales(A)		$	153,663				$	321,421			$	529,424			$	533,248			$	402,047			$	414,483
Restaurant operating costs:
Cost of goods sold			49,527					104,881				176,010				172,836				131,383				130,220
Labor and other related expenses			48,580					97,641				164,074				161,173				121,049				123,945
Occupancy costs			5,768					22,365				37,952				39,923				29,701				31,677
Other restaurant operating expenses			26,116					47,335				80,255				79,263				59,919				60,472
Restaurant operating profit(B)		$	23,672				$	49,199			$	71,133			$	80,053			$	59,995			$	68,169
Restaurant operating margin(B¸A)			15.4	%				15.3	%			13.4	%			15.0	%			14.9	%			16.4	%

(2)

Adjusted EBITDA represents earnings before interest, tax, depreciation and amortization adjusted to reflect the additions and eliminations described in the table below. Adjusted EBITDA is a supplemental measure of operating performance that does not represent and should not be considered as an alternative to net income or cash flow from operations as determined under U.S. GAAP, and our calculation thereof may not be comparable to that reported by other companies. Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under U.S. GAAP. Some of the limitations are:

	•	Adjusted EBITDA does not reflect our cash expenditures, or future requirements for, capital expenditures or contractual commitments;
	•	Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;
	•	Adjusted EBITDA does not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments on our indebtedness;
	•	although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements; and
	•	other companies in the restaurant industry may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.

	•	as a measure of operating performance to assist us in comparing the operating performance of our restaurants on a consistent basis because it removes the impact of items not directly resulting from our core operations;
	•	for planning purposes, including the preparation of our internal annual operating budgets and financial projections;
	•	to evaluate the performance and effectiveness of our operational strategies;
	•	to provide enhanced comparability between our historical results during the Predecessor period and results that reflect the new capital structure in the Successor periods;

	•	to calculate management and consulting fee payments to our principal stockholders; and
	•	to calculate incentive compensation payments for our employees, including assessing performance under our annual incentive compensation plan.

		Predecessor
		Period from					Successor
		July 29 2006					Period from
		through					December 6, 2006				Fiscal Year Ended								39 Weeks Ended
		December 5,					through July 29,				August 3,				August 2,				May 3,				May 2,
		2006					2007				2008				2009				2009				2010
		(In thousands)
Net income (loss)		$	1,086				$	3,348			$	(626	)		$	(1,971	)		$	(2,820	)		$	15,114
Net interest expense			5,533					15,102				22,618				20,557				15,258				14,246
Income tax expense			(422	)				566				(3,392	)			(5,484	)			(9,617	)			9,062
Depreciation and amortization			5,631					9,351				16,146				17,206				12,906				12,761
EBITDA		$	11,828				$	28,367			$	34,746			$	30,308			$	15,727			$	51,183
Adjustments:
Sponsor management fees(a)			—					865				1,250				1,486				1,142				1,199
Non-cash asset write-off:
Tradename impairment(b)			—					—				—				16,781				16,781				—
Restaurant impairment(c)			—					—				6,622				6,252				6,375				—
Loss on disposal of property and equipment(d)			444					554				977				877				463				545
Restructuring costs(e)			—					—				683				892				839				—
Pre-opening expenses (excluding rent)(f)			450					2,364				2,561				1,443				1,159				1,483
Hedging expenses(g)			—					313				2,631				1,543				2,335				(496	)
Losses on sales of property(h)			2,579					—				1,206				—				—				—
Non-cash rent adjustment(i)			(268	)				3,422				3,599				4,505				3,687				2,475
Acquisition related costs(j)			1,232					3,848				613				187				162				83
Non-recurring Predecessor costs(k)			1,627					—				—				—				—				—
Pro forma sale-leaseback rent adjustment(l)			(5,593	)				—				—				—				—				—
Other adjustments(m)			92					(39	)			99				843				787				23
Adjusted EBITDA		$	12,391				$	39,694			$	54,987			$	65,117			$	49,457			$	56,495

(a)		Sponsor management fees consist of fees paid to BRS and Black Canyon under the management and consulting services agreement. We will terminate this agreement in connection with the completion of this offering. See “Certain Relationships and Related Party Transactions”.
(b)		We recorded an impairment charge in fiscal year 2009 related to our tradename. See Note 6 to our consolidated financial statements for additional details.

(c)		Restaurant impairment charges were recorded in connection with the determination that the carrying value of certain of our restaurants exceeded their estimated fair value. See Note 8 to our consolidated financial statements for additional details.
(d)		Loss on disposal of property and equipment consists of the loss on disposal or retirement of assets that are not fully depreciated.
(e)		Restructuring costs include severance and other related costs resulting from the restructuring of our corporate office in late fiscal year 2008 and early fiscal year 2009.
(f)		Pre-opening expenses (excluding rent) include expenses directly associated with the opening of a new restaurant. See Note 2 to our consolidated financial statements for additional details.
(g)		Hedging expenses relate to fair market value changes of an interest rate swap and the related interest. See Note 10 to our consolidated financial statements for additional details.
(h)		We recognized losses in connection with the sale-leaseback of six restaurants in the period ended December 5, 2006 and two restaurants in fiscal year 2008 due to the fair value of the property sold being less than the undepreciated cost of the property. See Note 13 to our consolidated financial statements for additional details.
(i)		Non-cash rent adjustments represent the non-cash rent expense calculated as the difference in U.S. GAAP rent expense in any year and amounts payable in cash under the leases during the year. In measuring our operational performance, we focus on our cash rent payments. See Note 2 to our consolidated financial statements for additional details.
(j)		Acquisition related costs include: (i) expenses related to purchase accounting recognized in connection with the Acquisition, (ii) retention payments made to certain members of our management in connection with the Acquisition (U.S. GAAP expense recognized after award payment), and (iii) legal, professional and other fees incurred as a result of the Acquisition and related transactions.
(k)		Non-recurring Predecessor costs include (i) an allocation of Cracker Barrel corporate overhead costs for presentation as a stand-alone entity and (ii) an allocation of stock option expense on shares of Cracker Barrel stock recognized in accordance with applicable accounting guidance.
(l)		Our senior secured credit facility requires that certain transactions be given pro forma effect in the calculation of “Consolidated EBITDA”, including cash rent payments associated with sale-leaseback transactions entered into in connection with the Acquisition. The senior secured credit facility requires us to deduct from Consolidated EBITDA the pro forma cash rent payments that would have been incurred if the sale-leaseback transactions had occurred prior to the Acquisition. Pro forma sale-leaseback rent adjustment represents such pro forma rent expense for the Predecessor periods, which is not calculated in accordance with Article 11 of Regulation S-X. For additional information regarding the sale-leaseback transactions and the calculation and use of Consolidated EBITDA in our senior secured credit facility, see “Description of Certain Indebtedness” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources”.
(m)		Other adjustments include $0.6 million of casualty losses resulting from damages to our restaurants during fiscal year 2009, ongoing expenses of closed restaurants, as well as inventory write-offs, employee termination buyouts and incidental charges related to restaurant closings.

