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Things Will Get Worse for Dave & Buster’s Before They Get Better

The purgatory state restaurants find themselves in – wedged between looming vaccine distribution and a COVID-19 case resurgence—continues to flare up a familiar cliché: It’s going to get worse before it gets better. But for Dave & Buster’s, it’s an irrefutable reality. The eatertainment chain’s same-store sales plunged 75 percent in August, yet started to tick up as store openings did and public fears subsided. Comps declined 62 percent in September and 59 percent in October. Over the full quarter, Dave & Buster’s averaged 74 reopened, fully operational stores in its comps base that generated revenues at 57 percent of 2019 levels, up from 35 percent in Q2 when the brand boasted an average of 39 open comp venues. And reopened location sales peaked in late October at a 68 percent index to year-ago metrics, with the top quartile reaching a combined index of 91 percent. More telling, four restaurants actually generated figures above 2019 results. In Q3, 68 of Dave & Buster’s 104 reopened (total, not mature comp units) achieved positive store-level EBITDA, and 80 did so in October, bringing the company “within a few million dollars” of breakeven, despite the fact all of its California and New York stores were still closed, which represent 25 percent of Dave & Buster’s overall sales.

Simply, the company’s recovery was pointing up. November, though, proved a different story. And December is likely to be even bleaker. Industry tracker Black Box Intelligence reported restaurant comp sales across the entire chain sector declined 10.3 percent in November—the worst since August. COVID-19 hospitalization rates climbed above 100,000. Previous April and July highs were short of 60,000. As infections and deaths eclipsed earlier records as well, more than 20 states rolled back reopening plans and put a lid back on the capacity for restaurants. Renewed restrictions led to 15 store re-closings throughout November for Dave & Buster’s and, in turn, overall sales took another shot. The chain closed Q3 with 104 opened stores, but now has 90, or 65 percent of the system. Conditions resulted in the business of about $32.6 million, including a 69 percent drop in same-store sales and EBITDA loss of roughly $11 million—in just one month. The company burned through EBITDA cash of $2.7 million per week. CFO Scott Bowman said Thursday on a conference call Dave & Buster’s doesn’t see November’s downturn reversing near-term. Rather, it’s likelier to intensify over the balance of Q4, with the company conceding California and New York locations won’t open until early 2021. Additionally, holiday timing will take its toll. Historically, Dave & Buster’s benefits from high foot traffic and a robust special events business during December. “It’s going to have a pretty significant impact,” CEO Brian Jenkins said. December special events typically represent about 15 percent of Dave & Buster’s overall sales in the month. Early on, the company was actually booking some parties and allowed itself to hope for the best. “We kind of lost that bet a bit,” Jenkins said.

Overall for the year, party business mixes 10 percent of Dave & Buster’s total take. Even Thursday, the company lost additional stores temporarily to restrictions. Jenkins said two dropped and the company was bracing for a “further dial back.” Yet as tumultuous as the coming weeks promise to be, Dave & Buster’s feels better positioned than early March, when rollbacks and shutdowns dominoed the entire organization. “I’m not trying to minimize it, but I do view this as a temporary setback,” Jenkins said. He noted vaccines on the horizon. Also, the projection when restaurants reopen this next time, there won’t be the stop-start-close activity that’s made the past few months so daunting. “I think we’re pretty optimistic that when we get these stores open again, we have a pretty good shot that they’re going to stay open,” Jenkins said, “and we’re on a path to better days.”When Dave & Buster’s does get back online, it won’t be the same chain. Margo Manning, the brand’s chief operating officer, said Dave & Buster’s implemented and refined a number of service model and menu initiatives ahead of COVID-19. Originally, they planned to refresh the system in 2020 and ignite a banner year for Dave & Buster’s. Naturally, that didn’t happen. But the updates continued stirring even as priorities shifted from brand revitalization to survival tactics.

Dave & Buster’s has a new menu and food program coming in 2021.

One major objective was to establish a stronger differentiated food identity for Dave & Buster’s. Manning said they’ve landed on a fresh theme—“Inspired American Kitchen’—which the chain plans to bring to market in 2021. Manning said it’s rooted in enhanced flavors and quality ingredients and will enable guests to explore new flavors while also enjoying a balanced selection of familiar favorites. Operationally, the menu is designed with simplification in mind in an effort to boost consistency and quality, and get customers back into the arcade as fast as possible. It will feature 28 items, or 33 percent fewer than the 42 on Dave & Buster’s pre-COVID-19 menu. The company reopened stores with a temporary 15-item list. Its transition to the new menu began in mid-November and there are currently 17 offerings, with six more dishes planned for early March and the 28 expansion expected by late April. “Taken together, we expect our new menu to drive an improved guest experience to increase our food attachment rates and to accelerate table turns, all aimed toward increasing food and beverage sales,” Manning said. Dave & Buster’s supported the menu with a dedicated training program focused on flavor profiles and cooking techniques. And it’s in the process of rolling a new piece of kitchen equipment to every store to speed up cooking times. Additionally, Dave & Buster’s plans to upgrade the company’s kitchen management system to “facilitate a seamless flow of food.” That’s targeted for the first half of 2021. From a service-level perspective, Dave & Buster’s worked to empower guests to control more of their in-store experience, which would then free up employees to focus on cross-selling and up-selling. The nucleus of this effort, Manning said, consists of tablets, kiosks, and a mobile self-service order and pay platform that unlocks a completely contactless experience. Five new stores launched on the hybrid platform and “have been well received by our guests,” Manning said. Another new element arrived in November with the launch of third-party delivery via DoorDash and Uber Eats at 105 locations (essentially all that reopened in Q3). The plan is to add California and New York once they return.

