Restaurant recovery: Times are tough, outlook hazy for franchises, chains

HARLINGEN —We drive past them every day, and their names are known by all.

But national chain restaurants, many of them already in financial trouble due to changing eating habits and the fickleness of the public they serve, have suffered greatly due to the coronavirus-related shutdowns and restrictions.

Here is a list of some of the well-known brands which may or may not have time to regain their footing during the COVID-19 recovery phase.

Chuck E. Cheese

The kids’ party spot is in talks with lenders, seeking a $200 million loan just as a $1.9 billion quarterly debt payment comes due June 30, Bloomberg News reports.

The Irving-based fun-and-food chain hopes to use the cash infusion to avoid a bankruptcy filing, according to the Wall Street Journal.

Chuck E. Cheese had a relatively robust 2019, with $913 million in revenue for the year which pretty much matched the previous five years. But with the coronavirus-related shutdowns and shelter-at-home orders, the 2020 numbers are going to be a lot less fun for shareholders.

Pizza Hut

Just 10 months ago, David W. Gibbs, then president of Yum! Brands which owns Pizza Hut, said, “Our store count could drop to as low as 7,000 locations over the next 24 months primarily driven by closures of underperforming dine-in restaurants before rebounding to current levels and above in the future.”

Pizza Hut has about 7,500 locations in the United States.

Plano-based Pizza Hut’s earnings have consistently been out-performed by fellow Yum! Brands subsidiaries KFC and Taco Bell.

The chain announced last year that it would shutter up to 500 dine-in Pizza Hut restaurants in the U.S. and open smaller delivery-focused stores, which it has done in Harlingen.

Burger King

The publication Restaurant Business reports Burger King executives say the company plans to close 200 to 250 low-volume locations a year for the “next couple of years.”

Burger King has a whole lot of restaurants to pick from with 15,500 franchisees across the country and 71 company-owned locations.

Luby’s

Houston-based Luby’s is an iconic Texas brand. But it remains to be seen if the old-fashioned cafeteria-style concept is going to be viable in a post-coronavirus restaurant milieu.

Last July, Luby’s closed several restaurants to try to pay down its debt. In March, 35 more restaurants (it also owns Fuddrucker’s and Cheeseburger in Paradise) got the corporate axe.

Now we find out Luby’s Inc., the parent company that was started in San Antonio in 1947, is seeking to sell off its real estate assets and wind down its operating divisions if the company can’t be sold in its entirety.

Company executives said “certain of the company’s restaurants will remain open to continue serving our guests.”

Cafeteria and buffet-style restaurants seem to be in particularly perilous straits as we come out of the COVID-19 shutdown and shelter-at-home orders, because these eateries rely on a high-volume, high-density format.

It remains to be seen if current limits on numbers of customers will ease in time for these restaurants —Luby’s has 119 in the United States— to once again prosper.

Denny’s

Last month Denny’s announced the permanent closures of 15 New York restaurants tied to “unforeseeable business circumstances prompted by COVID-19,” according to WARN notices filed in the state of New York. Some 524 employees will lose their jobs.

The shuttered Denny’s locations were operated by the franchisee Feast American Diners. The franchisee runs   230 Denny’s, Jack in the Box, and Corner Bakery Cafe locations in 10 states .

Denny’s execs said last month that 312 locations had temporarily shut down nationwide due to the pandemic, or roughly 18 percent of its 1,700 locations.

Applebee’s

Over the past two years, Applebee’s closed more than 120 locations even before the coronavirus pandemic struck.

Its parent company, Dine Brands Inc., can only hope Applebee’s would perform as well as its sister subsidiary, IHOP.

In the fourth quarter of 2019, IHOP posted same-restaurant sales growth of 1.1 percent. Applebee’s, though, was down 2.5 percent.

COVID-19 shutdowns can’t have helped the bottom line at Applebee’s.

Hooters

Over 10 years the franchise has closed 7 percent of its stores, and more apparently are in the company’s crosshairs.

Hooters has tried to grow with the times, opening a number of restaurants called Hoots with more fully-clothed wait staff.

The jury is still out on the new concept.

Golden Corral

Golden Corral, that favorite of so many seniors due to its reasonable prices and lavish portions, isn’t drawing as many young people to its restaurants and that is a long-term problem for the company.

In Harlingen, a beautiful new restaurant was constructed next to the old one on Tyler Avenue, and business appears to have been brisk.

Whether the COVID-19 restaurant openings limitations will allow Golden Corral locations to operate profitably remains to be seen.

Like Luby’s, the business plan is high-volume and high-density, which for the interim isn’t possible under the restaurant restrictions limiting the percentage of the eatery that can be occupied.

Gov. Greg Abbott has ordered that bars and restaurants can increase capacity to 75 percent on June 12, and that should help.

Jack in the Box

Two years ago, Jack in the Box began seeking financial help because it was struggling.

Then franchisees filed suit against the company, which was closing a number of locations.

The coronavirus shutdowns were not altogether devastating to Jack in the Box, which like many fast-food operations continued to soldier on by relying on drive-thru service.

Jack in the Box’s second-quarter 2020 earnings of $216.16 million beat analysts’ projections and actually improved upon the $215.73 million in earnings in Q2 2019.

But despite holding its own, the word from CEO Lenny Comma on the Q2 earnings report was sobering:

“Given this uncertainty, we are prioritizing actions to bolster liquidity in the event we encounter greater volatility to our business. Because of this, we have temporarily suspended both share repurchases and the quarterly dividend typically paid next month with the intent to re-evaluate these decisions each quarter as we gain greater clarity on any further negative impact to our business trends.”

Chipotle

Chipotle has had well-documented problems with food poisoning at a number of its restaurants, but still maintained its financial health.

That may be changing, however.

Chipotle execs have announced they will close up to 65 locations this year.

Quiznos

Quiznos has been through the wringer.

The sandwich shop chain peaked at around 5,000 stores in the early 2000s but the Great Recession of 2007-2009 forced the closures of around 2,000 locations.

The company filed for bankruptcy in 2014, and today there are fewer than 800 stores left.

Logan’s Roadhouse

The steak chain laid off all of its employees during the coronavirus pandemic and closed all of its 261 locations in the United States.

Those restaurants shut down for about two months, but some are now reopening, including the Harlingen location at 2809 W. Expressway 83.

The company’s owner, Craftworks Holdings, said the decision to temporarily close locations came after one of its lenders withdrew financing after Logan’s filed for bankruptcy in early March.

“The debtors hope that they will be able to restart their operations at some point in the future, but there are many preconditions to a restart, including the obtaining of financing, the hiring of staff, and the ability to create a coherent and profitable business plan,” Craftworks said in a filing. “The shutdown could persist for a prolonged period time, if not permanently.”

rkelley@valleystar.com