Luby’s has formed a board subcommittee to begin investigating “strategic alternatives,” the corporate code for a sale, merger or refinancing.
“We look forward to the results of their work,” Chris Pappas, CEO of the beleaguered multiconcept operator, said in a statement announcing the move.
In addition to its namesake cafeteria chain, Luby’s operates the Fuddruckers fast-casual burger brand and the lone remaining unit of what had been a full-service burger group, Cheeseburger in Paradise. All of the brands have suffered steep declines in sales and profits, prompting the parent company to close 39 restaurants during the past two fiscal years.
It has also generated $35.9 million through the sale of restaurants during that period. Luby’s most recent fiscal year ended Aug. 29.
The company posted a loss of $5.3 million on revenues of $74.8 million, down 13% year over year, for the third quarter ended June 5.
Operations have been whittled down to 78 Luby’s Cafeterias, 42 Fuddruckers units and the lone Cheeseburger in Paradise. The company also holds the franchise rights to about 93 stores, according to Technomic research, and operates a contract division that manages noncommercial foodservice operations.
The newly formed special committee, which consists of six independent directors, has the assigned task of establishing a process to identify and evaluate strategic alternatives.
While the six-person group deliberates, Luby’s is continuing to pursue a number of cost-saving and revenue-raising initiatives, including the refranchising of Fuddruckers stores.
“We have already reduced our general and administrative expense by over 10% as we right-size the overhead needed to support our business operations, with additional plans to further reduce our cost structure in 2020,” Pappas said in the statement.
He stressed that the company is continuing to invest in leadership despite the efforts to rein in costs. He noted that the company recently hired VPs of marketing and information technology after bringing aboard a new chief operating officer, Todd Coutee, earlier this year.
Luby’s is packed with foodservice history and lore. Its namesake brand is one of the industry’s oldest chain concepts. The first restaurant opened in 1947, and the brand has enjoyed a cult following in its home state of Texas. Luby’s website identifies several customers who have been regulars for decades, including one who has eaten there virtually every day since 1974.
Fuddruckers was founded by concept creator Phil Romano, whose other ventures include Romano's Macaroni Grill. Many regard it as a forerunner of today’s fast-casual chains. It was launched as an upscale alternative to the mass-market fast-food burger brands, and featured touches such as allowing patrons to customize their meals and see where the meat for their burgers was ground.
Cheeseburger in Paradise was inspired by the Jimmy Buffett song of the same name. Seven of the 39 shuttered units in the Luby’s system bore that brand name.