The chain is also dealing with a lawsuit from its former CEO.
In its latest securities filing, Pizza Inn parent Rave Restaurant Group acknowledged that it can't predict how long the pandemic will last or whether it will reoccur. It doesn’t know to what extent off-premises will continue, if there’ll be additional restrictions, or even if individuals will want to return to buffets after social distancing is over.
All of those could factor into how the brand performs in the future. But in the current environment, operations appear to be headed in the right direction.
In the period ending December 27, Pizza Inn’s domestic same-store sales decreased from $18.95 million to $15.46 million, or 18.4 percent, which is the chain’s best performing quarter since the pandemic began. Pizza Inn saw comps drop 39 percent in the quarter ending June 28 and 22 percent in the quarter ending September 27.
The brand finished with 174 units—142 domestic and 32 international—compared to 187 locations in the year-ago period, when it had 153 domestic and 34 international restaurants. Pizza Inn said in its filing that it expects the modest net closure to continue in the near term and eventually reverse in future periods. It also believes international locations will increase moderately in the future.
Pie Five, Rave’s other concept, is on a similar track. In the recent quarter, comp sales declined from $4.75 million to $4.01 million, or 15.5 percent. That’s after seeing drops of 23 percent and 37.9 percent in the previous two periods. The chain now has 37 stores, down from 53 in the year-ago period. Pie Five said it expects the modest net closure to continue in the near term and eventually reverse.
However, maintaining sales isn't the only matter weighing on Rave’s mind. In only six months, the company received two delisting notices from Nasdaq. The first, sent last summer, told RAVE that it wasn’t in compliance with listing standards because stockholder equity was below $2.5 million. Rave also didn’t meet alternative standards of at least $35 million in listed securities or net income of $500,000 for the most recently completed fiscal year or two of the three most recently completed fiscal years. The company said in October that it resolved the issue by selling 2.5 million shares in at-the-market-sales, earning $3.65 million.
The second notice came in December when Nasdaq told Rave it failed to reach a minimum of $1 per share. The brand decided to appeal the delisting. On Thursday, Rave closed trading at $1.26 per share.
Additionally, Rave spent 2020 battling former CEO Scott Crane in court. Crane served as CEO from January 2017 until his ousting in July 2019. Current CEO Brandon Solano took over leadership in October 2019. In the lawsuit, Crane alleges that Rave "pulled the rug out from underneath him” and fired him without cause in an attempt to deprive him of shares. He’s seeking 928,000 shares and $300,000 in severance. Alternatively, the suit is seeking $2.4 million in actual damages plus unspecified exemplary damages, interest, attorney’s fees, and court costs.
Rave’s legal team filed a motion for summary judgement, which is pending. The case is currently in the discovery phase, and a trial is scheduled for April 5. The company said in a filing that “all of the claims are without merit and intends to vigorously defend the lawsuit.”
Rave has also faced issues with its franchisees in the past year. Last spring, the Pizza Inn Franchisee Association Board of Directors unanimously approved a vote of no confidence for Solano. In a letter, the association said it was growing concerned with the direction of the company. In response, Solano said he thinks Pizza Inn is “imminently fixable.”