A Goulash in the Making

For the traveling U.S. businessman who looks to Manhattan for culinary cachet, perhaps no group of restaurants has created more interest than Restaurant Associates. Its 19 restaurants--from the tree-decked Four Seasons to the Lucullan Forum of the Twelve Caesars, from the Italianesque Mamma Leone's to the open-all-night Brasserie --are a successful blend of imaginative showmanship, lofty prices and aspiration to high cuisine. Waldorf System, Inc., is a somewhat different chain of restaurants. Its 83 cafeterias, drive-ins and pancake houses in eight states lean heavily on self-service eateries in poor locations, offer such dishes as hash and an egg for 65-c-. Last week, in a deal that will produce an unusual corporate goulash, the two chains announced plans to merge.

Vine Leaves & Sausage. If the arrangement is ratified by stockholders of both firms--as expected--Waldorf (which has no connection with the Waldorf-Astoria Hotel) will give Restaurant Associates $5,200,000 in Waldorf stock, and thus about two-thirds' control of the combined firm. With sales stuck around $19 million a year for a decade, Waldorf has lost $510,000 over the past three years; Restaurant Associates' sales have climbed 40% to $28 million in that time, produced a $592,000 profit last year. Why, then, should Restaurant Associates want Waldorf?

The explanation: it is really Waldorf that wants Restaurant Associates. In fact, Waldorf already owns 19% of the firm (an investment that cost a mere $1,100,000), has options to acquire up to 49% control and enough cash to exercise them. So cozy are the two concerns that they already have headquarters in the same Manhattan building and, for the past year, have shared the same chairman, Martin Brody, 43, a former industrial caterer. The link between the two: Coffee Importer Abraham F. Wechsler, a founder of Restaurant Associates, whose family also has large holdings in Waldorf.

The Waldorf chain, which is trying to upgrade its image, menus and income, should be able to pick up some ideas from its new partner. Restaurant Associates specializes in distinctive touches, from a sybaritic menu at the Forum (truffle-stuffed quail wrapped in Macedonian vine leaves) to the farm market displays of fresh vegetables, fruits and gourds that decorate the Top of the Fair restaurant at the World's Fair (which the firm took over this year). To wring a profit from its three restaurants in Manhattan's gargantuan new Pan American Building, President and Chief Executive Joseph H. Baum, 44, relied on novel dazzle. Result: the Trattoria's casual dolce vita atmosphere to woo after-theater crowds, Charlie Brown's Ale & Chophouse with a 19th century British menu, and Zum Zum, a sausage and beer bar so successful that Baum plans to expand it into a chain within the chain.

Room & Board. All this success has only whetted Restaurant Associates' appetite for new and versatile ventures. The company sprang from humble beginnings as Manhattan's low-priced Riker's coffee-shop chain, changed its name to Restaurant Associates in 1945 and expanded into concession snack bars and cafeterias for the military. With that background, Restaurant Associates feels that it can do something to vitalize the Waldorf chain without compromising the attractive image of its expensive restaurants.

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