(3)		Adjusted EBITDA margin is defined as the ratio of Adjusted EBITDA to total revenues. See footnote 2 above for a discussion of Adjusted EBITDA as a non-GAAP measure and a reconciliation of net income (loss) to Adjusted EBITDA.
(4)		We use a number of key performance indicators in assessing the performance of our restaurants, including change in comparable restaurant sales and average check. These key performance indicators are discussed in more detail in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Performance Indicators”. Comparable restaurant data for the period from July 29, 2006 through December 5, 2006 is based on 18 full weeks through December 3, 2006, and comparable restaurant data for the period from December 6, 2006 through July 29, 2007 is based on 34 full weeks through July 29, 2007.
(5)		The as adjusted column in the selected balance sheet data table above reflects the balance sheet data as further adjusted for (i) our receipt of the estimated net proceeds from the sale of shares of Class A common stock offered by us at an assumed initial public offering price of $      per share, the midpoint of the price range set forth on the cover of this prospectus, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us and (ii) the repayment of outstanding indebtedness and redemption of our Series A preferred stock as described in “Use of Proceeds”. See “Capitalization” and “Use of Proceeds”. A $1.00 increase (decrease) in the assumed initial public offering price of $      per share, the midpoint of the price range set forth on the cover of this prospectus, would increase (decrease) each of cash and cash equivalents and total assets by approximately $      million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. Similarly, if we change the number of shares offered by us, the net proceeds we receive will increase or decrease by the increase or decrease in the number of shares sold, multiplied by the offering price per share, less the incremental estimated underwriting discounts and commissions and estimated offering expenses payable by us.

 

Investing in shares of our Class A common stock involves a high degree of risk. Before you purchase our Class A common stock, you should carefully consider the risks described below and the other information contained in this prospectus, including our consolidated financial statements and accompanying notes. If any of the following risks actually occurs, our business, financial condition, results of operations or cash flows could be materially adversely affected. In any such case, the trading price of our Class A common stock could decline, and you could lose all or part of your investment.

 

Risks Related to Our Business

 

If we fail to execute our growth strategy, which primarily depends on our ability to open new restaurants that are profitable, our business could suffer.

 

Historically, the most significant means of achieving our growth strategies have been through opening new restaurants and operating those restaurants on a profitable basis. We expect this to continue to be the case for the foreseeable future. In fiscal year 2011, we plan to open approximately 15 company-owned restaurants, and we intend to grow our company-owned restaurants at a long-term annual growth rate of 10%. We expect to open substantially all of our new restaurants in, or adjacent to, states where we have existing restaurants. Delays or failures in opening new restaurants, or achieving lower than expected sales in new restaurants, could materially adversely affect our growth strategy. Our ability to open new restaurants successfully will also depend on numerous other factors, some of which are beyond our control, including, among other items, the following:

 

 

We cannot assure you that any restaurant we open will be profitable or achieve operating results similar to those of our existing restaurants.

 

We cannot assure you that we will be able to respond on a timely basis to all of the changing demands that our planned expansion will impose on management and on our existing infrastructure, nor that we will be able to hire or retain the necessary management and operating personnel. Our existing restaurant management systems, financial and management controls and information systems may not be adequate to support our planned expansion. Our ability to manage our growth effectively will require us to continue to enhance these systems, procedures and controls and to locate, hire, train and retain management and operating personnel.

 

Some of our new restaurants will be located in areas where we have existing restaurants. Increasing the number of locations in these markets may cause us to over-saturate markets and temporarily or permanently divert customers and sales from our existing restaurants, thereby adversely affecting our overall profitability.

 

Some of our new restaurants will be located in areas where we have little or no experience. Those markets may have different competitive conditions, market conditions, consumer tastes and discretionary spending patterns than our existing markets, which may cause our new restaurants to be less successful than restaurants in existing markets.

Macroeconomic conditions could adversely affect our ability to increase the sales and profits of existing restaurants or to open new restaurants.

 

As in fiscal year 2009 and through the first three fiscal quarters of fiscal year 2010, the United States may continue to suffer from a severe downturn in economic activity and remain in a recession. Recessionary economic cycles, higher interest rates, higher fuel and other energy costs, higher foreclosure rates, inflation, increases in commodity prices, higher levels of unemployment, higher consumer debt levels, higher tax rates and other changes in tax laws or other economic factors that may affect discretionary consumer spending could adversely affect our revenues and profit margins and make opening new restaurants or operating existing restaurants more difficult. In particular, during the recent recession, we have experienced a reduction in customer traffic and a decrease in average check at our restaurants, which has negatively impacted our sales. We could continue to experience reduced customer traffic, reduced average checks or limitations on the prices we can charge for our menu items, any of which could further reduce our sales and profit margins. Also, businesses in the trade area in which some of our restaurants are located may experience difficulty as a result of macroeconomic trends or cease to operate, which could, in turn, further negatively affect customer traffic at our restaurants. All of these factors could have a material adverse impact on our results of operations and growth.

 

Our success depends on our ability to compete with many other restaurants.

 

The restaurant industry is intensely competitive, and we compete with many well-established restaurant companies on the basis of taste of our menu items, price of products offered, customer service, atmosphere, location and overall customer experience. Our competitors include a large and diverse group of restaurant chains and individual restaurants that range from independent local operators to well-capitalized national restaurant companies. Many of our competitors have substantially greater financial and other resources than we do, which may allow them to react to changes in the restaurant industry better than we can. As our competitors expand their operations or as new competitors enter the industry, we expect competition to intensify. Moreover, our competitors can harm our business, even if they are not successful in their own operations, by taking away some customers or employees or by aggressive and costly advertising, promotional or hiring practices. We also compete with other restaurant chains and retail businesses for quality site locations, management and hourly employees.

 

Health concerns and government regulation relating to the consumption of beef, chicken, peanuts or other food products could affect consumer preferences and could negatively impact our results of operations.

 

Many of the food items on our menu contain beef and chicken. The preferences of our customers for our menu items could be affected by health concerns about the consumption of beef or chicken or negative publicity concerning food quality, illness and injury generally. In recent years, there has been negative publicity concerning E. coli bacteria, hepatitis A, “mad cow” disease, “foot-and-mouth” disease, avian influenza, peanut and other food allergies and other public health concerns affecting the food supply. This negative publicity, as well as any other negative publicity concerning food products we serve, may adversely affect demand for our food and could result in a decrease in customer traffic to our restaurants. If we react to the negative publicity by changing our menu, we may lose customers who do not prefer the new menu, and we may not be able to attract sufficient new customers to generate the revenue needed to make our restaurants profitable. These health concerns, negative publicity, or menu changes could result in a decrease in customer traffic or a change in product mix, which could materially harm our business.

