PATRIZIO’S SOLD

Here’s the memo–no, memo is the wrong word, let’s say essay–founder Jack Knox sent to his Highland Park and Plano employees:

To All Patrizio Highland Park and Patrizio North Managers and Chefs:

As many of you know, I’ve always owned Patrizio through my 91% ownership of Sixx Holdings, Inc. I put Patrizio in Sixx because in my other life – as an oil and gas guy – I wound up with this company (Sixx) which had drilling credits (NOL’s) which could be used to shelter Patrizio’s operations, which were very profitable.

Patrizio has been and continues to be such a great restaurant concept for all of us. I wish I could say that I’m some sort of genius for figuring out that we could keep prices low and sell more product into a broader market, but I am forced to acknowledge that Wal-Mart (the name of my dog, since he hails from their parking lot) beat me to this astounding but predictable assessment of customer intelligence.

I had a small office in Rome for a few years when we were drilling a series of dry holes offshore Baria in southern Italy. There was a great place down in Trastevere, the old part of the city that was a big “Italian foodhall”-food flying through the air-not much money-loud-fun-tasted good. This was pre-Macaroni Grill and pre-Olive Garden and pre-almost everything affordable. So, I have to give some credit to Restaurante Gigi Fassi for their influence in the Patrizio market niche.

Happily, Patrizio has been a HUGE success – thanks to all of you. I THINK Highland Park is the highest grossing Italian restaurant per square foot in the metroplex – as in $5,000,000 on 4,200 square foot – (“say what?”)!! North does about $2.7 to $2.9 – also very good.

We opened Patrizio HP on September 22, 1989 and we opened Patrizio Plano – (built too big; the owner was an idiot) – on April 14, 1994. Wow! What a fun and successful ride it has been with both of these stores thanks to all of you and your predecessors.

So by now you’re undoubtedly saying, “What’s this all about?” I met with Brad this morning and discussed all this and we decided we could send an email and just “tell it all”. So, it’s about my selling my 91% interest in the parent company (Sixx Holdings) to Ed Bailey, a great guy with a great family and a great record of business success. Don’t worry! Patrizio is going to remain Patrizio – I am still going to be around because I still have a financial interest in the company (sorry FOH managers) and I believe that there are exciting times ahead for all of us.

Here is what has transpired. Around the last week of March, I bumped into Don Godwin (a prominent attorney and a very good customer of Cafe Pacific) and his wife, Carmen at the Mansion on a Saturday night. He and Carmen were there with Lee and Ed Bailey and Don told me that Ed and Lee would like to make an offer for Patrizio. I said, “OK – let’s talk sometime.” A couple of weeks later, Ray Williams and I went to lunch at Biernat’s with Don Godwin and Ed Bailey and I learned more about Ed and his company. At that point, I realized that Ed and his group were serious and extremely well-qualified to be a purchaser.

To tell you a little about Ed and his family, he is a mid-westerner. He is an investor and he had several successful retail operations in Cincinnati, Ohio before he moved to Dallas about 22 years ago. He is married to Lee, who is a smart and charming woman. Their daughter was just graduated from SMU Law School and their son is a Junior at SMU. He and Lee are actively involved in several of the charitable things I am involved in. They know the Millers, and their daughter and Jackie Stewart’s daughter were in high school together.

The Bailey family understands very clearly our market niche and market strategy. After our lunch with Bailey and Godwin, Ray and I took their interest in Patrizio very seriously and I suggested that they make us an offer. On April 12th, Ray and I went to Ed’s office in the Galleria Tower for breakfast (offices which make mine look like a Red Roof lobby, I must add). At breakfast, Ed Bailey proposed an offer to buy my stock in Sixx Holdings. After a couple of weeks of further negotiations, we reached an agreement for me to sell my 91% interest in Sixx Holdings, Inc. (which owns Patrizio Restaurants, Inc.) for a cash consideration and the retention of the cash in the company (already ours). In addition, as the developer of the Patrizio concept, I am retaining a small royalty in perpetuity, which will go to my private foundation – The Foundation for Sick Children – which does stuff like supplying medicine and equipment to hospitals and doctors in third world countries and which now occupies a significant part of my time and an even more significant part of my interest.

So here’s the deal – when we get up in the morning (Friday), everything will be the same around here, around Sixx, and around Patrizio, except for one thing: Ed will own my stock and he will own the company. LIFE GOES ON.

Ed and Lee Bailey are smart and talented people and sophisticated investors. Among their many investments are (plus or minus a few) 60 independently located and owned McDonald’s outlets. Ed is routinely cited by the parent company of McDonald’s as the poster boy for successful operations and innovative marketing (think marble floors and woodburning fireplaces and chandeliers in some of his units).

Some of you met Ed and Lee when they were my guests at the North Star luncheon at Patrizio Highland Park a few weeks ago. I am completely – and absolutely – and unequivocally – endorsing this guy. If I’m wrong – my bad – but I don’t think I will be.

Although Ed and his family have investments in many different things, they do not have an operating company that runs and owns Patrizio Restaurants. They are clearly buying a “company” in this case – with its own culture – its own administration – its own management – and its own operating style. They want to build more Patrizios. Ed is buying the “company”, not just the food and beverage sales, and he correctly assigned important value to the “company”.

We are going to have a lot of fun. I think we will all enjoy some changes – some growth – perhaps some stress – but HEY! We have done great together – thanks to you – and I really believe that the best is yet to come.

This transaction will close tomorrow (Friday) morning unless something falls out of the sky, so tomorrow we can just get up, run our business as always, be on the team and we can grow Patrizio to the next level!

I sincerely treasure our working relationships and I thank you so much for allowing me to stand on your shoulders to be able to be part of something as successful as Patrizio is and will be in the future. I’m not going anywhere and I’m certainly not going away from these restaurants. Leave the voice mails as usual – send the status reports as usual (to me) and observe the “Big Rule” (every problem must be reported) as usual. I’m just going to try to spend more time with my “boys” (Wal-Mart and Bubby). See you soon. With every good wish.

Sincerely,

JACK

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