Several suspended their quarterly cash dividends.
Some casual-dining brands are switching their operation model and increasing liquidity as they chart through several unknowns during the COVID-19 pandemic.
The Cheesecake Factory, which has transitioned to off-premises, is temporarily closing 27 units across its concepts, including two Cheesecake Factory units. The brand drew down $90 million from its revolving credit facility to bolster its cash flow and curtailed its planned unit growth for the year. Its evaluating other measures to preserve financial flexibility, as well.
“The coronavirus pandemic has had an unprecedented impact on the restaurant industry as containment measures escalate," said David Overton, chairman and CEO. "While the situation remains fluid, we are taking decisive but difficult actions to enable our restaurants to manage through the specific circumstances in their communities, while further strengthening our liquidity position.With 42 years of history as a guide, we believe we will overcome these challenging near-term operating conditions and be even better positioned for the long term."
Ruth's Hospitality Group, parent of Ruth's Chris Steak House, drew down from its credit facility to increase liquidity to $54.7 million.
All BJ's Restaurants locations are still open and utilizing takeout and delivery, although CEO Greg Trojan added that "restaurants remaining open may change due to the fluidity of the situation and changing ordinances." The company drew down remaining amounts from its $250 million line of credit, and now have $95 million in cash on its balance sheet. CFO and President Greg Levin estimated that if all restaurants closed, weekly costs would be $5 million, including the retention of restaurant management, field operations, and support teams.
J Alexander's converted 45 of its 47 restaurants into a takeout only model with a limited menu. The brand drew down $17 million from its credit facility, pushing its cash reserve to $26 million.
Cracker Barrel operates 664 units and 28 Maple Street Biscuit Company locations across 45 states. Most of the stores have been operating via pick-up and delivery. The company has yet to close any locations but that is subject to change.
The brand also provided notice to its lenders to borrow the remaining available amount under its revolving credit facility so that a total of approximately $947 million is currently outstanding.
In a filing, the company also announced that all 19 Punch Bowl Social locations have been closed and most restaurant and corporate staff have been laid off and that it wouldn't save the company from foreclosure. Cracker Barrel purchased 58.6 percent interest in the eatertainment brand in July 2019.
Texas Roadhouse expanded its carryout option for corporate stores to curbside service in light of more than 75 percent of states closing dining areas. The brand hasn’t closed any of its U.S. locations, and each are operating on a full, limited, or to-go basis.
The brand drew down $190 million from its revolving credit facility to boost its cash reserve to more than $300 million.
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Bloomin’ Brands, parent of Outback Steakhouse, said that it will leverage takeout and delivery and continue limited in-restaurant dining where available. The company has more than $400 million in cash after a significant withdrawal from its credit facility. In what now seems ages ago, the casual-dining brand said during its Q4 and annual review that it was still mulling a sale, but those plans are now on the back burner. It also announced at the time a strategic plan to save $40 million in 2020 and 2021.
“In addition to expanding our growing carry-out and delivery business, we have taken actions to tightly manage costs in this new environment,” Bloomin’ Brands CFO Chris Meyer said in a statement. “These actions, combined with our strong cash reserves, address near-term volatility under current market conditions.”
Darden Restaurants, which oversees Olive Garden and LongHorn Steakhouse, said during its Q3 earnings call this week that its drawing down its $750 million credit facility to push its cash reserve to about $1 billion. In the week ending Wednesday, same-store sales were down 60 percent. CFO Rick Cardenas said 60 percent of units are takeout only, 16 percent have mandated other capacity constraints, and the remaining 24 percent have no mandates, but are operating at 50-percent capacity.
“While I can't predict the level or length of any reductions to our sales, assuming a sales decline of 50 percent for the entire fourth quarter would result in negative operating cash flow of approximately $300 million for the quarter,” Cardenas said during the earnings’ call.
IHOP and Applebee’s parent Dine Brands Global drew down $223 million from its credit facility to increase liquidity. Denny’s said it’s secured additional funding through its revolving credit facility and that it’s eliminating its pre-arranged stock trading plan.
Due to the impact of COVID-19, many brands have withdrawn their 2020 financial guidance and suspended their quarterly cash dividend.
According to research from data platform Sense360, between March 12 and 14, the casual-dining sector lost 27 percent of its share in visits year over year. Black Box Intelligence reported that in the week ending March 8, comp traffic at full-service restaurants was down 3.7 percent, a number that has undoubtedly risen significantly in recent weeks.