 

Peanuts contribute to the atmosphere of our restaurants, and we offer buckets of peanuts on our tables and throughout our restaurants. Owing to the severe nature of some peanuts allergies, peanuts have recently been identified by the U.S. Food and Drug Administration as a significant allergen, and federal and state regulators have contemplated extending current peanut labeling regulations to the restaurant industry. The introduction of such regulations could cause us to reduce our use of peanuts and modify the atmosphere of our restaurants, which could adversely affect our business and brand differentiation.

Health concerns arising from outbreaks of viruses may have an adverse effect on our business.

 

The United States and other countries have experienced, or may experience in the future, outbreaks of viruses, such as avian influenza, SARS and H1N1. To the extent that a virus is food-borne, future outbreaks may adversely affect the price and availability of certain food products and cause our customers to eat less of a product or avoid eating in restaurant establishments. To the extent that a virus is transmitted by human-to-human contact, our employees or customers could become infected, or could choose, or be advised, to avoid gathering in public places, any one of which could adversely affect our business.

 

Changes in consumer preferences could harm our performance.

 

Our success depends upon consumer preferences for beef and our other menu items. We also depend on trends regarding away-from-home dining. Consumer preferences might shift as a result of, among other things, health concerns or dietary trends related to cholesterol, carbohydrate, fat and salt content of certain food items. Negative publicity over the health aspects of such food items may adversely affect demand for our menu items and could result in lower customer traffic, sales and results of operations.

 

Changes in food and supply costs could adversely affect our results of operations.

 

Our profitability depends in part on our ability to anticipate and react to changes in food and supply costs. The food item accounting for the largest share of our cost of goods sold, at 31.5% in fiscal year 2009, is beef. Any increase in food prices, particularly for beef, could adversely affect our operating results. In addition, we are susceptible to increases in food costs as a result of factors beyond our control, such as weather conditions, food safety concerns, costs of distribution, product recalls and government regulations. We cannot predict whether we will be able to anticipate and react to changing food costs by adjusting our purchasing practices and menu items and prices, and a failure to do so could adversely affect our operating results. In addition, because our menu items are moderately priced, we may not seek to or be able to pass along price increases to our customers. If we adjust pricing there is no assurance that we will realize the full benefit of any adjustment due to changes in our customers’ menu item selections and customer traffic.

 

We rely heavily on certain vendors, suppliers and distributors which could adversely affect our business.

 

Our ability to maintain consistent price and quality throughout our restaurants depends in part upon our ability to acquire specified food products and supplies in sufficient quantities. In some cases, we may have only one supplier for a product or supply. Our dependence on single source suppliers subjects us to the possible risks of shortages, interruptions and price fluctuations. We currently purchase most of our beef, under contract, from JBS Swift Beef Company, the largest beef supplier in the world. We are under contract through July 2011 for the supply of a substantial majority of our expected beef requirements. We are also under a contract with Koch Foods Inc. for our supply of chicken through December 2011. In addition, we rely on one primary distributor to deliver products to our restaurants. If any of these vendors, our other suppliers or our primary distributor is unable to fulfill their obligations, or if we are unable to find replacement providers in the event of a supply or service disruption, we could encounter supply shortages and incur higher costs to secure adequate supplies, which would materially harm our business.

 

Approximately 67% of our company-owned restaurants are located in the Southeast and Southwest United States and, as a result, we are sensitive to economic and other trends and developments in those regions.

 

As of May 2, 2010, a total of 124 of our company-owned restaurants were located in the Southeast and Southwestern United States. As a result, we are particularly susceptible to adverse trends and economic conditions in those regions, including their labor markets. In addition, given our geographic concentration in these regions, negative publicity regarding any of our restaurants in these regions could have a material adverse effect on our business and operations, as could other occurrences in these regions such as local strikes, energy shortages or increases in energy prices, droughts, hurricanes, fires, floods or other natural disasters.

We have implemented an enhanced restaurant prototype, but our current restaurant prototype and any future prototypes may not be successful and could have a negative impact on our sales, returns on invested capital and brand image.

 

We have implemented an enhanced restaurant prototype under which we have opened 20 restaurants and which will be used for future expansion. This enhanced restaurant prototype incorporates changes in size, materials, layout, and operational and aesthetic elements from our previous restaurant prototype, and there can be no assurance that this or any future prototypes will be successful in all or any of our markets. If our current restaurant prototype does not continue to be successful, particularly as we seek to increase our rate of opening new restaurants, we may need to reduce our rate of development of this current restaurant prototype or modify our plans by altering the current restaurant prototype or developing a new restaurant prototype. The introduction of any new prototypes could slow growth and result in less favorable sales and lower returns on invested capital than we have experienced with our previous restaurant prototypes. Additionally, any future changes to our restaurant prototype and layout could negatively impact our brand image.

 

We may incur costs resulting from breaches of security of confidential customer information related to our electronic processing of credit and debit card transactions.

 

The majority of our restaurant sales are by credit or debit cards. Other retailers have experienced security breaches in which credit and debit card information has been stolen. We may in the future become subject to claims for purportedly fraudulent transactions arising out of the actual or alleged theft of credit or debit card information, and we may also be subject to lawsuits or other proceedings relating to these types of incidents. Any such claim or proceeding could cause us to incur significant unplanned expenses, which could have an adverse impact on our financial condition and results of operations. Further, adverse publicity resulting from these allegations may have a material adverse effect on us and our restaurants.

 

We may need additional capital in the future, and it may not be available on acceptable terms.

 

The development of our business may require significant additional capital in the future to fund our operations and growth, among other activities. We have historically relied upon cash generated by our operations and lease financing to fund our expansion. In the future, we intend to rely on funds from operations, lease financing and, if necessary, our existing senior secured credit facility. We may also need to access the debt and equity capital markets. There can be no assurance, however, that these sources of financing will be available on acceptable terms, or at all. Our ability to obtain additional financing will be subject to a number of factors, including market conditions, our operating performance, investor sentiment and our ability to incur additional debt in compliance with agreements governing our then-outstanding debt. These factors may make the timing, amount, terms or conditions of additional financings unattractive to us. If we are unable to generate sufficient funds from operations or raise additional capital, our growth could be impeded.