Lastly, to expand reach and leverage new kitchen capabilities, Manning said Dave & Buster’s is starting to look at the virtual brand potential from specific food categories. “We’re exploring concepts that could be rolled out nationally, regionally, or offered in specific markets or offered seasonally or even offered around specific major events,” Manning said. Some other recent upgrades remain on the table but are taking a backseat somewhat to strengthening the company’s core business. For instance, Dave & Buster’s recently unveiled a system-wide in-store radio station, D&B Live, and deployed a cloud-based digital video system to centrally manage programming on its “Wow Walls,” and other high-visibility screens. It also experimented in the fall with sports programming to see how guests would respond to a more immersive watch experience featuring live DJs and events like vendor-managed beverage tastings. “We’re taking the learnings from these tests and refining our programming and event strategies to be in a position to expand them as COVID restrictions ease,” Jenkins said. At this point, however, Dave & Buster’s doesn’t have plans to further rollout Wow Walls (there are about 50 currently and they feature nearly 50-foot-wide LED TV screens that can show up to six events at once) as it guards capital. The chain also launched a new national brand marketing campaign in September with CMO Brandon Coleman, a former Del Frisco’s president who joined in February. It was directed by a new agency add Mother of New York. Jenkins said the sports ran for five weeks and were a “meaningful investment.” But Dave & Buster’s delayed and canceled holiday plans. Jenkins said they want to reserve powder for a time when COVID fears are actually waning, not increasing, and the appetite for guests to get out “is not something we’re swimming upstream on.” But again, the campaign provided a noticeable boost in September, Jenkins said, which points to long-term resilience. Dave & Buster’s just need to get stores open again. “… we have the playbook to navigate through this resurgence and feel confident that demand will return once resurgence subsides,” Bowman said. One potential development Jenkins briefly touched on was the opportunity of sports betting. Kevin Bachus, Dave & Buster’s SVP of entertainment, is “deep into those discussions” with a potential partner, Jenkins said. He didn’t offer any additional details but said more could come after Q4. Dave & Buster’s reported Q3 revenues of $109.1 million, down 63.6 percent, year-over-year. Food and beverage revenues (35.2 percent of total revenues in Q3) declined 69.2 percent to $38.3 million. Amusement and Other revenues (68.4 percent of total) fell 59.5 percent to $70.7 million. Comp sales for the full quarter slid 66 percent, year-over-year. Non-comparable store revenues for the period were $20.1 million, down from $40.1 million in the year-ago quarter. Operating loss in Q3 totaled $56 million against operating profit of $6.5 million in Q3 2019. Adjusted EBITDA was negative 16 million versus $46 million. Net loss was $48 million versus net income of $500,000.

Dave & Buster’s ended the quarter with $314 million of availability under its revolving credit agreement, net of a $150 million minimum liquidity covenant, and $10 million in letters of credit. Bowman said the company’s improved liquidity has “alleviated the substantial doubt about the company’s ability to continue as a going concern and the company has sufficient liquidity to satisfy its obligations over the next 12-month period.” “… We’ve demonstrated the resilience of the D&B brand and the pent-up demand that exist among our guests to return to Dave & Buster’s unique menus. When they do, they’ll be greeted by an inspired team, a fresh new menu, a more customer-centric experience, and the good clean fun they’ve come to expect from Dave & Buster’s,” Jenkins added. – Source: fsr.

New York City to Halt Indoor Dining on Monday

New York Gov. Andrew Cuomo announced Friday that New York City will shut down indoor dining beginning Monday, but that outdoor dining and takeout/delivery would remain. “In New York City, you put the CDC caution on indoor dining together with the rate of transmission and the density and the crowding, that is a bad situation,” said Cuomo during a press conference. “The hospitalizations have continued to increase in New York City. We said that we would watch it, if the hospital rate didn’t stabilize, we would close indoor dining. It has not, we are going to close indoor dining on Monday.” More than 1,500 NYC residents are hospitalized and bed capacity is below 20 percent. The hospitalization rate is 2.41 per 100,000 New Yorkers—a figure that NYC Mayor Bill de Blasio wants below two. The seven-day average of new cases is 2,614 and The rolling average of NYC residents testing positive is 5.32 percent. de Blasio stood behind the decision to temporarily shutter indoor dining. “I support him 100 percent because we have to protect against the worst,” de Blasio told the media. “The worst is the virus just grows and grows, that more and more people get infected, our hospitals start to get stressed and then get to the point where they can’t provide the service that people need. That puts lives in danger.” New York City first shut down in-person dining in March. It wasn’t until June that outdoor dining began. Soon after, indoor dining was scheduled to return, but it was delayed because of a rise in COVID cases during the summer. Dining rooms didn’t reopen until the end of September, but only at 25 percent capacity. In November, Cuomo set a 10 p.m. curfew for State Liquor Authority-licensed restaurants and bars. New York City joins several other cities and states that have closed indoor dining, including California, Colorado, Washington, Oregon, New Mexico, Illinois, Kentucky, Pennsylvania, Minnesota, Michigan, St. Louis, and Baltimore. Andrew Rigie, executive director of the NYC Hospitality Alliance, said that while health and safety are paramount, Cuomo’s decision doesn’t make sense given the data. He noted that Manhattan has a positivity rate of 2.7—less than half of many counties throughout the state where indoor dining is still open (Albany, 7.2 percent; Westchester, 6 percent; Suffolk, 6.1 percent).

