As it began to look for buyers (101 potential strategic buyers and 153 financial buyers were initially contacted, with 73 executing confidentiality agreements), Bar Louie continued to suffer a drain on cash flow from struggling units. It soon became apparent liquidity troubles would require a sale process to continue in a Chapter 11 arena.
Another challenge was Bar Louie’s real estate amid a general decline in traditional mall traffic.
“What we were able to do was to outline through the constituencies involved that, at its heart, this was a good business,” says Meitiner, now a Bar Louie board member.
Carl Marks Advisors assisted the company in securing bridge funding. And part of the task was to refine operations and prove Bar Louie could generate a return for its lender on the other side.
Meitiner says the chain’s comeback strategy had legitimate legs for the future. “This was a viable business that was making profit,” he says. “But it had two problems: It was burdened by debt servicing and it had  locations that were not profitable.”
“So imagine then how profitable the other locations were that not only were they able to offset the losses from the unprofitable locations, but they were able to generate a decent EBITDA,” he adds.
Once again, the unique nature of Bar Louie’s situation came into focus. Management had answers, which is seldom the case in these turnarounds, Meitiner says. It just didn’t have any capital to implement them.
Yet there’s no question the case draws a cautionary tale. Meitiner served as president and CEO of retailer Sephora in 1998 when it entered the U.S. market. In 2020’s first quarter, it threatened to close 600 locations (inside J.C. Penney stores) before coming to an agreement to keep them open. Retraction is far from an uncommon reality in retail or otherwise, and it often stems from similar missteps, Meitiner says. “The thing I would say is location and store growth must follow a strict adherence to objective site assessment prior to any decision being made to sign a new lease for a new location,” he says. “And this must include local-market restaurant, evaluation of competition, site visits, and visiting competitors to really assess the ROI and financial model.
“And when you look at businesses that end up having to close lots of location, they did not adhere to that discipline.”
Bar Louie invested so heavy in new stores that it couldn’t invest as much as it needed in things like IT systems and infrastructure. It’s the notion of keeping your powder dry so you can put money into areas you know work. Like patios, for instance.
“You need to make sure you have a really efficient operating base. That’s what distinguishes winners from losers,” Meitiner says.
So what happened when COVID-19 entered the fray?
Bar Louie acted early and aggressively to shut down stores, maintaining a core staff of three per venue.
For the first time in brand history, Bar Louie partnered with third-party delivery platforms. Today, it works with six. The company progressed from basically no delivery revenue to it representing 15 percent of sales. Meitiner says Bar Louie stood the system up in four weeks.
It’s also dove into the ghost kitchen pool. The chain is currently working on a virtual concept, Sweet Lou’s. Focused on wings, dessert, and sandwiches, it’s piloting in Dallas and Cleveland, with future markets on tap if all goes well.
Bar Louie resized its corporate office and moved into more of a shared workplace. “As we got through to the end of the bankruptcy period and revenues kept increasing, we hired behind those revenues, we didn’t get ahead of it,” Meitiner says. “So we were able to operate well within budget. And importantly, it provided the lender group with the confidence that their support of the business had been warranted.”
There are new marketing partners, particularly social media marketing. “All of these things would have happened, but they wouldn’t have happened in the timeframes they ended up happening in,” Meitiner says of the COVID-19 effect.
Closing the additional 22 stores was a very similar process to the original 38.
The brand planned to open about 15 units per year before 2020’s bankruptcy. Meitiner expects a more measured approach moving forward, especially as the pandemic lingers. While the brand has climbed out of the red and back to profitability, guarding near-term strengths will lead it through crisis times and beyond, Meitiner says.
“It’s building around the 50 locations, building those ghost kitchens, broadening the delivery business, making the core locations even more profitable,” he says.