 

In connection with the Acquisition, we entered into a senior secured credit facility with aggregate borrowings of up to $168.0 million consisting of (i) a $138.0 million term loan facility due in December 2012 and (ii) a $30.0 million revolving credit facility due in December 2011. Our obligations and the guarantees under the senior secured credit facility are secured by all of our assets. As of May 2, 2010, we had $133.2 million of outstanding borrowings under our term loan facility and no outstanding borrowings under our revolving credit facility. We also issued $80.0 million aggregate principal amount of senior subordinated unsecured mezzanine term notes due June 2014 to help fund the Acquisition. We intend to use a portion of our proceeds from this offering to prepay all of the senior subordinated unsecured mezzanine term notes. We may not be able to refinance our indebtedness prior to or at its maturity on acceptable terms or at all.

 

Our existing senior secured credit facility requires us to maintain financial covenants and failure to do so would adversely affect our business and limit our ability to incur additional debt.

 

The lenders’ obligation to extend credit under our existing senior secured credit facility depends upon our maintaining certain financial covenants including, as of May 2, 2010, a minimum consolidated fixed charge coverage ratio of 1.20:1 and a maximum consolidated leverage ratio of 5.50:1. Failure to maintain these ratios

could result in an acceleration of outstanding amounts under the term loan and restrict us from borrowing amounts under the revolving credit facility to fund our future liquidity requirements.

 

We may be required to record additional impairment charges in the future.

 

In accordance with accounting guidance as it relates to the impairment of long-lived assets, we make certain estimates and projections with regard to company-owned restaurant operations, as well as our overall performance in connection with our impairment analyses for long-lived assets. When impairment triggers are deemed to exist for any given company-owned restaurant, the estimated undiscounted future cash flows for the restaurant are compared to its carrying value. If the carrying value exceeds the undiscounted cash flows, an impairment charge would be recorded equal to the difference between the carrying value and the estimated fair value. In fiscal years 2009 and 2008 we recorded impairment charges of $6.3 million and $6.6 million, respectively.

 

We also review the value of our goodwill and other intangible assets on an annual basis and when events or changes in circumstances indicate that the carrying value of goodwill or other intangible assets may exceed the fair value of such assets. The estimates of fair value are based upon the best information available as of the date of the assessment and incorporate management assumptions about expected future cash flows and contemplate other valuation measurements and techniques. In fiscal year 2009, we recorded an impairment charge of $16.8 million relating to our tradename.

 

The estimates of fair value used in these analyses requires the use of judgment, certain assumptions and estimates of future operating results. If actual results differ from our estimates or assumptions, additional impairment charges may be required in the future. If impairment charges are significant, our results of operations could be adversely affected.

 

We depend upon our executive officers and may not be able to retain or replace these individuals or recruit additional personnel, which could harm our business.

 

We believe that we have benefited substantially from the leadership and experience of our executive officers, including our President and Chief Executive Officer, G. Thomas Vogel, and our Chief Financial Officer, Amy L. Bertauski. The loss of the services of any of our executive officers could have a material adverse effect on our business and prospects, as we may not be able to find suitable individuals to replace such personnel on a timely basis. In addition, any such departure could be viewed in a negative light by investors and analysts, which could cause our Class A common stock price to decline. Other than our President and Chief Executive Officer, none of our executive officers are subject to non-compete or non-solicitation obligations at the present time. Moreover, we do not have employment agreements with any of our executive officers, except for our President and Chief Executive Officer, and we do not maintain “key man” or “key woman” insurance policies on the lives of any executive officers. As our business expands, our future success will depend greatly on our continued ability to attract and retain highly skilled and qualified executive-level personnel. Our inability to attract and retain qualified executive officers in the future could impair our growth and harm our business.

 

We are dependent on attracting and retaining qualified employees while also controlling labor costs.

 

We are dependent upon the availability of qualified restaurant personnel. Our future performance will depend on our ability to attract, motivate and retain our regional managers and general managers. Competition for these employees is intense. The loss of the services of members of our restaurant management team or the inability to attract additional qualified personnel as needed could materially harm our business.

 

In addition, availability of staff varies widely from restaurant to restaurant. Our turnover for all restaurant managers in fiscal year 2009 was 19%. In fiscal year 2009, our hourly restaurant employee turnover at our comparable restaurants was 104%. If restaurant management and staff turnover trends increase, we could suffer higher direct costs associated with recruiting, training and retaining replacement personnel. Moreover, we could suffer from significant indirect costs, including restaurant disruptions due to management changeover and potential delays in new restaurant openings or adverse customer reactions to inadequate customer service

levels due to staff shortages. Competition for qualified employees exerts upward pressure on wages paid to attract such personnel, resulting in higher labor costs, together with greater recruitment and training expense.

 

We, and our franchisees, must comply with the Fair Labor Standards Act and various federal and state laws governing employment matters, such as minimum wage, tip credit allowance, overtime pay practices, child labor laws and other working conditions and citizenship requirements. Federal and state laws may also require us to provide new or increased levels of employee benefits to our employees, many of whom are not currently eligible for such benefits. Many of our employees are hourly workers whose wages are likely to be affected by an increase in the federal or state minimum wage or changes to the tip credit allowance. Proposals have been made, and continue to be made, at federal and state levels to increase minimum wage levels, including changes to the tip credit allowance. An increase in the minimum wage or a change in the tip credit allowance may require an increase or create pressure to increase the pay scale for our employees. A shortage in the labor pool or other general inflationary pressures or changes could also increase our labor costs. A shortage in the labor pool could also cause our restaurants to be required to operate with reduced staff, which could negatively impact our ability to provide adequate service levels to our customers.

 

Legal complaints or litigation may hurt us.

 

Occasionally, restaurant customers file complaints or lawsuits against us or our franchisees alleging that we are responsible for some illness or injury they suffered at or after a visit to our restaurants, or that we have problems with food quality or operations. We and our franchisees are also subject to a variety of other claims arising in the ordinary course of our business, including personal injury claims, contract claims, claims by franchisees and claims alleging violations of federal and state law regarding workplace and employment matters, discrimination and similar matters. We could also become subject to class action lawsuits related to these matters in the future. The restaurant industry has also been subject to a growing number of claims that the menus and actions of restaurant chains have led to the obesity of certain of their customers.

 

Regardless, however, of whether any claim brought against us in the future is valid or whether we are liable, such a claim would be expensive to defend for us and our franchisees and may divert time and money away from our and our franchisees’ operations and, thereby, hurt our business.