Rigie also lamented that restrictions are coming without economic support. “Closing indoor dining in New York City will severely jeopardize the survival of countless small businesses and jobs and now it’s more important than ever that all levels of government pass critical support to help save the industry,” Rigie said in a statement. “The federal government must enact the RESTAURANTS Act, a revitalization program to help mitigate the economic and social devastation caused by the pandemic, state government must extend and strengthen the eviction mortarium through 2021 and enhance unemployment benefits for the thousands of workers who will lose their jobs again, and city government must permanently cap third-party delivery fees and require these companies to give restaurants ownership of their customer data.”According to New York’s data, restaurants are responsible for 1.4 percent of COVID cases, compared to 74 percent from living room spread. The Five Borough Chamber of Commerce Alliance said the restrictions couldn’t have come at a worse time for restaurants, which are “are holding on for survival by a thread and trying in some way to make up for the devastating losses of the past nine months.” “This shutdown marks a completely different economic climate than restaurants faced at the onset of the pandemic, where many were in a better financial position and supported by federal stimulus funding,” the organization said. “We now fear that thousands of small businesses will be forced to permanently close their doors and lay off employees, which will have an irreversible impact on the city’s economic recovery and social fabric. To prevent the total collapse of the nation’s largest and most vibrant restaurant industry, the federal government urgently needs to enact a new COVID-19 relief package.” – Source: fsr.

20 Restaurant Brands that Unveiled new Store Prototypes this Year, from KFC to Burger King to Chipotle

Quick-service, fast-casual and casual-dining restaurants were all impacted by the COVID pandemic, forcing a change in future store designs to accommodate more technology and less dine-in. Fast-casual and fine-dining brands alike dove into drive-thru experiences, while quick-service brands revamped menus for ease of operation and lower operational cost. Others leaned into technology with the use of digital lockers, new app developments, or artificial intelligence drive-thrus for customers. Quick-service chains like Papa John’s and KFC redid the drive-thru, while Restaurant Brands International released the Burger King “Restaurant of Tomorrow” design that focuses even more on the drive-thru element. And yet there was still more room for innovation. Brands like Chipotle and KFC – along with many others – developed to-go-only stores with no seating. Starbucks’ new store it opened in November 2019, before the pandemic, had only a single podium for one barista to hand out orders, signaling the future trend. This, obviously, was the prelude to virtual brands, many of which have been launched by large companies including Bloomin’ Brands, Brinker International, Smokey Bones and Lazy Dog. Ghost kitchens, too, are a trend, which Nathan’s Hot Dogs, Chick-fil-A, and Dickey’s Barbecue Pit leaned into. Many brands went the way of no-labor or no-storefront. However, the new store prototypes Nation’s Restaurant News decided to highlight here year continue to support the idea of hospitality in brick-and-mortar locations. Don’t worry, there will be a virtual- and ghost-kitchen review of 2020, so look for that in the coming weeks. In this gallery, see the new store prototypes and designs launched by restaurant companies in 2020. – Source: NRN.

On-Premise Restaurant Sales Rates still Lag Last Year, Nielsen CGA says

Data indicate rates of U.S. on-premise restaurant sales remain at about half what they were a year ago for the week ended Dec. 5, according to a Nielsen CGA track of outlets that remained open and operating. New York-based Nielsen CGA’s RestauranTrak data set, released Thursday, found sales velocity in the on-premise channel was down 48% year-over-year for the week ended Dec. 5, the company said.  “Sales velocity is the rate of sale,” said a Nielsen CGA spokesman, “meaning that we’re not saying that total U.S. on-premise sales (inclusive of the entire industry — all bars, restaurants, taprooms, etc., including those that closed) is negative 48% year-over-year. “Instead, we’re specifically saying that for the outlets that we measure and that are still operational, sales are down 48% on average for the one-week period ending Dec. 5 vs. the same week one year prior,” the spokesman said. The RestauranTrak data is derived from Nielsen CGA’s Check-Level Insights Pool, or CLIP, which comes from about 10,000 transaction-level point-of-sale feeds from a demographically balanced set of largely independently owned on-premise establishments. “These establishments share this data directly with Nielsen CGA,” the spokesman said. The Nielson CGA RestauranTrak report looked more narrowly at five of the most populous states: California, Florida, Illinois, New York and Texas.

California

Sales velocity the week ended Dec. 5 was down 14% compared to the week ended Nov. 28. Nielsen CGA said California was “the only state of the five we analyzed that experienced declines during this period, as restrictions across the state tighten,” the company said. Sales velocity was down 49% year-over-year (comparing the week ending Dec. 5 to the same week one year prior.)

Florida

Sales velocity was up 3% compared to the week ended Nov. 28. Sales velocity was down 19% year-over-year (comparing the week ending Dec. 5 to the same week one year prior).

Illinois

Sales velocity was up 1% compared to the week ended Nov. 28. Sales velocity was down 70% year-over-year (comparing the week ending Dec. 5 to the same week one year prior).

New York

Sales velocity was up 4% compared to the week ended Nov. 28. That followed two consecutive weeks of 15% declines across the state. Sales velocity was down 60% year-over-year (comparing the week ending Dec. 5 to the same week one year prior).

