With pro and college sports suspended for much of 2020, restaurants scrambled to find alternative programming for their TVs after dining rooms reopened. Too bad cameras weren’t turned on the fearsome battles that erupted within the industry itself. The year might’ve been a stinker in most respects for the business, but it fostered a fight card for the ages. Here are some of the more noteworthy bouts.
Biglari vs. Cochran
The challenger in the Steak ‘n Shake-logoed shorts was Sardar Biglari, CEO of that brand and holder of a significant stake in Cracker Barrel Old Country Store, which he tried to leverage for a fifth time in 2020 to get a say on the company’s direction. But Sandy Cochran, the CEO of Cracker Barrel, wasn’t about to cede power to a meddler who’s repeatedly steered Steak ‘n Shake directly at the iceberg, no matter how loudly he professed to be the mental twin of Warren Buffett. And Biglari spun the volume dial all the way to 11 in 2020, using letters, securities filings and any other bullhorn he could wield to argue for control of a seat on Cracker Barrel’s board.
Cochran was quick to counter the gadfly’s jabs with a few haymakers of her own. In a communication to Biglari’s fellow shareholders, the CEO noted that investors in Biglari’s holding company had seen their returns decline 61% in value during the last decade. In the same timeframe, Cochran noted, Cracker Barrel’s stock owners watched their investment soar 520% in value.
She also pointed out that Steak ‘n Shake was faltering even before the pandemic. “We consider the deterioration of Steak ‘n Shake, a brand that once held a storied place in American restaurant history, to be a cautionary tale of poor capital allocation, underinvestment, lack of strategic vision, subpar leadership, and lost brand identity,” Cochran wrote.
She emerged as the winner and still champion of the slugfest when only about 2% of Biglari’s fellow stockholders voted for his candidate for a board seat, Briad Group co-CEO Raymond Barbrick. A place on the board went instead to management’s candidate, former Walmart executive Gisel Ruiz.
The battle cost Cracker Barrel $5.2 million in the second quarter alone. But the lump in Cochran’s biscuit gravy for the last 10 years was squashed again.
Mask refuseniks vs. restaurants
Citizens are required to wear seat belts in a car, stay seated while a plane is landing and refrain from smoking in most indoor public spaces. But state and local directives to wear a mask somehow morphed into intolerable infringements on personal freedom for many, leading to flat-out refusals to don one in places ranging from the White House to Joe’s Bar & Grill. The resistance from restaurant customers led to a number of high-profile instances of violence, including a slashing and a threat to shoot up an IHOP in New York.
The confrontations became so common and heated that the Centers for Disease Control and Prevention (CDC) issued recommendations for keeping staffs safe when customers balked at covering their faces as a condition of being served.
A big part of the problem for restaurants was being cast as enforcers of the directives. They, rather than the police or liquor-control agents, were obliged to ensure that customers covered their faces. Yet if the establishments failed, they faced fines or other sanctions from those government parties. Repeated failures could lead to the suspension of liquor licenses, a threat that was made good for hundreds if not thousands of eating places.
Meanwhile, the scene is set for more run-ins. Some states are bolstering their requirements that masks be worn by customers any time they’re not chewing or sipping. And President-elect Joe Biden has said he’ll ask all Americans to wear masks whenever they leave their homes in the 100 days following his inauguration.
Independent restaurants vs. chain operations
Unity often proved elusive during 2020, and not just in the political arena. Restaurants, for instance, were profoundly polarized by the pandemic. Many chain outlets sporting drive-thrus actually fared better sales-wise during the crisis than they did in pre-COVID times. Even in the full-service sector, multi-unit operations with a strong brand identity and a head start on pivoting to takeout and delivery found the situation far less threatening than their one-off counterparts, which typically lacked enough seating to operate in the black while dining-room capacities were limited. Nor could they pull together money to keep the business alive after sales lightened to a trickle. The prevailing wisdom holds that independents made up the bulk of the 110,000 restaurants that were closed according to the National Restaurant Association during the pandemic’s first eight months.