 

We are subject to state and local “dram shop” statutes, which may subject us to uninsured liabilities. These statutes generally allow a person injured by an intoxicated person to recover damages from an establishment that wrongfully served alcoholic beverages to the intoxicated person. In the past, after allegedly consuming alcoholic beverages at our restaurants, individuals have been killed or injured or have killed or injured third parties. Because a plaintiff may seek punitive damages, which may not be fully covered by insurance, this type of action could have an adverse impact on our or our franchisees’ financial condition and results of operations. A judgment in such an action significantly in excess of our insurance coverage, or the insurance coverage of one of our franchisees, could adversely affect our financial condition or results of operations. Further, adverse publicity resulting from any such allegations may adversely affect us, our franchisees and our restaurants taken as a whole.

 

Our current insurance may not provide adequate levels of coverage against claims.

 

We currently maintain insurance customary for businesses of our size and type. However, there are types of losses we may incur that cannot be insured against or that we believe are not economically reasonable to insure. Such losses could have a material adverse effect on our business and results of operations. In addition, we self-insure a significant portion of expected losses under our workers’ compensation, general liability, employee health and property insurance programs. Unanticipated changes in the actuarial assumptions and management estimates underlying our reserves for these losses could result in materially different amounts of expense under these programs, which could have a material adverse effect on our financial condition, results of operations and liquidity. As a public company, we intend to enhance our existing directors’ and officers’ insurance. While we expect to obtain such coverage, there can be no assurance that we will be able to obtain such coverage at all or at a reasonable cost now or in the future. Failure to obtain and maintain adequate

directors’ and officers’ insurance would likely adversely affect our ability to attract and retain qualified officers and directors.

 

Failure to obtain and maintain required licenses and permits or to comply with alcoholic beverage or food control regulations could lead to the loss of our liquor and food service licenses and, thereby, harm our business.

 

The restaurant industry is subject to various federal, state and local government regulations, including those relating to the sale of food and alcoholic beverages. Such regulations are subject to change from time to time. The failure to obtain and maintain these licenses, permits and approvals could adversely affect our operating results. Typically, licenses must be renewed annually and may be revoked, suspended or denied renewal for cause at any time if governmental authorities determine that our conduct violates applicable regulations. Difficulties or failure to maintain or obtain the required licenses and approvals could adversely affect our existing restaurants and delay or result in our decision to cancel the opening of new restaurants, which would adversely affect our business.

 

In the 39 weeks ended May 2, 2010, 7.4% of our total sales from company-owned restaurants were attributable to the sale of alcoholic beverages, and we plan to responsibly increase our alcoholic beverage sales in the future. Alcoholic beverage control regulations require each of our restaurants to apply to a state authority and, in certain locations, county or municipal authorities for a license or permit to sell alcoholic beverages on-premises and to provide service for extended hours and on Sundays. Alcoholic beverage control regulations relate to numerous aspects of daily operations of our restaurants, including minimum age of patrons and employees, hours of operation, advertising, trade practices, wholesale purchasing, other relationships with alcohol manufacturers, wholesalers and distributors, inventory control and handling, storage and dispensing of alcoholic beverages. In the past, we and our franchisees have been subject to fines for violations of alcoholic beverage control regulations. Any future failure to comply with these regulations and obtain or retain liquor licenses could adversely affect our results of operations and overall financial condition.

 

We rely heavily on information technology, and any material failure, weakness, interruption or breach of security could prevent us from effectively operating our business.

 

We rely heavily on information systems, including point-of-sale processing in our restaurants, management of our supply chain, payment of obligations, collection of cash, credit and debit card transactions and other processes and procedures. Our ability to efficiently and effectively manage our business depends significantly on the reliability and capacity of these systems. The failure of these systems to operate effectively, maintenance problems, upgrading or transitioning to new platforms, or a breach in security of these systems could result in delays in customer service and reduce efficiency in our operations. Remediation of such problems could result in significant, unplanned capital investments.

 

Our failure or inability to enforce our trademarks or other proprietary rights could adversely affect our competitive position or the value of our brand.

 

We own certain common law trademark rights and a number of federal trademark and service mark registrations, including Logan’s Roadhouse^® and the design, our stylized logos set forth on the cover and back pages of this prospectus, Logan’s^® and the design, The Logan^®, Onion Brewski^®, Brewski Onions^®, Peanut Shooter^®, Roadies^® and The Real American Roadhouse^®, as well as the peanut man logo and the trade dress element consisting of the “bucket” used in connection with our restaurant services, and proprietary rights relating to our methods of operation and certain of our core menu offerings. We believe that our trademarks and other proprietary rights are important to our success and our competitive position, and, therefore, we devote resources to the protection of our trademarks and proprietary rights. The protective actions that we take, however, may not be enough to prevent unauthorized use or imitation by others, which could harm our image, brand or competitive position. If we commence litigation to enforce our rights, we will incur significant legal fees.

We are not aware of any assertions that our trademarks or menu offerings infringe upon the proprietary rights of any third parties, but we cannot assure you that third parties will not claim infringement by us in the future. Any such claim, whether or not it has merit, could be time-consuming and distracting for executive management, result in costly litigation, cause changes to existing menu items or delays in introducing new menu items, or require us to enter into royalty or licensing agreements. As a result, any such claim could have a material adverse effect on our business, results of operations and financial condition.

 

If we fail to comply with federal and state statutes, regulations and rules governing our offer and sale of franchises and our relationship with our franchisees, we may be subject to franchisee-initiated litigation and governmental or judicial fines or sanctions.

 

We are subject to various state laws that govern the offer and sale of franchises, as well as the rules and regulations of the Federal Trade Commission. Additionally, many state laws regulate various aspects of the franchise relationship, including the nature, timing and sufficiency of disclosures to franchisees upon the initiation of the franchisor-potential franchisee relationship, our conduct during the franchisor-franchisee relationship and renewals and terminations of franchises.

 

Any past or future failures by us to comply with these laws and regulations in any jurisdiction or to obtain required government approvals could result in franchisee-initiated lawsuits, a ban or temporary suspension on future franchise sales, civil and administrative penalties or other fines, or require us to make offers of rescission, disgorgement or restitution, any of which could adversely affect our business and operating results. We could also face lawsuits by our franchisees based upon alleged violations of these laws. In the case of willful violations, criminal sanctions could be brought against us.

 

Our franchisees could take actions that could be harmful to our business.

 

Our franchisees are contractually obligated to operate their restaurants in accordance with Logan’s Roadhouse standards and all applicable laws. Although we attempt to properly train and support franchisees, franchisees are independent third parties that we do not control, and the franchisees own, operate and oversee the daily operations of their restaurants. As a result, the ultimate success and quality of any franchised restaurant rests with the franchisee. If franchisees do not successfully operate restaurants in a manner consistent with our standards, the Logan’s Roadhouse image and reputation could be harmed, which in turn could adversely affect our business and operating results. Further, the failure of either of our two franchisees or any of their restaurants to remain financially viable could result in their failure to pay royalties owed to us. Finally, regardless of the actual validity of such a claim, we may be named as a party in an action relating to, and/or be held liable for, the conduct of our franchisees if it is shown that we exercise a sufficient level of control over a particular franchisee’s operation.