Texas

Sales velocity was up 13% compared to the week ended Nov. 28. Matching Florida’s numbers, sales velocity was down 19% year-over-year (comparing the week ending Dec. 5 to the same week one year prior). New York Gov. Andrew Cuomo said Friday that New York City would be shutting down indoor restaurant dining indefinitely on Monday as the COVID-19 hospitalizations increased. Nielsen Holdings PLC, a data analytics company, in November 2019 launched Nielsen CGA’s RestauranTrak as a benchmarking platform for foodservice operators in the U.S. – Source: NRN.

CEO Jimmy Haber steps down; debtor-in-possession financing will allow operations to continue . . . .

Plant-Based Concept by Chloe Files Chapter 11 Bankruptcy; Goes up for Sale Despite Legal Battle

Blaming the COVID pandemic, the 14-unit plant-based concept By Chloe filed Chapter 11 bankruptcy on Monday, and CEO Jimmy Haber stepped down. New York-based parent company BC Hospitality Group Inc. also said it has put the chain up for sale as part of the bankruptcy proceeding. It has also obtained debtor-in-possession financing to continue operations from existing investors that include Bain Capital Double Impact Fund LP, QOOT International, Kitchen Fund, and Lion Capital. The company is seeking an auction by mid-February 2021. While the company searches for a new CEO, Catey Mark Meyers, who is chief of staff, will serve as CEO in the interim. Haber is also CEO of ESquared Hospitality, which operates the BLT Steak concept and affiliated brands. ESquared confirmed that Haber remains CEO of that company. The bankruptcy comes after years of legal wrangling over the plant-based chain, which was founded in 2015 by Chloe Coscarelli as a vegan concept featuring house-made burgers, sandwiches, pastas, cold-pressed juices, and baked sweets. It was initially developed in partnership with Samantha Wasser, who is Haber’s daughter. With interest in plant-based diets rapidly growing, the concept was a hit and it grew to include locations in Boston, Los Angeles, and Providence, R.I., as well as licensed units in Canada and the U.K. Initially Coscarelli owned 50% of the company with ESquared Hospitality, which controlled BC Hospitality Group. But the relationship “soured,” according to court documents, and Coscarelli was terminated.  ESquared acquired Coscarelli’s 50% stake and the name was changed to BC Hospitality Group LLC.

ESquared explored opportunities with outside investors, ultimately taking in $31 million in two tranches from the group led by Bain Capital and Kitchen Fund, according to the filing, leading to the current ownership group. Coscarelli later sued to reclaim her stake, charging ESquared Hospitality with trademark infringement and other violations. In that lawsuit, Coscarelli also said her termination was motivated in part by her rejection of advances by Haber, who she said had become infatuated with her. The case went to arbitration in 2019 and Coscarelli was issued a partial award that, if held up in federal district court, would reinstate Coscarelli’s interests, along with $2.3 million in attorney’s fees. According to the bankruptcy filing, however, BC Hospitality Group considers that ruling “unenforceable” and attempts to negotiate a settlement have reached an impasse. Coscarelli did not immediately respond to requests for comment. Meanwhile, the pandemic severely disrupted operations, and three restaurants were closed entirely since March, with others operating at reduced capacity, the company said in the filing. About half of the company’s staff were furloughed or laid off, and revenues are down 67% since February, according to the filing. BC Hospitality obtained $2.7 million in Paycheck Protection Program loans, and the company expects the debt will be fully forgiven, the filing said. Mark Meyers in a statement described the restructuring as a positive step that would move the company toward its growth goals, which include more expansion in the Los Angeles market and internationally in 2021. “The COVID-19 pandemic hit all sectors of the restaurant industry especially hard, including the fast-casual category,” said Mark Meyers. “In the face of remarkably challenging conditions to operate in, we believe that a complete reorganization of the company is necessary for By Chloe to emerge and thrive long term.” – Source: Fast Casual.

California Pizza Kitchen Emerges from Bankruptcy

California Pizza Kitchen has completed its bankruptcy restructuring with an equity transaction that eliminated more than $220 million in existing debt from its capital structure, the company said.  The Los Angeles-based casual-dining brand said it “now faces no near-term debt maturities” and that substantially all of CPK’s equity is now held by CPK’s pre-petition lenders. CPK had filed July 30 for Chapter 11 reorganization in the U.S. Bankruptcy Court for the Southern District of Texas. An Oct. 8 auction was canceled after no qualified bidders emerged. “We want to thank our partners, creditors and equity holders for helping make our emergence plan so successful,” said Jim Hyatt, CEO of CPK, said in a statement. “We are a stronger and healthier company as a result of the restructuring,” Hyatt said, “and we look forward to delivering more of our innovative, California-inspired cuisine to our loyal CPK guest community.” CPK completed its restructuring las month with the support of its creditors and previous equity holders. The company said that going forward, it was focused on expanding global franchising, innovating its menu with such items as the recently introduced plant-based “Don’t Call Me Chicken” pizza, and accelerating its recent off-premise sales increases during the COVID-19 pandemic. Kirkland & Ellis served as legal counsel to CPK, Guggenheim Securities, LLC served as its financial adviser and investment banker, and Alvarez & Marsal Inc. served as restructuring adviser. First-lien lenders were represented by Gibson, Dunn & Crutcher LLP as legal counsel and FTI Consulting, Inc. as financial adviser. California Pizza Kitchen, founded in 1985, has more than 240 restaurants in 10 countries and U.S. territories. – Source: NRN.

