Restaurant Firm Cancels Chevys Deal

A Dallas-based restaurant company has backed out of plans to purchase most of the restaurants held by Emeryville, Calif.-based Chevys Inc., citing among other reasons California’s growing health insurance costs.

Chevys is a privately held restaurant group that has been struggling financially and is closing many of its Rio Bravo restaurants.

In June, Consolidated Restaurant Operations Inc. announced plans to acquire the Chevys Fresh Mex and Fuzio Universal Pasta restaurants, with about 4,000 employees in California.

There are more than 100 Chevys casual dining Mexican restaurants, including 58 restaurants in California, and about 10 Fuzios, featuring Asian and Italian fare, mainly in Northern California.

Since the deal was announced, the state Legislature approved a bill requiring employers with 20 or more workers to provide health-care benefits to part-time employees beginning in 2006. Chevys has about 1,800 part-time employees in California, the company said.

Gov. Gray Davis has not said whether he would sign the bill.

Consolidated Restaurants also said a proposal to raise the minimum wage in San Francisco and increased workers’ compensation costs in the state factored into its decision to abandon the deal.

“It is no longer in our best interest to proceed with the currently structured acquisition based on recent events,” John Harkey Jr., Consolidated Restaurants’ chief executive, said.

Chevy CEO Ron Maccarone said the company would not immediately launch a search for a new buyer.