 

We are subject to many federal, state and local laws with which compliance is both costly and complex.

 

The restaurant industry is subject to extensive federal, state and local laws and regulations, including those relating to building and zoning requirements and those relating to the preparation and sale of food. The development and operation of restaurants depend to a significant extent on the selection and acquisition of suitable sites, which are subject to zoning, land use, environmental, traffic and other regulations and requirements. We are also subject to licensing and regulation by state and local authorities relating to health, sanitation, safety and fire standards and liquor licenses, federal and state laws governing our relationships with employees (including the Fair Labor Standards Act of 1938, the Immigration Reform and Control Act of 1986 and applicable requirements concerning the minimum wage, overtime, family leave, tip credits, working conditions, safety standards, immigration status, unemployment tax rates, workers’ compensation rates and state and local payroll taxes), federal and state laws which prohibit discrimination and other laws regulating the design and operation of facilities, such as the Americans With Disabilities Act of 1990, or the ADA. In addition, we are subject to a variety of federal, state and local laws and regulations relating to the use, storage, discharge, emission and disposal of hazardous materials.

We are reviewing the health care reform law enacted by Congress in March 2010. As part of that review, we will evaluate the potential impacts of this new law on our business, and accommodate various parts of the law as they take effect. There are no assurances that a combination of cost management and price increases can accommodate all of the costs associated with compliance. We do not expect to incur any material costs from compliance with the provision of the health care law requiring disclosure of calories on menus, but cannot anticipate any changes in customer behavior resulting from the implementation of this portion of the law, which could have an adverse effect on our sales or results of operations.

 

The impact of current laws and regulations, the effect of future changes in laws or regulations that impose additional requirements and the consequences of litigation relating to current or future laws and regulations, or our inability to respond effectively to significant regulatory or public policy issues, could increase our compliance and other costs of doing business and therefore have an adverse effect on our results of operations. Failure to comply with the laws and regulatory requirements of federal, state and local authorities could result in, among other things, revocation of required licenses, administrative enforcement actions, fines and civil and criminal liability. In addition, certain laws, including the ADA, could require us to expend significant funds to make modifications to our restaurants if we failed to comply with applicable standards. Compliance with all of these laws and regulations can be costly and can increase our exposure to litigation or governmental investigations or proceedings.

 

Any strategic transactions that we consider in the future may have unanticipated consequences that could harm our business and our financial condition.

 

From time to time, we evaluate potential mergers, acquisitions of restaurants (including from our franchisees), joint ventures or other strategic initiatives to acquire or develop additional concepts. To successfully execute any acquisition or development strategy, we will need to identify suitable acquisition or development candidates, negotiate acceptable acquisition or development terms and obtain appropriate financing. Any acquisition or future development that we pursue, whether or not successfully completed, may involve risks, including:

 

 

We will incur increased costs as a result of operating as a public company, and our management will be required to devote substantial time to comply with the requirements applicable to public companies.

 

Prior to this offering, we have not been subject to the reporting requirements of the Securities Exchange Act of 1934, or the Exchange Act, or the other rules and regulations of the Securities Exchange Commission, or the SEC, or any securities exchange relating to public companies. We are working with our legal and financial advisors and independent accountants to identify those areas in which changes should be made to our financial and management control systems to manage our growth and our obligations as a public company. These areas include corporate governance, corporate control, internal audit, disclosure controls and procedures and financial reporting and accounting systems. We have made, and will continue to make, changes in these and other areas. However, the expenses that we will be required to incur in order to adequately prepare for being a public company could be material. Ongoing compliance with the various reporting and other requirements applicable to public companies will also require considerable time and attention of management. We cannot predict or estimate the amount of the additional costs we may incur, the timing of such costs or the degree of impact that our management’s attention to these matters will have on our business. In addition, the

changes we make may not be sufficient to allow us to satisfy our obligations as a public company on a timely basis.

 

In addition, we expect these rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantial additional costs to maintain the same or similar coverage. These rules and regulations could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees or as executive officers.

 

Risks Related to This Offering and Ownership of Our Class A Common Stock

 

Concentration of ownership among our existing executive officers, directors and principal stockholders may prevent new investors from influencing significant corporate decisions.

 

Upon consummation of this offering our executive officers, directors and principal stockholders will own, in the aggregate, approximately     % of our outstanding Class A common stock and will own options that will enable them to own, in the aggregate, approximately     % of our outstanding Class A common stock. As a result, these stockholders will be able to exercise control over all matters requiring stockholder approval, including the election of directors, amendment of our amended and restated certificate of incorporation and approval of significant corporate transactions and will have significant control over our management and policies. We currently expect that, following this offering,      of the      members of our board of directors will be designees of BRS, Black Canyon or Canyon Capital. BRS, Black Canyon and Canyon Capital can take actions that have the effect of delaying or preventing a change in control of us or discouraging others from making tender offers for our shares, which could prevent stockholders from receiving a premium for their shares. These actions may be taken even if other stockholders oppose them. The concentration of voting power among BRS, Black Canyon and Canyon Capital may have an adverse effect on the price of our Class A common stock. The interests of these stockholders may not be consistent with your interests as a stockholder. After the lock-up period expires, BRS, Black Canyon and Canyon Capital will be able to transfer control of us to a third-party by transferring their Class A common stock, which would not require the approval of our board of directors or our other stockholders.

 

Our amended and restated certificate of incorporation will provide that the doctrine of corporate opportunity will not apply against BRS, Black Canyon or Canyon Capital, or any of our directors who are employees of or affiliated with BRS, Black Canyon or Canyon Capital, in a manner that would prohibit them from investing or participating in competing businesses. To the extent they invest in such other businesses, BRS, Black Canyon or Canyon Capital may have differing interests than our other stockholders.

 

We will be a “controlled company” within the meaning of The NASDAQ Stock Market rules, and, as a result, we will rely on exemptions from certain corporate governance requirements that provide protection to stockholders of other companies.

 

Upon completion of this offering, BRS, Black Canyon and Canyon Capital will own more than 50% of the total voting power of our Class A common stock and we will be a “controlled company” under The NASDAQ Stock Market corporate governance listing standards. As a controlled company, we will be exempt under The NASDAQ Stock Market listing standards from the obligation to comply with certain of The NASDAQ Stock Market corporate governance requirements, including the requirements:

 

 

Accordingly, for so long as we are a controlled company, holders of our Class A common stock will not have the same protections afforded to stockholders of companies that are subject to all of The NASDAQ Stock Market corporate governance requirements.