Johnny Rockets Owner Fat Brands Merges with Its CEO’s Investment Fund

Fat Brands, the owner of Fatburger and Johnny Rockets, announced it has completed its long-awaited merger with its controlling shareholder, Fog Cutter Capital, the investment firm founded by Fat’s CEO, Andy Wiederhorn. Terms of the deal were not disclosed, but the merger has been in the works for several months and is viewed as a way to simplify the company’s corporate structure while also enabling it to raise more funds for future acquisitions. Fat Brands stock soared on the news—up 50% in early morning trading. “Fat Brands has considered a combination with Fog Cutter as another step in our efforts to simplify our corporate structure and eliminate limitations that restrict our ability to use common stock for accretive acquisitions and capital raising,” Wiederhorn said in a statement. Fog Cutter holds more than $100 million in net operating loss carryforwards, or NOLs as a result of a 2017 tax sharing agreement. That enables the investment firm to shelter Fat Brands’ taxable income. But that can only happen if Fog Cutter holds more than 80% of the shares of Fat Brands. That prevented Fat Brands from issuing additional shares to make acquisitions or raise cash. By creating more shares, that would have diluted ownership and would have put Fog Cutter under that 80% mark, ending its ability to act as Fat Brands’ tax shelter. Thus, Wiederhorn said, the merger will enable Fat Brands to buy even more restaurant companies. “We believe that the steps we have taken in 2020 will position us to capitalize on organic and acquisition-led growth in the future,” Wiederhorn said. Fat Brands has made a series of acquisitions, generally of bargain chains. That includes Johnny Rockets, its most recent acquisition. Since 2017 the company has acquired Ponderosa and Bonanza, Hurricane Grill & Wings, Elevation Burger, and Yalla Mediterranean. – Source: Restaurant Business.

Cracker Barrel ads new Programs for the Sake of Flexibility

With the marketplace in flux because of the worsening pandemic, Cracker Barrel Old Country Stores is embracing several new initiatives that promise greater flexibility in responding to the shifting realities, including a tweak of its holiday meals program. Executives noted that the managers of its restaurants face a fluid situation that can change drastically, often with just a few days’ notice. Contending with dining-room reclosings and other immediate service limitations has been a challenge in fulfilling such routine duties as staffing a shift because the variables can shift so profoundly and instantly, CEO Sandy Cochran explained to financial analysts during the company’s first-quarter conference call. “They did an excellent job of it, but it’s been tough,” she said of the field managers. She noted that several new programs should increase the brand’s ability to adjust to the shifts, particularly the need to rely heavily or exclusively on takeout to sustain sales. Those moves include the addition of a new smaller-sized option to the chain’s Heat ‘n Eat line, a menu of prepared takeout meals that customers re-heat at home before serving. The meals tend to be large, with enough meat and sides provided to feed 10, at a price of $139.99. To snag more families as takeout customers, Cracker Barrel added new versions that feed six people at a lower charge of $69.99. The family-oriented chain has also added a family-sized chicken-fried turkey meal for $39.99. Cochran also revealed that a new adult-beverages menu has been introduced in 250 stores, with another 350 units likely to add beer and wine by the end of Cracker Barrel’s fiscal year. The alcoholic options are intended to increase the checks of dine-in customers when table service is permitted.

The new menu accounts for 1% of sales at the units where it is now available, with most of that being incremental, Cochran said. She projected that sales would double as more merchandising and promotion is employed. “We don’t have our oil lamps or the dessert cards or the table tents, which was merchandising that would have been a great place to tell our guests about the new beverage program. And a lot of our guests, they know the menu so well, they don’t actually look at it,” Cochran said.  The chain has spent about $6 million to date to add the beverages. Cracker Barrel is also girding itself for the vagaries of the pandemic by embracing new technology, according to management. About 250 units have been outfitted with a new POS system that supports the use of tablets. “We certainly found tablets to be very beneficial in the stores that have them for our curbside and some of the off-premise piece of it,” said Jill Golder, Cracker Barrel’s CFO. Cochrane said the new system, with its enhanced digital capabilities, had a decidedly positive effect on sales during the Thanksgiving season. Not all of the coping mechanisms being developed for the brand are arising in headquarters. Cochran related how unit managers of some Kentucky stores along the Tennessee border started producing meals for their colleagues in Tennessee after Kentucky suspended dining room service. The moves helped the Tennessee restaurants bolster their throughput, the CEO said. Cracker Barrel reported that sales for its namesake brand had climbed on a same-store basis to  83.6% of 2019 levels. Comparable sales for the company’s secondary brand, Maple Street Biscuit Co., soared 20%, according to the parent company. Overall, net profits leaped 295%, to $170.7 million, on revenues of $646.5 million, a decrease of 14%. Correction: An earlier version of this story mistakenly indicated that results released by Cracker Barrel were for its second fiscal quarter, when in fact the figures were for the first quarter of fiscal 2021. – Source: Restaurant Business.