That didn’t exactly turn chains and independents against one another, but some friction was clearly evident. Independents felt the need to create an advocate pursuing their particular interests instead of relying on the National Restaurant Association (NRA), a group that professes to speak for the industry as a whole. The Independent Restaurants Coalition (IRC) and the NRA often pursued the same ends, but they remained distinct, with their own respective recovery proposal--the Restaurants Act for the IRC, the Blueprint for Recovery for the NRA.
Harmony wasn’t likely fostered by some chain executives’ assessment of independents’ carnage as an unprecedented development opportunity—all those vacant sites!—rather than a human catastrophe for the operators and their staffs. No fisticuffs erupted, but plenty of muttering could be heard.
Restaurants vs. governors
Without acontainment planfrom the White House, state governors became the key figures in combating the coronavirus. They were the ones who typically suspended restaurant operations and ordered residents to stay hunkered down at home. And that often didn’t sit well with operators who suddenly found themselves with dark dining rooms, spoiling food and employees who couldn’t pay their rent or feed their families. Those objectors looked at states that were quick to lift restrictions, like Florida and Georgia, and wondered why they were going broke while peers in those climes were able to conduct business almost as usual.
It didn’t help that many of the restaurateurs felt whipsawed by the use of executive orders to impose restrictions almost instantly. New Jersey restaurants restocked their walk-ins and pantries in anticipation of reopening a big portion of their dining rooms. Four days before onsite eating was ready to commence, Gov. Phil Murphy announced that he had to “hit pause” and keep dine-in service suspended. Five days after indoor dining returned in New York City, restaurants in about 20 areas were directed--though by Mayor de Blasio, not New York Gov. Andrew Cuomo—to reshut their dining rooms. Cuomo eventually went along with the move.
Lawsuits challenging governors’ unilateral actions during the crisis were filed in a number of states, including Michigan, Arizona and New Jersey. Operators in western Pennsylvania announced that they were going to ascend on the office of Gov. Tom Wolf and force him to reverse some of his service restrictions, but the insurrection was called off.
The salt in the wound was the disregard shown by some of the governors for their very own restrictions. After reclosing dining rooms in much of California, Gov. Gavin Newsom was caught on camera while attending a dinner party at The French Laundry. Illinois Gov. Jay Pritzker would not say where he was spending Thanksgiving, even as he implored rank-and-file citizens to stay home. Cuomo drew fire for urging New Yorkers not to gather for the holidays and then bringing his mother home from a resident care facility.
A number of the lawsuits have yet to be resolved.
Franchisee vs. franchisor
Conflicts between a chain’s home office and the businesses actually operating the network are as common in the restaurant industry as forks and napkins. But the unprecedented strife of 2020 ratcheted up the tension appreciably—not just within struggling brands, but even among some high flyers like McDonald’s.
Indeed, the ketchup really flew between Big Mac and its franchisees this year. Operators say they were blindsided by a communication stating they’ll likely be paying higher non-royalty fees to McDonald’s going forward because of abrupt changes in the home office’s policy.
The industry’s largest chain was also sued by current and former Black franchisees, who accused the Golden Arches of not being color blind in their dealings with the franchisee community. Alleging widespread discrimination, the minority operators—77 in total—are seeking damage payments of at least $4 million per store. McDonald’s has denied the allegations.
Franchisees of the Subway sandwich chain say they’re facing a hit to margins because of their franchisors’ decision to stop reimbursing them for third-party delivery fees. The home office says those rebates were intended to help units launch a delivery program and were never intended to be permanent.
The year did bring an end to a longstanding battle, the struggle between Jack in the Box and its franchisees. The friction, which figured into the departure of CEO Lenny Comma, was settled in November. Now operators in that system say they’re ready to start opening stores again.
Restaurants vs. Mother Nature
As if the coronavirus wasn’t enough of a natural threat, the restaurant industry was walloped this year by some of the worst weather the U.S. has ever seen. So many storms struck operations along nation’s perimeter between June and November that the National Hurricane Center (NHC) ran out of names to give them—only the third time that’s happened in the agency’s history. And never before have so many storms hit in such a short stretch of time.
In each instance, restaurants at best found their sales impacted. At worst, they were forced to close stores, usually for a short-term, but sometimes for longer stretches. The disruptions were particularly severe in Texas and Florida, the nation’s second and third-largest restaurant markets, respectively.