 

There may not be a viable public market for our Class A common stock.

 

Prior to this offering, there has been no public market for our Class A common stock. The initial public offering price for our Class A common stock will be determined through negotiations between us and the representative of the underwriters and may not be indicative of the market price of our Class A common stock after this offering. If you purchase shares of our Class A common stock, you may not be able to resell those shares at or above the initial public offering price. We cannot predict the extent to which investor interest in our company will lead to the development of an active trading market on The NASDAQ Global Select Market or otherwise or how liquid that market might become. An active public market for our Class A common stock may not develop or be sustained after the offering. If an active public market does not develop or is not sustained, it may be difficult for you to sell your shares of Class A common stock at a price that is attractive to you, or at all.

 

Our stock price may be volatile or may decline regardless of our operating performance, and you may not be able to resell your shares at or above the initial public offering price.

 

After this offering, the market price for our Class A common stock is likely to be volatile, in part because our shares have not been traded publicly. In addition, the market price of our Class A common stock may fluctuate significantly in response to a number of factors, most of which we cannot control, including:

 

 

 

In addition, the stock markets, and in particular The NASDAQ Stock Market, have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many food service companies. In the past, stockholders have instituted securities class action litigation following periods of market volatility. If we were involved in securities litigation, we could incur substantial costs and our resources and the attention of management could be diverted from our business.

 

Future sales of our Class A common stock, or the perception in the public markets that these sales may occur, may depress our stock price.

 

Sales of substantial amounts of our Class A common stock in the public market after this offering, or the perception that these sales could occur, could adversely affect the price of our Class A common stock and could impair our ability to raise capital through the sale of additional shares. Upon completion of this offering, we will have           shares of Class A common stock outstanding. The shares of Class A common stock offered in this offering will be freely tradable without restriction under the Securities Act of 1933, which we refer to as the Securities Act, except for any shares of our Class A common stock that may be held or acquired by our directors, executive officers and other affiliates, as that term is defined in the Securities Act, which will be restricted securities under the Securities Act. Restricted securities may not be sold in the public market unless the sale is registered under the Securities Act or an exemption from registration is available.

 

We, each of our officers and directors and the selling stockholders have agreed, subject to certain exceptions, with the underwriters not to dispose of or hedge any of the shares of Class A common stock or securities convertible into or exchangeable for shares of Class A common stock during the period from the date of this prospectus continuing through the date 180 days after the date of this prospectus, except, in our case, for the issuance of Class A common stock upon exercise of options under existing option plans. Credit Suisse Securities (USA) LLC may, in its sole discretion, release any of these shares from these restrictions at any time without notice. See “Underwriting”.

 

All of our shares of Class A common stock outstanding as of the date of this prospectus may be sold in the public market by existing stockholders 180 days after the date of this prospectus, subject to applicable volume and other limitations imposed under federal securities laws. See “Shares Eligible for Future Sale” for a more detailed description of the restrictions on selling shares of our Class A common stock after this offering.

 

In the future, we may also issue our securities in connection with investments or acquisitions. The amount of shares of our Class A common stock issued in connection with an investment or acquisition could constitute a material portion of our then-outstanding shares of our Class A common stock.

 

Anti-takeover provisions in our charter documents and Delaware law might discourage or delay acquisition attempts for us that you might consider favorable.

 

Our amended and restated certificate of incorporation and amended and restated bylaws will contain provisions that may make the acquisition of our company more difficult without the approval of our board of directors. These provisions:

 

 

 

These anti-takeover provisions and other provisions under Delaware law could discourage, delay or prevent a transaction involving a change in control of our company, even if doing so would benefit our stockholders. These provisions could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors of your choosing and to cause us to take other corporate actions you desire.

 

If you purchase shares of Class A common stock sold in this offering, you will incur immediate and substantial dilution.

 

If you purchase shares of Class A common stock in this offering, you will incur immediate and substantial dilution in the amount of $      per share because the initial public offering price of $      is substantially higher than the pro forma net tangible book value per share of our outstanding Class A common stock. This dilution is due in large part to the fact that our earlier investors paid substantially less than the initial public offering price when they purchased their shares. In addition, you may also experience additional dilution upon future equity issuances or the exercise of stock options to purchase Class A common stock granted to our employees, consultants and directors under our stock option and equity incentive plans. See “Dilution”.

 

If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.

 

The trading market for our Class A common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business. We do not currently have and may never obtain research coverage by securities and industry analysts. If no securities or industry analysts commence coverage of our company, the trading price for our Class A common stock would be negatively impacted. If we obtain securities or industry analyst coverage and if one or more of the analysts who covers us downgrades our Class A common stock or publishes inaccurate or unfavorable research about our business, our stock price would likely decline. If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, demand for our Class A common stock could decrease, which could cause our stock price and trading volume to decline.

 

We do not expect to pay any cash dividends for the foreseeable future.

 

The continued operation and expansion of our business will require substantial funding. Accordingly, we do not anticipate that we will pay any cash dividends on shares of our Class A common stock for the foreseeable future. Any determination to pay dividends in the future will be at the discretion of our board of directors and will depend upon results of operations, financial condition, contractual restrictions, including our senior secured credit facility and other indebtedness we may incur, restrictions imposed by applicable law and other factors our board of directors deems relevant. Accordingly, if you purchase shares in this offering, realization of a gain on your investment will depend on the appreciation of the price of our Class A common stock, which may never occur. Investors seeking cash dividends in the foreseeable future should not purchase our Class A common stock.

 

This prospectus contains statements about future events and expectations that constitute forward-looking statements. Forward-looking statements are based on our beliefs, assumptions and expectations of our future financial and operating performance and growth plans, taking into account the information currently available to us. These statements are not statements of historical fact. Forward-looking statements involve risks and uncertainties that may cause our actual results to differ materially from the expectations of future results we express or imply in any forward-looking statements and you should not place undue reliance on such statements. Factors that could contribute to these differences include, but are not limited to, the following:

 

 

 

Words such as “anticipates”, “believes”, “continues”, “estimates”, “expects”, “goal”, “objectives”, “intends”, “may”, “opportunity”, “plans”, “potential”, “near-term”, “long-term”, “projections”, “assumptions”, “projects”, “guidance”, “forecasts”, “outlook”, “target”, “trends”, “should”, “could”, “would”, “will”, and similar expressions are intended to identify such forward-looking statements. We qualify any forward-looking statements entirely by these cautionary factors. Other risks, uncertainties and factors, including those discussed under “Risk Factors”, could cause our actual results to differ materially from those projected in any forward-looking statements we make. We assume no obligation to publicly update or revise these forward-looking statements for any reason, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.