Restaurant Operators Brace for a Bitter Winter

Vaccines to combat COVID-19 were being rolled out, but it was expected for the next several weeks, though much if not all the winter, pandemic cases, and related deaths may continue to rise. In response, governments at the state, county, and local levels were tightening limits on social gatherings, including indoor restaurant dining. Outdoor dining on patios, decks, and sidewalks, which in recent months helped sustain many restaurants whose dining rooms operated at reduced capacity because of social distancing requirements, was ending across much if not most of the country as winter weather takes hold. Take-out and home delivery remained viable options, even lifelines, for many but certainly not all restaurants. The National Restaurant Association on Dec. 2, in its fifth industry survey conducted during the pandemic, estimated more than 110,000 restaurants, or 17% of all restaurants operating before the pandemic, have closed. Most of the closings took place early in the pandemic, but the NRA said 10,000 restaurants have closed in the last three months alone. “This means these businesses are closed on either a temporary or permanent basis,” the NRA survey’s summary said. “It will be some time before it becomes clear how many of the temporary closures become permanent. Many restaurant operators are waiting to see if or when it makes sense to reopen.” Sean Kennedy, the NRA’s executive vice president for public affairs, in a Dec. 7 letter to the leaders of the Senate and House of Representatives appealing for federal assistance, observed, “The vast majority of permanently closed restaurants were well-established businesses and fixtures in their communities. On average, these restaurants had been in business for 16 years, and 16% had been open for at least 30 years.”

As the NRA looked to the future, its survey of 6,000 restaurant operators, conducted Nov. 17-30, asked operators whether in the absence of federal assistance they thought their restaurants would still be open for business in six months; 37% of respondents said no. The survey considered the state of the restaurant industry as of October. Because of the surge in COVID-19 cases in the fall, more stringent restrictions were being placed on indoor dining and drinking establishments, so circumstances for most restaurant operators have only worsened since the survey was conducted. The NRA study found consumer spending in restaurants remained well below normal levels in October. “Overall, 79% of restaurant operators said their total dollar sales volume in October was lower than it was in October 2019,” the study said. “Only 12% reported higher sales in October. Sales were down 29% on average.” Restaurant operators reported sales declines for both full-service and limited-service segments. Sales declines were the most severe in the case of independent full-service restaurants, where sales were down 36% from a year ago. “The vast majority of restaurant operators do not expect business conditions to improve in coming months,” the survey said. Seventy-five percent of operators expected their sales to decrease from current levels during the next three months. Only 6% of operators expected their sales to increase from current levels in that span. A breakdown revealed 83% of full-service restaurant operators and 67% of limited-service operators expected their sales to decrease from October levels during the next three months. Already in October, outdoor dining was beginning to decline as an option with 49% of operators saying their restaurants in that month offered outdoor dining compared with 67% in September. Fifty-two percent of full-service operators said they offered outdoor dining in October compared with 74% in September. Forty-six percent of limited-service operators said they offered outdoor dining in October compared with 60% in September.

Meanwhile, the costs of running restaurants were on the rise with 59% of operators saying labor costs as a percent of sales were higher than before COVID-19. Only 21% of respondents said labor costs were lower. Eighty-six percent of operators said their profit margin was lower than before COVID-19, and only 6% said their profit margin was higher. The survey indicated 36% of operators said they were considering temporarily closing their restaurants until the pandemic is brought under control, including 43% of full-service operators and 28% of limited-service operators. “Although many restaurants added back employees after the initial lockdowns, overall staffing levels remain well below normal,” the survey found.  Eighty-one percent of operators said their staffing levels in October were below what they would have expected in the absence of COVID-19. Forty-five percent of respondents said their restaurants were operating with more than 20% fewer-than-normal staff. Forty-nine percent of operators said they expected staffing levels to decline in the next three months with 58% of full-service operators and 40% of limited-service operators expecting staffing cuts. The winter of 2021 was expected to exact a heavy toll on the nation’s restaurant industry, especially should federal support prove to be lacking or too light. – Source: Food Business News.

Restaurant group SBE’s C3 Acquires 22 Locations of Specialty’s Café and Bakery in Bankruptcy Sale to Convert into new Concept EllaMia

SBE Entertainment Group’s C3 (Creating Culinary Communities) on Tuesday announced plans to convert 22 locations of Specialty’s Café and Bakery acquired in an asset sale into a new brick-and-mortar concept called EllaMia. Specialty’s Café and Bakery Inc., based in Pleasanton, Calif., filed for Chapter 7 bankruptcy on May 27. At the time of closing, the chain had 41 leased units mostly in the Western U.S. In its bankruptcy filing, the company blamed the COVID-related shutdown for destroying the chain’s niche market, which included operating near busy office parks. Since March, many workers are working remotely, leaving those office parks empty. Another company, Sparges LLC, purchased several other Specialty’s Cafe and Bakery units during the sale, according to court documents. EllaMia will serve breakfast and lunch along with all-day coffee in collaboration with Lavazza. Chef Romain Fournel, formerly of Jean Philippe Patisserie in Las Vegas and Patisserie Henriet in Paris, designed the menu to include fresh-baked pastries, gourmet sandwiches, salads, macarons, and chocolates. The locations will feature a grab-and-go case as well as community seating. But the EllaMia locations will also serve as host kitchens for C3’s growing stable of virtual brands. “Unlocking the value of underutilized real estate and creating opportunity in a hurting foodservice industry is key to the C3 model,” said Sam Nazarian, CEO, and founder of C3. “The introduction of EllaMia along with three to six proprietary C3 brands in each individual location effectively means operating 100 distinct dining concepts in a third of the space required by a traditional restaurant.” C3 brands that will utilize EllaMia shared kitchens and be available for delivery to the surrounding communities include Umami Burger, Krispy Rice, Sam’s Crispy Chicken, Plant Nation, LA Gente, In a Bun, and The Other Side. Customers will be able to order from every brand in one order as part of the proprietary system at C3. “A true restaurant of the future, EllaMia kitchens are each equipped to fluidly prepare foods from different C3 concepts to maximize the efficiency of real estate and labor,” said Brad Reynolds, chief operating officer of C3, in a statement. ”