 

We estimate based upon an assumed initial public offering price of $      per share, the midpoint of the range set forth on the cover of this prospectus, we will receive proceeds from the offering of approximately $      million, after deducting estimated underwriting discounts and commissions and offering expenses payable by us. We will not receive any proceeds from the sale of shares of our Class A common stock by the selling stockholders, including any shares sold by the selling stockholders in connection with the exercise of the underwriters’ option to purchase additional shares.

 

We intend to use the proceeds from this offering together with cash on hand:

 

 

Interest on the senior subordinated unsecured mezzanine term notes accrues at 13.25% per annum, with 3.25% of that amount payable, at our option, in-kind as an addition to the outstanding principal amount. The senior subordinated unsecured mezzanine term notes mature in June 2014. See “Description of Certain Indebtedness — Senior Subordinated Unsecured Mezzanine Term Notes”.

 

A $1.00 increase or decrease in the assumed initial public offering price of $      per share would increase or decrease the proceeds we receive from this offering by approximately $      million, assuming the number of shares offered by us, as set forth on the cover of this prospectus, remains the same.

 

Pending use of the net proceeds from this offering described above, we may invest the net proceeds in short- and intermediate-term interest-bearing obligations, investment-grade instruments, certificates of deposit or direct or guaranteed obligations of the United States government.

 

We have not paid any dividends on our Class A common stock since our incorporation. We currently intend to retain all available funds and any future earnings to fund the development and growth of our business and to repay indebtedness; therefore, we do not anticipate paying any cash dividends in the foreseeable future. Additionally, our ability to pay dividends on our Class A common stock is limited by restrictions on the ability of our subsidiaries and us to pay dividends or make distributions to us, including restrictions under the terms of the agreements governing our indebtedness. See “Description of Certain Indebtedness”. Any future determination to pay dividends will be at the discretion of our board of directors, subject to compliance with covenants in current and future agreements governing our indebtedness, and will depend upon our results of operations, financial condition, capital requirements and other factors that our board of directors deems relevant.

 

The following table sets forth our cash and cash equivalents and our capitalization as of May 2, 2010 on:

 

 

 

You should read the following table in conjunction with the sections entitled “Use of Proceeds”, “Selected Historical Consolidated Financial and Operating Data”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes included elsewhere in this prospectus.

 

 

 

 

This table excludes the following shares, as of May 2, 2010:

 

 

Dilution represents the difference between the amount per share paid by investors in this offering and the pro forma net tangible book value per share of our Class A common stock immediately after this offering. Net tangible book value per share as of May 2, 2010 represented the amount of our total tangible assets less the amount of our total liabilities, divided by the number of shares of Class A common stock outstanding at May 2, 2010. Our net tangible book value (deficit) as of May 2, 2010 based on           shares of our Class A common stock outstanding was $      million, or $      per share of Class A common stock. The pro forma net tangible book value (deficit) as of May 2, 2010 based on           shares of our Class A common stock outstanding was $      million, or $      per share of Class A common stock, excluding proceeds from this offering.

 

After giving effect to the sale of the           shares of Class A common stock offered by us in this offering, our pro forma net tangible book value (deficit) as of May 2, 2010 would have been approximately $      million, or $      per share of Class A common stock. This represents an immediate increase in net tangible book value to our existing stockholders of $      per share and an immediate dilution to new investors in this offering of $      per share. The following table illustrates this pro forma per share dilution in net tangible book value to new investors.

 

 

A $1.00 increase (or decrease) in the assumed initial public offering price of $      per share, the mid-point of the price range set forth on the cover of this prospectus, would increase (or decrease) net tangible book value by $      million, or $      per share, and would increase (or decrease) the dilution per share to new investors by $     , based on the assumptions set forth above.

 

The following table summarizes as of May 2, 2010, on an as adjusted basis, the number of shares of Class A common stock purchased, the total consideration paid and the average price per share paid by the equity grant recipients and by new investors, based upon an assumed initial public offering price of $      per share (the mid-point of the initial public offering price range) and before deducting estimated underwriting discounts and commissions and offering expenses:

 

 

Except as otherwise indicated, the discussion and tables above assume no exercise of the underwriters’ option to purchase additional shares and no exercise of any outstanding options. If the underwriters’ option to purchase additional shares is exercised in full, our existing stockholders would own approximately     % and our new investors would own approximately     % of the total number of shares of our Class A common stock outstanding after this offering.

 

The tables and calculations above are based on           shares of Class A common stock outstanding as of May 2, 2010, give effect to the proposed          -for-1 stock split we intend to effect prior to the completion of this offering and assume no exercise by the underwriters of their option to purchase up to an additional           shares from us and the selling stockholders to cover over-allotment of shares. This number excludes, as of May 2, 2010:

 

 

To the extent that any outstanding options are exercised, new investors will experience further dilution.

 

The following table provides a summary of our historical consolidated financial and operating data for the periods and at the dates indicated. We derived the statements of income (loss) data and the per share data presented below for the period from July 29, 2006 through December 5, 2006 (Predecessor) and the period from December 6, 2006 through July 29, 2007 and the fiscal years ended August 3, 2008 (53 weeks) and August 2, 2009 (Successor) and selected balance sheet data presented below as of August 3, 2008 and August 2, 2009 from our audited consolidated financial statements included elsewhere in this prospectus. The selected statements of income (loss) data and the per share data for the fiscal years ended July 29, 2005 and July 28, 2006 and the selected balance sheet data as of July 29, 2005, July 28, 2006 and July 29, 2007 have been derived from audited historical financial statements and related notes not included in this prospectus. We derived the statement of income (loss) data and the per share data for the 39 weeks ended May 3, 2009 and May 2, 2010 and the historical balance sheet data as of May 2, 2010 from our unaudited condensed consolidated financial statements included elsewhere in this prospectus. The unaudited condensed consolidated financial statements have been prepared on the same basis as our audited consolidated financial statements and, in the opinion of our management, reflect all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of this data. The results for any interim period are not necessarily indicative of the results that may be expected for a full year.

 

On December 6, 2006, BRS, Black Canyon, Canyon Capital and their co-investors, together with our executive officers and other members of management, through LRI Holdings, Inc., acquired Logan’s Roadhouse, Inc. All periods prior to the Acquisition are referred to as Predecessor, and all periods including and after such date are referred to as Successor. The consolidated financial statements for all Successor periods are not comparable to those of the Predecessor periods. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Matters Affecting Comparability of Results” for additional information regarding the Acquisition and other items that affect the comparability of financial results across periods.

 

The historical results presented below are not necessarily indicative of the results to be expected for any future period. This information should be read in conjunction with “Risk Factors”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, and our consolidated financial statements and the related notes included elsewhere in this prospectus.