The added availability of different cuisine to accommodate varying consumer preferences is another benefit for each local EllaMia community.” The restaurant chain will service Chicago and Seattle, as well as multiple communities in California, including San Diego, the San Francisco Bay Area, Sacramento, and Orange County (Irvine and Costa Mesa). In addition, EllaMia locations with also open at major university campuses including Arizona State, UC-Berkeley, Iowa State, University of Michigan, the University of Nebraska and the University of Richmond. In June, C3 announced 15 locations of new full-service Casa Dani in collaboration with Chef Dani Garcia along with 100 locations — including virtual restaurants —of quick-service Minük. C3, created as a partnership between SBE, shopping mall company Simon, and Accor Hospitality Group, introduced virtual brands Krispy Rice, Sam’s Crispy Chicken, brick-and-mortar restaurants Casa Dani and Minük as well as a food hall in New York City that has yet to open called Citizens this year. – Source: NRN.

Inspire Brands Completes its $11.3B Acquisition of Dunkin

division. Inspire Brands completed its $11.3 billion acquisition of Dunkin’ Brands on Tuesday, creating one of the largest restaurant operating companies in the country while giving the Roark Capital-owned company a larger, global reach. Dave Hoffmann, who had been Dunkin’ Brands CEO, was named a special advisor to Inspire CEO Paul Brown and will help guide the transition of Dunkin’ into the Atlanta-based Inspire. Scott Murphy, who had been president of Dunkin’ Americas, was named president of Dunkin’ and head of Inspire’s beverage and snack category. Dunkin’ Brands operated Dunkin’, the coffee, and doughnut chain, as well as the ice cream concept Baskin-Robbins. Murphy will report to Brown, while Jason Maceda will be the president of Baskin and will report to Murphy. Brown called Dunkin’ and Baskin “two of the most iconic restaurant brands in the world.” “This is an incredible moment in our journey as a company,” he said in a statement. Inspire used a combination of existing debt, cash on hand, and $5.4 billion in equity financing from private-equity owner Roark Capital to fund the deal, according to federal securities filings. Inspire was created in 2018 following the somewhat surprising acquisition of Buffalo Wild Wings by Arby’s. The company has been on a buying binge ever since, acquiring Sonic and then Jimmy John’s. It appeared to be taking a break from making deals during the pandemic but over the summer set its sights on Dunkin’, one of the 10 largest restaurant chains in the U.S. and the second biggest coffee concept behind only Starbucks.

The Dunkin’ deal makes Inspire the second largest restaurant company in the U.S. by both system sales and locations, with $24 billion in domestic annual system sales—behind only McDonald’s, which generates about $40 billion a year. Globally, Inspire’s brands generate $26 billion in system sales. It also represents a major victory for Hoffmann, who was named CEO in 2018, two years after he joined the company from McDonald’s. The acquisition came at a price of nearly 50% higher than the stock price the week before he took the top job, according to data from the financial services site Sentieo. During that time, Dunkin’ has undertaken a broad overhaul of its flagship brand, adding new technology and more drive-thru locations while shifting away from locations inside gas stations that don’t have the same capabilities, or revenues, of a normal unit. And both Dunkin’ and Baskin were able to recover quickly during the pandemic—Dunkin’s same-store sales rose 0.9% in the U.S. in the third quarter, for instance, while Baskin’s soared 6.5%. “Over the past few years, we have accomplished much to be proud of, including the execution of our strategic plans that led to the transformation of our two beloved, iconic brands,” he said in a statement. “We are confident that Inspire’s proven stewardship of franchised restaurant concepts and best-in-class capabilities will drive further growth for both Dunkin’ and Baskin-Robbins around the world.” – Source: Restaurant Business.

Employers can Require COVID-19 Vaccination, but there are Exceptions. Here’s what you and your Boss Need to Know

Can they require the vaccine? The short answer is yes, with some exceptions, attorneys say. The trickier question is whether they should. While many people are eager to get vaccinated, polls show a substantial minority fear the safety of a vaccine that was developed so quickly. Companies are mulling about how to create a safe workplace for all while respecting those concerns. “There is an enormous amount of anxiety out there,” said Barry Hartstein, an attorney in the Chicago office of the labor and employment firm Littler Mendelson. “Employers want a quick fix, they want employees coming back to work, they don’t want employees scared to come back to work,” Hartstein said.

Is it legal for employers to mandate vaccination and fire workers who don’t comply?

COVID-19 is such a threat to public health that many employers will be able to make the case that requiring vaccination is “job-related and consistent with business necessity.” That is the standard under the Americans with Disabilities Act that permits employers to make medical inquiries and administer medical tests, Hartstein said. Federal agencies have not yet issued specific guidance for employers. However, in March the Equal Employment Opportunity Commission said employers can require workers to take COVID-19 screening tests, and that rationale will likely be applied to mandatory vaccination, he said. There is also precedent from prior pandemics, including smallpox and the H1N1 swine flu, when employers were given leeway to require vaccines.

Dr. Corina Marcu of Hartford Hospital receives one of Connecticut’s first COVID-19 vaccinations on Dec. 14, 2020. Fifteen doses were administered to health care providers and environmental services workers after the Pfizer BioNTech vaccine arrived at Hartford Hospital that morning. Hartford Healthcare officials called it “the dawn of a new day.” (Mark Mirko/Mark Mirko) Workplaces most vulnerable to infection, such as hospitals and other health care facilities, are most likely to require employees to get inoculated. Many hospitals mandate employees get the flu vaccine during non-pandemic times, said Michael LeRoy, a professor in the School of Labor and Employment Relations at the University of Illinois at Urbana-Champaign. Employers of first responders, teachers, and meatpacking workers could also make compelling arguments for a mandate, he said. Employers can fire workers who refuse to get a shot, with some exceptions.

Q. What are the exceptions?

 

If workers can show that a disability or sincerely held religious belief prevents them from getting vaccinated, employers are required by federal law to provide a reasonable accommodation. That could include a remote work arrangement, constant mask-wearing at work or not scheduling unvaccinated employees to work during periods of high transmission rates, LeRoy said. Even so, courts may put more weight on the safety of the workplace than an individual worker’s rights. A federal appeals court in 2018 dismissed a lawsuit brought by a health care professional who claimed disability discrimination after she was fired for refusing to vaccinate for rubella because she worried about an allergic reaction. The court said her “garden variety allergies” didn’t constitute a disability and her job required her to work with vulnerable patients. An employer’s ability to offer reasonable accommodations can determine whether it makes sense to require vaccination, said Nathaniel Glasser, an attorney with labor and employment firm Epstein Becker Green, which represents management. For example, factories or other workplaces where teleworking is not an option may find a mandate is disruptive to the business if they don’t have a plan for addressing people who decline, he said.

Q. What if employees believe the vaccine is unsafe?

This is where things get tricky. The speed with which the COVID-19 vaccines were developed and the limited testing on certain populations, including pregnant women, have many people concerned about safety. Surveys have shown rising confidence as the rollout nears, and an ABCNews/Ipsos poll published Monday found 80% of Americans plan to get the vaccine at some point. But other research points to greater wariness. Only half of Americans and a quarter of Black Americans, polled in early December said they would get vaccinated, while the rest said they weren’t sure or would not, according to The Associated Press-NORC Center for Public Affairs Research. Forcing workers to decide between getting a vaccine or losing their job could hurt morale at a time when anxiety is already high, and disrupt business operations if enough people refuse, attorneys say.

“Employers will have to decide whether they want to put employees into a position to make that call,” said Paul Starkman, an attorney with Clark Hill who represents management in employment cases. Employees could resist vaccination because of safety concerns and claim protection under the National Labor Relations Act, which protects the rights of employees, both unionized and not, to engage in “concerted activity” regarding employment conditions, Hartstein said. If enough people seek exemptions one way or another, it could dilute the effectiveness of a vaccination program and make a mandate moot, he said.

Q. Is it different for public versus private employers?

In some cases there may be a stronger rationale to mandate vaccination among public employees, LeRoy said. For example, police have high contact with the public, so keeping them from getting sick is in the public interest.

But public employees also have constitutional rights in employment that private-sector employees do not, including a 14th Amendment right to due process if they are fired or disciplined. Private sector employees, by contrast, are employed at will and can be fired for any reason as long as it doesn’t violate civil rights, anti-discrimination laws or a contract.

Q. What about unionized workplaces?

The case law is mixed on whether employers must bargain with the union on vaccination matters, Hartstein said. Often it depends on the collective bargaining agreement, he said.

However, employers will need the support of labor organizations to make a vaccination program successful, whether it is voluntary or mandatory.  “Getting their buy-in is going to be critical to the success of a vaccination program if an employer is going to do it,” Hartstein said. Several unions have called for their members to be prioritized for vaccination because they work essential jobs — in food production, grocery stores and schools — that make them vulnerable to infection. The United Food and Commercial Workers Union did not respond to queries asking if it would support mandatory vaccination for its members. Dan Montgomery, president of the Illinois Federation of Teachers, which represents 103,000 teachers and support staff in the state, seemed open to it. “I think teachers would welcome that,” Montgomery said. “We want to get back in our schools but we want to do it safely. We see vaccination as a path to do that.”

Q.Could employers be held liable if they don’t require their workforce to be vaccinated and people get sick?

The Occupational Safety and Health Administration requires that employers provide a safe work environment. OSHA has not said what role a COVID-19 vaccine plays in that, but experts don’t anticipate that the agency will require employers to mandate vaccination. “I think it’s more likely that OSHA would require employers to offer or encourage or allow employees to be vaccinated than to mandate a COVID vaccine,” Glasser said.

Q. How can employers encourage employees to get vaccinated without mandating it?

A primary strategy is through educational campaigns to communicate the benefits, safety and efficacy of the vaccines, Glasser said. Some employers are asking if they should give bonuses to employees who get vaccinated, Hartstein said. He warns that could suggest the vaccine is undesirable or dangerous, which is a perception employers should seek to avoid.

Q. What are employers opting to do?

Most companies are thinking about how to strongly encourage vaccination, attorneys say. Even hospitals, whose workers are first in line to get vaccinated, are stopping short of mandating the vaccine. Attorneys are advising their clients to wait for guidance from the government before finalizing a plan. “Think about how you want to handle it without making any final decisions because we don’t know what it’s going to look like once it is done,” Starkman said. “To what extent does the CDC (Centers for Disease Control and Prevention) or other agencies offer guidance about how and whether to mandate it and who gets it when and in what way.” – Source: The Chicago Tribune.

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